I do think PLAN should be ramping to produce 2-3 nuclear submarines per year, so it's good that they've invested in the facilities to do that. But I am skeptical of the budgetary side of things. I don't see how PLAN is going to accomodate massively increased spending on building and operating submarines (say, at least a fourfold increase over current spending) plus an even more dramatic increase in the budgets for carriers and naval aviation, plus maintaining high levels of spending and growth across other areas (surface combatants, amphibs and auxiliaries) that folks seem to take for granted. I don't see it working unless the plan is to increase the defence budget comparable to US levels, i.e. ~3.5% of GDP.
It's a fair question. But a lot depends on the threat perception that the Chinese leadership sees. Chinese defense spending is pretty low relative to percent of GDP, compared with other major powers. China spent a lot in defense spending as % of fiscal revenue before Deng's era, then it started to fall quickly and even became lower than Taiwan's defense spending by the '90s (of course it also had to do with depreciating Chinese currency at the time). It quickly bounced back and started a period of 15-20 years of rapid increase at double digits after the 1996 Taiwan Crisis, particularly the 1999 NATO bombing of Chinese Embassy at Belgrade, until the mid-2010's when it settled on a steady pace largely in accordance to the GDP growth.
If the security environment is indeed deteriorating as you say and the Chinese leadership also agrees, then I do see a huge problem in their increasing defense spending significantly. We'll have to see.
IMO, they do and will increase defense spending now, but I suspect that they will not switch to a panic mode or emergency mode right away. The contest with the US is still considered to be a long term one and based on comprehensive national power, and the US is seen scrambling and shooting in its foot often right now. Other things to consider: the Chinese are much more efficient and cost-effective in their defense spending than the American and haven't been making a lot of strategic mistakes in investing in wrong programs compared to the US.
So far as I can see, PLAN is still very resource constrained and will remain so for the forseeable future, and in a strategic environment where peer conflict is a live possibility (as opposed to the more benign strategic environment of the previous generation) then it becomes very important to maximise return on investment in terms of delivering capabilities that can deliver victory and avert defeat. Aircraft carriers are certainly valuable, but the enormous costs required to realise a credible capability puts them towards the bottom of such RoI calculations in my view, and nuclear-powered carriers even moreso.
I don't think aircraft carriers are luxury. In fact, the Chinese has sunk a lot of investments into the carrier program in the last two decades and have only started to reap the benefits of a full-blown, competitive, world-class carrier program (003, J-15B, J-15D, J-35, KJ-600). Liaoning and Shandong are really toys in comparison. Besides, carriers will be an important component when contesting with the US in the Western Pacific and over time, Northern Indian Ocean. PLAN doesn't need 12 supercarriers to begin to make a difference. They're not going to patrol the globe in the next two decades.
SSN/SSBN are not mutually exclusive to supercarriers, together with H-20, YU-20 etc, China will have for the first time potent power projection platforms to contest if not control up to the second island chain by 2035.
So given the strategic importance of the carrier program, I don't believe there will be a shortage of funding. If more is needed, more will come. China will still outgrow the US economically considerably in the next 10-15 years. Defense spending can increase both because of the growth in economy and the share of the economy.