Taiwan unveiled its first domestically built submarine, "Haikun," on Thursday.

The diesel-electric submarine, costing $1.5 billion, will not enter service for two years.

It is the first of eight submarines in Taiwan's plan to strengthen its defense against China.

Two submarines were purchased from the Netherlands in the 1980s.

Tensions between Beijing and Taiwan have escalated, raising concerns of a possible military conflict.

Taiwan collaborates with Washington to modernize its armed forces amid daily military exercises by Beijing.

The Haikun is set to be handed to Taiwan's navy next year after undergoing tests.

China's Ministry of Defense downplays the submarine's significance, calling Taiwan's expectations overrated.

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