15 December 2016

China and India set to drive a 10-year global arms race

David Reid 

Emerging global powers China and India are set to drive stronger defense spending over the next decade, according to a new report released by IHS Markit.

Global military spending rose in 2016 to $1.57 trillion and annual budgets should return to pre-financial crisis levels by 2018.

There is now a risk of an arms race as Asia Pacific nations increase their military spending as they move their focus from territorial defense to power projection, analysts believe.

"This is new for the region and is likely to increase military-to-military contact between states," Craig Caffrey, principal analyst at IHS Jane's, said in a release Monday.

"Rising defense spending could therefore be indirectly responsible for increased tension within the region which in turn could spur faster budget growth," he said.

IHS said China's defense budget is on track to almost double within 10 years, from $123 billion in 2010 to $233 billion by 2020.

At that 2020 level, China's defense budget would be about four times bigger than the UK's and more than the combined spending of Western Europe.

For its part India spent more than $50 billion on its military might in 2016, pushing Russia out of the top five biggest spenders.

The South Asian country is in the grip of a modernization drive and is tipped to leap past the U.K. into third spot by 2018, should sterling remain at relatively weak levels.

Caffrey said procurement spending has recently been constrained by rising personnel costs but that is set to change.

"India needs new equipment to fulfill its modernization drive. Over the next three years, India will re-emerge as a key growth market for defense suppliers," he said.

The United States remains far and away the world's biggest buyer of military goods and services, spending $622 billion in 2016, according to IHS Janes.

That figure is more than four times larger than China and represents about 40 percent of global spend.

"Since 9/11, over $9.35 trillion has been allocated to the US defense budget, with the Overseas Contingency Operations (OCO) accounting for $1.62 trillion or 17.3 percent of the total US Department of Defense (DoD) budget," said Guy Eastman, senior analyst at IHS Jane's.

"US DoD investment levels going forward were to decrease by 1.1 percent in real terms, but with the election of Donald Trump, the expectation is that both investment and readiness will receive injections of much needed funds," Eastman said.

Western Europe's defense budget rose for the first time since 2009 and IHS Janes' believes that trend will continue, estimating that roughly $10 billion will be added across the next 5 years.

The IHS Jane's Defense Budgets team produces the annual Jane's Defense Budgets Report every December. The report examines and forecasts defense expenditure for 105 countries and claims to capture 99 percent of global defense spending.

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