Asian military budgets to eclipse US by decade's end

Military budgets in North America will be eclipsed by the end of the decade because of a surge of defence spending in China and its Asian neighbours, a new report says.

Next year, Israel will sell twice as many drones as the US Photo: EPA

Military budgets in North America will be eclipsed by the end of the decade because of a surge of defence spending in China and its Asian neighbours, a new report says.

Defence budgets in the Asian Pacific region will leap 35 per cent to £325 billion by 2021 even as US spending is slashed by a quarter to £306 billion.

The global arms trade is growing strongly despite the economic woes of the past five years, but the shift in spending threatens the dominance of American, British and European defence firms, the research by IHS Jane's found.

Guy Anderson, senior principal analyst at the defence consultancy, said "The global arms market is about to get very turbulent. We may already have reached 'peak defence' with the US dominance of the global defence market under threat. The big Western defence companies have no option – export or shrink – but this could be sowing the seed of their own demise."

The report found American arms manufacturers were already being overtaken in some key high tech areas.

Next year, Israel will sell twice as many drones as the US and will become the biggest exporter of the unmanned aircraft by the end of this year.

China's defence spending is predicted to jump from £81.7 billion last year to £134 billion by 2021, the study called The Balance of Trade, says.

Spending in India and Indonesia is also expected to climb sharply. By contrast, defence spending growth in the UK, France, Germany and Italy will be negligible over the next eight years.

Paul Burton, senior manager on IHS Jane's DS Forecast, said: "Two things are happening: budgets are shifting East and global arms trade is increasing competition.

"This is the biggest explosion in trade the world has ever seen. At this rate, defence trade between countries will have more than doubled by 2020."

Telegraph