The United States can meet the China military challenge by capitalizing on existing strengths, spending smarter, and reinforcing our alliances – not increasing the defense budget.
Key assessments and recommendations
- China has demonstrated its commitment to long-term military competition with the United States through its defense spending, military operations, and official statements from its leaders.
- The U.S. response should be measured, confident, and fiscally sustainable, building on our significant existing advantages to deter conflict and avoid a costly and wasteful arms race.
- Washington does not need to increase defense spending to meet the challenge; the United States can sustain our military advantage by purposefully getting our house in order. That means fiscal discipline through streamlined appropriations and procurement and enhancing efforts to revamp the defense industrial base and drive strategic innovation.
- Eliminating inefficiencies that hinder readiness and strategic investments will empower the Pentagon to be more targeted and resourceful in fostering rapid, scalable, and sustainable innovation; and promoting advanced manufacturing.
- The United States should continuously reinforce our alliances—a key security and geopolitical advantage—by enhancing cooperation; sharing the costs of defense investments; and more deeply integrating our defense industrial supply chains.
- At the same time, the United States needs to maintain dialogue with the People’s Liberation Army (PLA)—particularly on topics such as maritime, space, cyber, nuclear, and AI—to reduce the risk of miscalculation or unintended conflict.
Context: The China military challenge
China is the only competitor to the United States with the intent and, increasingly, the capacity to reshape the international order. China’s defense budget has grown on average by 7.5 percent a year over the past decade, totaling $233 billion in 2024. In fact, this figure understates Beijing’s spending, as that core budget figure does not include its space program, provincial military base operations, dual use R&D, and certain other costs. Moreover, while the United States has global commitments, China concentrates its military capabilities in the Indo-Pacific.
Nonetheless, the United States faces this challenge from a position of strength. Our armed forces are better equipped, better led, more experienced, and are strengthened further by alliances throughout the Indo-Pacific and globally. Even with China’s rapid spending hikes, the U.S. defense budget remains more than double China’s—both in absolute spending and as a percentage of GDP.
At stake is the post-WWII security architecture that has enabled the region’s extraordinary economic growth, benefiting the United States; its allies and partners; as well as China itself. More concretely, China’s efforts to dominate the South China Sea would give it control over a strategic waterway through which a substantial amount of global trade passes. Its nuclear buildup creates the prospect of a new arms race.
The role of Congress
Congress and the Biden administration agree on the China challenge. However, they now need to act on this consensus by prioritizing and redirecting defense resources strategically and efficiently to sustain long-term competition. Policymakers can do this even in a constrained budget environment. A critical prerequisite is to return to the normal appropriations cycle. This means moving away from continuing resolutions, which lead to uncertainties and inefficiencies that undermine readiness and complicate timely and strategic investments in our defense capabilities.
Another key part of preparing to compete with China is improving the Pentagon’s financial management and efficiency, which can then give policymakers the information required and clarity to decide where, when and how to allocate resources and make investments. To ensure accountability, Congress must demand full, transparent audits of the Pentagon’s budget. The Department of Defense’s failure to pass its annual audit for six consecutive years underscores the urgent need for Congress to pass the Audit the Pentagon Act of 2023, which enjoys bipartisan support.
Reshaping defense thinking
The United States holds a military edge over China in various areas but relying solely on long-standing advantages will not guarantee long-term peace and stability. We need to invest in practical battlefield technology and revamp our advanced manufacturing sector to build a defense ecosystem that can adapt to evolving military challenges; remain resilient and adaptable; pursue innovative and affordable solutions; and deter adversaries without escalating tensions. This vision would also signify a commitment to revitalizing the U.S. advanced manufacturing sector and its workforce.
A prime example of this new approach is the Replicator Initiative, which emphasizes leveraging American technological innovation to maintain military superiority over our adversaries. This initiative focuses on deploying relatively low-cost, expendable autonomous systems such as drones. The Pentagon has faced challenges in rolling out, scaling production, and integrating these promising systems into the existing military structure, thus demonstrating the complexity of adopting new ideas and innovating on a large scale.
The Russia-Ukraine conflict illustrates a practical application of this approach—one that has direct implications for the situation in the South China Sea. In the Black Sea, relatively cheap Ukrainian drones have rendered much of the Russian fleet inoperable. We should apply this lesson to the South China Sea, where U.S. and Chinese maritime interests intersect and our fleets interact most directly. Rather than race to ensure that the U.S. Navy has more ships than the PLA Navy (an exercise that would be costly and risky, and that fails to take into account our advantages in terms of the size, sophistication, and armaments or the number of vessels our allies and partners could field), we should look for lower-cost ways to make clear to Beijing the futility of an expensive ship building spree.
Rebuilding our defense workforce
A key aspect of this endeavor is to position the defense industrial sector as a center for innovation and societal advancement accessible to all Americans. Investing in a skilled defense workforce presents an opportunity to engage and recruit a new generation of workers, and to retrain and upskill individuals from traditional manufacturing backgrounds, including those transitioning from the fossil fuel industry, veterans, and recent graduates. Congress can help by supporting and funding new regional defense innovation hubs and enhancing university science and technology programs.
Washington should prioritize projects in economically disadvantaged areas and foster partnerships with community colleges, historically Black colleges and universities, Hispanic serving institutions, and other minority serving institutions to ensure equitable reach of these initiatives, tap new innovative partners, and build resiliency in the Pentagon’s partner pool. This approach assures that the benefits of defense spending are shared widely.
Reassuring our allies and partners
The U.S. approach to military competition with China must prioritize our alliances and partnerships. Countries such as Japan, South Korea, Australia (both bilaterally and through AUKUS), the Philippines, and others share our values and our concerns about the increasingly assertive PLA. The March 2024 renewal of funding for the Compact of Free Association—which has been the cornerstone of the U.S. presence in the Pacific for almost half a century—was a welcome and important signal to our Pacific allies.
China may perceive these partnerships as part of a containment strategy, but they need not be provocative to be effective. Joint military exercises play a significant role, but less conspicuous efforts to bolster defense cooperation and interoperability; integrate regional defense industries; broaden access to defense technologies; and improve logistical support frameworks are also vital. Our partners also share responsibility to uphold these relationships, contribute to mutual defense efforts, support the defense industrial base, and invest in innovation and procurement.
Regularizing U.S.-China military-to-military dialogue
Increased military competition makes it even more important that the U.S. and Chinese militaries talk, to manage tensions as they operate in close proximity, prevent miscommunication, and avert conflicts. The United States and China also need to put in place rules to manage disagreements in areas such as maritime, space, cyber, nuclear, and AI. This is not just a bilateral issue; countries around the world would be affected by conflict and so expect the United States to engage in continuous, constructive dialogue.
Thus, China’s use of military dialogue as leverage—halting talks to signal displeasure or attempting to influence U.S. policies, such as arms sales to Taiwan—may score tactical points but raises the risk of miscommunication and misunderstanding and undermines its reputation globally. Similarly, calling Beijing out when it shuts down communication channels is not just the responsible thing to do—it also bolsters the U.S. image as a responsible actor.