Tag: military
Bi-Weekly Geopolitical Report – Update on US and China Defense Spending (August 11, 2025)
by Patrick Fearon-Hernandez, CFA | PDF
In our Mid-Year Geopolitical Outlook, we reminded investors that President Trump’s import tariffs aren’t the only issue between the United States and China, despite the media frenzy surrounding them so far this year. We warned that even as the trade dispute persists, China is continuing to press for geopolitical advantage by beefing up its armed forces, pushing an all-of-nation effort to surpass the US in science and technology, and launching a diplomatic charm offensive to exploit the US’s weaker image as it cuts foreign aid, reduces its support for allies, and erects across-the-board trade barriers.
In this report, we focus on the US-China military rivalry from the perspective of “defense economics,” i.e., the impact of a country’s overall economic strength on its military effort and the impact of its military effort on the economy. Even though China is now facing significant, structural economic headwinds, we show that its high defense spending and relative fiscal flexibility will probably make it more challenging for the US to defend its position as the global hegemon. As always, we wrap up with the implications for investors.
Don’t miss our accompanying podcasts, available on our website and most podcast platforms: Apple | Spotify
Bi-Weekly Geopolitical Podcast – #66 “Update on the US-China Military Balance of Power” (Posted 5/16/25)
Bi-Weekly Geopolitical Report – Update on the US-China Military Balance of Power (May 12, 2025)
by Daniel Ortwerth, CFA | PDF
In early 2021, we published a series of reports assessing the overall balance of power between the United States and China in military, economic, and diplomatic terms. In early 2023, we provided an update to our analysis. The current report is the next in what we intend to be a biennial series on the subject. Looking comprehensively at both countries’ power and sources of power, we assess that, while the US retains the greater military capacity to influence the world and protect its interests, China continues to close the gap, perhaps at an accelerating pace. For example, China continues to expand its lead in the number of combat-capable ships in its navy, it has gained valuable operational experience, and it can deploy enormous forces to the South China Sea, the East China Sea, and the Taiwan Strait. China’s coastal military forces are now strong enough to potentially deter the US from intervening in a crisis around Taiwan.
In this report, we provide an update to the numerical comparison and our analysis of China’s military development over the last two years. We emphasize critical areas such as China’s continuing buildup of its strategic nuclear arsenal and how that could spur a destabilizing new global arms race. We conclude with the implications for investors.