S. Defense Department report says China's military continues to build longer-range capabilities designed to extend the reach of its power to influence regional disputes.
That's not gone unoticed in South East Asia where spending is up on submarines and naval bases. As China gains influence, countries across the region are modernising their military and watching their neighbours. South-east Asia's strategic environment is more uncertain now than it has been in decades.
Presenter: Matt Abud
Malcolm Cook, Director, East Asia Program, Lowy Institute; Andrew Davies, Director, Operations and Capability Program, Australian Strategic Policy Institute
ABUD: Submarines, fighter planes and upgrades across the board ... South East Asia's new weapons are more sophisticated, more powerful - and more expensive - than ever before. Malcolm Cook from the Lowy Institute says purchases from Malaysia and Vietnam are among the most striking.
COOK: For Malaysis and Vietnam that have got most attention is their purchases of attack submarines, both have about fourteen attack submarines and have or are going to or have based them in the South China Sea to increase their ability to defend their claims there. Vietnam's also agreed to purchase six kilo class Russian submarines as well, again probably focused on their claims in the South China Sea.
ABUD: Nearby Singapore is building up its port so that it can take aircraft carriers - and in the region, only the US uses those. This means countries are stocking up on arms that allow them to project their power further in the region. Mr. Cook says neighbours are watching each other closely. But China's rise is the biggest consideration.
COOK: Everybody in the region is worried that east asia's strategic future is not as stable as it has been, with China's rising military might the key factor, and everybody's kind of hedging against that.
ABUD: The South China Sea is a prominent flashpoint here, with China, Vietnam, and Malaysia three countries with territorial claims in the area.
COOK: Once a decade the South China Sea comes back in its place but certainly in March this year China started to refer to the South China Sea as a core interest, the first time it has done that, and that certainly limits China's ability in terms of managing the South China Sea and probably raises tensions.
ABUD: US Secretary of State Hillary Clinton recently called for disputes to be resolved cooperatively - the first time the US has explicitly not recognised China's sovereignty. Some reports say smaller countries are getting closer to the US to balance against China. And this week the Pentagon reported that China has boosted its advantage over Taiwan - raising the risk, it said, of misunderstanding and miscalculation. But if all this looks like the start of an arms race - then looks can be deceiving. In spite of the uncertainty, South-East Asian countries aren't spending a higher percentage of their GDP on weapons. Some are actually spending less.
Andrew Davies from the Australian Strategic Policy Institute says South-East Asia is paying attention, but certainly showing no signs of panic over China's rise.
DAVIES: South East Asian countries are now richer than they were, and they can afford the sort of sophisticated militaries that countries like Western European nations have had for decades. But another factor is that the internal stability of South East Asia has mostly improved - Thailand has some problems at the moment - but generally speaking if you look at South East Asia today compared to twenty, thirty years ago, the internal stability has improved to the point where nations can start looking outwards rather than inwards.
ABUD: But risks still exist.
DAVIES: It certainly has some problems associated with it, one of which is that you have a bunch of nations who are inexperienced about operating power projection capabilities, and they'll be bumping up against one another in a region with a bunch of contested claims. Now all of that should be manageable, but certainly there is the potential for some friction there.
ABUD: No matter what happens, regional powers are gaining strength - and that means US dominance will change.
DAVIES: The US is certainly well-aware that the rise of Chinese power is a challenge to them. And the latest four-yearly defense review started to openly broach the subject of what the US can do in areas where another country's trying to deny them access. Now that was coded language for operating in the South China Sea. But the truth of the matter is that ultimately the geographical advantages means that it will be very hard for the US to do that. So it will be more about accommodation than conflict.
ABUD: Change is on the way - and the biggest risk is simply uncertainty about what happens next.