Even the most casual observer seems to know that China's economy has been growing at a roughly 10% annual rate for much of the past decade. Less recognized and arguably more important to the state of the world is the fact that China's defense spending rose even faster than that -- 12% or more a year between 2000 and 2009.

"The accelerating pace of China's defense budget increases is driving countries in the region, as well as the U.S., to react to preserve a balance of power and stability," says Jacqueline Newmyer, head of...