“Instead of fixating on Beijing, or worse, emulating China’s top down, inefficient, state driven approach to R&D, the US government can use this announcement [of China’s military spending plans] as a further nudge to get our own innovation house in order,” said Anja Manuel, a former diplomat and partner at Rice, Hadley, Gates & Manuel, a strategic consulting firm.

“We could also give smart tax credits to the most important technologies,” she said. “Currently I think you can get roughly the same R&D tax credit for developing a new craft beer and a new microchip.”

At a time when overall central government spending – not counting transfers to local governments – is on course to decline, albeit by a modest 0.2 per cent, military spending will rise to 5.4 per cent of the national budget in 2021 from 5.1 per cent in 2020, the highest portion in several years, according to the report.

Others said the impact of China’s growing assertiveness, drive and determination was not limited to Washington.

“China’s increased military spending, and related science and technology spending increases, should be taken seriously by policymakers in Washington, as well as by policymakers in Japan, South Korea, Australia, and other countries in the Indo-Pacific,” said Rockford Weitz, a professor at the Fletcher School of Law and Diplomacy at Tufts University and director of the school’s maritime studies programme.

The stakes were rising as sea and air space were more frequently contested in the East and South China seas, he said.

“The US and its allies in the Indo-Pacific will need to keep pace with those investments,” Weitz said.

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“China also is doing very well in unmanned air, sea and ground vehicle programmes and working on intelligent swarming for them. The AI and quantum work will contribute to that.”

The CSIS report said China was also catching up with the US in conventional warfare capabilities. This, it said, had “increased the risk of conflict, including the potential for a more confident and emboldened China seeking to unilaterally change the status quo through the threat or the use of force”.

Notably missing from Friday’s announced military budget were details about specific spending priorities. China also funds many military activities in other parts of its overall budget that tend to mask the true scope of its defence procurement.

These include spending on the paramilitary People’s Armed Police and coastguard, space programmes, and revenue from military-owned commercial enterprises, defence mobilisation funds and sales of land, as well as recruitment bonuses for college students and provincial military base operating costs, according to the CSIS.

“Quantum engineering translates into encryption and improved artificial intelligence, both of which are Xi Jinping’s military development priorities.”

A top Republican on the Senate Armed Services Committee called on the US to step up its own spending in response. Even as the Pentagon has seen a reduction of US$400 billion in “buying power” since 2011, the PLA added more than US$200 billion, Senator Jim Inhofe of Oklahoma said.

“This kind of sustained investment has helped China jump ahead of us in key technologies,” he said. “If America wants to stand up to China, it’s going to take not just working with our allies and partners, but real investment of our own – into innovative capabilities and the forward posture that will send a strong message of deterrence.”

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Wortzel said some spending this year was likely aimed at mitigating the effects of Trump administration restrictions on exports to China and the crackdown on Chinese military students attending US universities.

“That means that the PLA and defence industries cannot get the technologies they relied on from intellectual property theft or espionage,” he said. “The Biden administration will probably not lift those restrictions.”

The State Department confirmed the new administration’s concern about US technology being diverted to the PLA.

“We have to play a better defense, which must include making sure that American technologies are not facilitating China’s military buildup or human rights abuses,” a representative of the department said. “The rapid development and operational focus of China’s military constitutes a significant and long-term security threat to the United States and to our allies and partners.”

China’s outsize military-civilian ambitions have also been hampered by its inability to buy US companies and technology as laws and administrative vetting is stepped up and more diligently enforced, including by the Committee on Foreign Investment in the United States.

“This deprived China’s military and defence industries of access to US defence or dual use technology as well as to some joint venture programmes or investments in the US,” Wortzel said.

Various groups have tried to estimate China’s actual defence spending. The Stockholm International Peace Research Institute (SIPRI) estimated that in 2019 Beijing spent nearly 40 per cent more than the official amount, while the US Department of Defence has reported that China’s actual spending could exceed US$200 billion.

“Compared to many countries, especially democracies, China is far less transparent about how it allocates its defence spending,” the CSIS said.

“Although estimates vary, China’s military spending is the second highest in the world after the United States,” it said.

“According to SIPRI, China’s military spending far exceeds that of its neighbours and was greater than the combined expenditure of India, Russia, Japan, South Korea and Taiwan in 2019.”