Published date: 12th August 2025 | Author: Jane Edmondson
The Indo-Pacific region includes the countries of Australia, India, Indonesia, Japan, New Zealand, the Philippines, Singapore, South Korea, Taiwan, and Thailand. The region has become an area of rising strategic importance due to China’s global military expansion, ongoing tensions in the South China Sea related to uncertainty about Taiwan, and, most recently, an escalation of tensions between India and Pakistan. NATO, the United States, and its allies have identified the Indo-Pacific region as a top defence priority. This has translated into record-high defence budgets, new joint cooperation frameworks such as AUKUS, the U.S.-Japan (USJF) Alliance, and the U.S.-India TRUST, and a renewed focus on technological innovation and capacity expansion.
The Indo-Pacific defence market constituted 22% of the world’s total global defence expenditures in 2024.1 China’s defence spending amounts to 46% of the region’s total, followed by India, Japan, and Taiwan, combining for a total of 26%. While currently 65%-70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective, with the potential to equip other countries in the region. Defence industrial bases of smaller — but growing — capability are also being cultivated in Australia, Indonesia, Malaysia, Thailand, and Vietnam.
The Indo-Pacific region constituted 22% of the world’s global military expenditures in 2024. China’s defence expenditures amounted to 46% of the region’s total spending on defence, with India, Japan, and Taiwan combining for 26%.2 While currently 65%-70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective, with the potential to equip other countries in the region.
For illustrative purposes only.
Future of Defence Indo-Pacific ex-China UCITS ETF (QUAD) aims to provide exposure to Indo-Pacific defence spending, ex-China.
China’s military expansion has kick-started the most significant rearmament drive in the Indo-Pacific since the Cold War. In response, countries from India to Japan are not only increasing defence budgets but also accelerating efforts to localise arms production.
This shift – from imports to domestic sourcing – presents a growing opportunity for Indo-Pacific defence companies.
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