China Just Scared the S#!t Out of Europe

The war in Ukraine has been eye-opening in the sense that new AI and drone technology is being battle-tested for the first time ever.

Similarly, the conflict between India and Pakistan has proven to be a crucible of its own — but for Chinese weapons.

You see, Pakistan has been moving away from U.S. weapons platforms and embracing new military hardware coming out of China.

Now that it’s come to blows with India, we’re seeing just now what Chinese weapons perform in live combat situations, and the early results have been… disconcerting.

Last week, Pakistan deployed Chinese fighter jets like the J-10C and JF-17 Thunder, as well as the HQ-9 air defense system to shoot down Indian fighter jets and drones.

Among the apparent victims were three Rafale jets — a top-of-the-line French fighter manufactured by Dassault Aviation.

This is noteworthy for a few reasons…

First, it shows that China’s weapons platforms are indeed formidable. Up to this point, they hadn’t been battle-tested. Now they have.

It also vindicates Pakistan’s decision to pivot away from Western weapons platforms and source more defense products from China.

China accounted for 82% of Pakistan’s arms imports from 2019–2023, according to the Stockholm International Peace Research Institute (SIPRI).

Some of those purchases included the aforementioned J-10C Vigorous Dragon (which replaced the U.S.-made F-16) and an array of surface-to-air missile (SAM) systems, including the HQ-9P, LY-80, FD-2000 and FM-90. These platforms now serve as the foundation for Pakistan’s air defense.

Pakistan has also benefited from China’s space assets. It’s launched satellites from Chinese facilities, and in 2018, it became the first outside nation to gain access to BeiDou’s military-grade position, navigation, and timing data, which increases the precision of missiles, aircraft, and ships.

And then there are the drones. China is the world’s leading drone manufacturer, so it’s no surprise Pakistan has placed bets on UAVs like the CH-4 and Wing Loong II to enhance its intelligence, surveillance, and reconnaissance capabilities.

In addition to proving themselves capable, Chinese defense manufacturers also stand to gain financially from this performance.

The United States dominates international arms trade, accounting for 43% of the global arms exports. China ranks fourth behind Russia and France, accounting for just under 6%.

Obviously, China is nowhere near closing that gap. However, there are plenty of hostile nations out there — Russia, North Korea, Iran, etc. — that have been frozen out of U.S. defense technology.

China will be eager to fill the void among pariah nations, pretty much ensuring that it leapfrogs both Russia and France in the next few years.

And in fact, that shift is already being reflected in the market. While shares of Dassault plunged on news of its jets being downed, shares of AVIC Chengdu Aircraft Co., maker of the J-10C aircraft, spiked 20% higher.

Of course, U.S. defense contractors have something to gain here too…

Unnerved by Russia’s invasion of Ukraine, Europe has been ramping up defense spending to levels not seen since the Cold War. And while U.S. weapons platforms have been the standard for decades, President Trump’s punitive tariff policies, contempt for Europe, and threats to abandon NATO have many U.S. allies second-guessing their reliance on American weapons.

Many policymakers would like to see Europe resurrect its own military-industrial complex. However, that’s not likely to happen any time soon. So they’re stuck with us.

And that may not be a bad thing for either party.

Remember, those were Dassault Rafale jets that got shot down — not F-35s.

Which is to say China’s J-10 absolutely passed a critical performance test, but it didn’t exactly win the Super Bowl of dogfights. Despite China’s advances — especially in cutting-edge fields like drones and hypersonics — American weapons are still broadly the most sophisticated, capable, and lethal weapons on the planet.

So if European powers are shaken by China’s technological advancement or disappointed in the European fighter’s performance, there’s only one place to turn.

That’s why U.S. defense contractors stand to gain the most from this new global arms race.

And if you want to profit you should check out my latest report on the most cutting-edge defense tech right here.