China is reaching “near-parity” with the West in terms of military technology and its defense expenditure is currently topped only by U.S., which spent $604.5 billion on defense last year, the International Institute for Strategic Studies (IISS) said in a report Tuesday.

Beijing’s total 2016 defense budget was $145 billion, which is 1.8 times higher than South Korea and Japan combined, according to the IISS report.

"China's military progress highlights that Western dominance in the field of advanced weapons systems can no longer be taken for granted," IISS director John Chipman said Tuesday, according to Agence France-Presse.

"An emerging threat for deployed Western forces is that with China looking to sell more abroad, they may confront more advanced military systems, in more places, and operated by a broader range of adversaries," Chipman added.

The country’s air force had started working on a "highly capable" short-range missile in a class only few countries leading in aerospace technology have been able to develop, according to IISS.

Furthermore, military exports to Africa last year "were moving from the sale of Soviet-era designs to the export of systems designed in China." The report said that China "appears to be reaching near-parity with the West," and that Chinese-manufactured drones are being used in Nigeria and Saudi Arabia.

The report also stated that European countries are "only gradually" increasing their defense expenditure.

"While Europe was one of the three regions in the world where defense spending rose in 2015-16, European defense spending remains modest as a proportion of the continent's GDP," according to the report.

The IISS said in its report that Russia remained the "principle security concern" with $60 billion in defense spending. It noted that Russian military equipment surpasses the missile and rocket arms systems of the U.S., which is NATO's most capable power.

"The Kalibr cruise missile, for instance, is being fitted to an array of Russian naval vessels — including an arctic patrol vessel," the report said.