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During the 1990s, military spending, arms procurement and defence industrialisation have all increased rapidly in East Asia. Although these developments do not constitute an arms race, they nevertheless have important implications for suppliers of defence equipment, for arms control and for regional stability. This paper assesses trends in the defence spending of East Asian states, particularly in the light of the economic crisis, which began in mid-1997. It also focuses on three closely-related issues: the nature of the regional market for defence equipment; defence industrialisation; and the effect of trends in defence procurement and industrialisation on East Asian states' military capabilities, and on the regional military balance.