China Expands Secret Nuclear Facilities Amid Global Security Concerns

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The Pentagon says China crossed 600 warheads by end of 2024. 

The target? 1,000 by 2030.

Now here's the part the mainstream financial press is still sleeping on: the last nuclear arms control treaty between the U.S. and Russia just expired. There is no replacement. 

China was never in it. The regulatory guardrails are gone and Washington's defense budget just crossed $900 billion, with a $1 trillion proposal already on the table.

So the question isn't whether the defense spending supercycle is real. The question is whether your portfolio knows it yet.

In the mist-covered mountains of Sichuan Province, China is moving fast. New satellite imagery analyzed between 2022 and 2026 confirms major construction activity at two previously known, but quietly upgraded, nuclear weapons sites. 

The findings, shared by geospatial intelligence expert Renny Babiarz with The New York Times, put a hard number on something defense analysts have suspected for years: Beijing's nuclear expansion has shifted from gradual to aggressive.

The first site, Zitong, sits deep in a Sichuan valley. Engineers have been building new bunkers and defensive ramparts. A freshly built complex there is bristling with extensive piping infrastructure, the kind consistent with handling highly hazardous materials. Harvard physicist Hui Zhang, who reviewed Babiarz's findings, confirmed what that pattern likely means: high-explosives testing to perfect the implosion systems at the core of modern nuclear warheads.

The second site, Pingtong, is even more telling. It's a double-fenced facility with a 360-foot-high ventilation stack. Experts believe this is where China is manufacturing the plutonium cores, the "pits," that sit at the heart of every nuclear warhead. New air-handling equipment, heat dispersers, and fresh construction surrounding the main structure all point to an accelerated production timeline.

 Above the facility's entrance, a Xi Jinping slogan is painted in characters large enough to be visible from space: "Stay true to the founding cause and always remember our mission."

Timing is everything. The last remaining nuclear arms control treaty between the United States and Russia, New START, expired earlier this month. There is no replacement. 

Washington wants any successor agreement to include China. Beijing has shown zero interest. The regulatory vacuum is now complete.

The Pentagon's latest estimate puts China at more than 600 warheads by end-2024, on track to reach 1,000 by 2030. That's still well below the U.S. and Russian stockpiles, but the rate of growth is what's alarming analysts. "Without a real dialogue on these topics, which we lack, it's really hard to say where it's going, and that, for me, is dangerous," said Matthew Sharp, a former State Department official now at MIT's Center for Nuclear Security Policy.

The Sichuan sites themselves are not new, they were originally built 60 years ago as part of Mao Zedong's "Third Front," designed to hide China's nuclear infrastructure deep in mountains away from potential U.S. or Soviet strikes. What's new is the pace and scale of recent upgrades. Babiarz noted that change accelerated starting in 2019, and has not slowed since.

RAND analyst Michael Chase frames the strategic logic clearly. China's objective is reducing U.S. leverage through nuclear coercion, a calculation that carries direct relevance to any scenario involving Taiwan, even a purely conventional conflict.

None of this happens in a vacuum from a market perspective. The U.S. Congress approved $900.6 billion in defense spending for fiscal 2026. 

President Trump has proposed a $1.01 trillion budget for FY2026, a 13% increase. NATO allies have committed to spending 5% of GDP on defense by 2035, a number almost no NATO member currently hits. Each of these pressures creates a durable, multi-year demand signal for defense contractors, aerospace suppliers, and the ETFs that hold them.

The Sichuan revelations add urgency to a trend that was already in place. When satellite images confirm adversary nuclear expansion at the same moment arms control collapses, defense budget debates move quickly. 

Appropriations follow threat assessments. And right now, the threat assessment for China is being revised upward.

Five ETFs capture this theme in meaningfully different ways.

ITA (iShares U.S. Aerospace & Defense) remains the largest pure-play in the space, with $15.1 billion in AUM and a 1-year return of 52.44%. It anchors on large-cap primes: RTX, Boeing, Lockheed Martin, which hold the biggest government contract exposure.

XAR (SPDR S&P Aerospace & Defense) takes a different angle, using an equal-weight approach that amplifies mid- and small-cap exposure. It's outperforming ITA YTD, up 12.69% vs. ITA's 8.63%, as smaller contractors benefit disproportionately from new contract awards.

PPA (Invesco Aerospace & Defense) sits between the two, offering broader exposure that includes emerging segments like cybersecurity and space tech alongside traditional defense primes.

For investors who want to express conviction with more leverage, DFEN provides 3x daily exposure, but it's a tactical tool, not a core holding.

And for the geopolitically sophisticated, SHLD (Global X Defense Tech ETF) has been the standout performer, with a 1-year return exceeding 101%, concentrating on the intersection of AI, cybersecurity, and military technology where future defense budgets are flowing fastest.

Portfolio Framework:

Defense ETFs are not a clean one-way trade. Budget cycles can shift, especially in an election-adjacent environment. Satellite imagery, while compelling, doesn't confirm the ultimate production goal: expansion of infrastructure does not automatically equal expansion of warheads. And defense stocks have already had a strong multi-year run. ITA is up 52% over the past year. Valuations are stretched in pockets of the sector.

There's also a concentration risk. ITA's top five holdings represent more than 54% of the portfolio. A single earnings miss from RTX or Lockheed can move the fund significantly. And while geopolitical tension supports the defense narrative, de-escalation or diplomatic breakthroughs, however unlikely they look today, would create sharp drawdowns across the sector.

China is building 1,000 warheads by 2030, in secret mountain facilities now exposed by satellite imagery, at a moment when global arms control has collapsed — that is a structural, durable catalyst for defense spending. It doesn't resolve in one quarter. It resolves over years.

For investors with a 3–5 year horizon, the defense ETF space offers one of the more defensible growth theses in the current market. The numbers from Sichuan just made that case stronger.

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Disclaimer: This is not financial or investment advice. Do your own research and consult a qualified financial advisor before investing.