STOCKHOLM, Sweden - World governments spent a record $1.46 trillion on upgrading their armed forces last year despite the economic downturn, with China climbing to second place behind top military spender the United States, a Swedish research group said yesterday.

Global military spending was 4 percent higher than in 2007 and up 45 percent from a decade ago, the Stockholm International Peace Research Institute, or SIPRI, said in its annual report.

"So far the global arms industry, booming from the wars in Iraq and Afghanistan and from spending increases by many developing countries, has shown few signs of suffering from the crisis," SIPRI said.

The report added, however, that arms companies may face reduced demand if governments cut future military spending in response to rising budget deficits. It also noted U.S. arms purchases - by far the highest in the world - were expected to rise less rapidly under President Obama after sharp growth during the Bush administration.

U.S. military spending increased nearly 10 percent in 2008 to $607 billion and accounted for about 42 percent of global arms spending, SIPRI said.

The United States was followed for the first time by China, which increased its military spending by 10 percent to an estimated $84.9 billion, SIPRI said. The report noted that China's military spending was hard to pinpoint because the official defense budget was deemed by Western defense analysts to be considerably lower than actual spending.

SIPRI researcher Sam Perlo-Freeman said China's increased spending did not make it the world's second-strongest military power "because a lot of other countries have been at this game for a lot longer than China."

"While they are certainly seeking to increase their regional and global influence," he said, ". . . there is very little evidence of any hostile intent in terms of the region."

The report said China was seeking to equip its armed forces for modern warfare involving the use of precision weapons and high-tech information and communications technology.

France narrowly overtook Britain - last year's No. 2 - for third place, and Russia climbed to fifth place from seventh in 2007, SIPRI said.

SIPRI estimated that there are 8,400 operational nuclear warheads in the world, 2,000 of which are kept on high alert and capable of being launched in minutes. The total number was down from 10,200 a year earlier, primarily due to the quick withdrawal of warheads by Russia and the United States under limits set by bilateral treaties.