China spent $165 billion on its military in fiscal year 2014, sticking to a two-decade trend of growth that continues to worry the Defense Department, according to the Pentagon's latest report on China's military power . "China's military modernization has the potential to reduce core U.S. military technological advantages," the report states. "China's officially-disclosed military budget grew at an average of 9.5 percent per year in inflation-adjusted terms from 2005 through 2014, and China will probably sustain defense spending growth...