In an effort to challenge China, the United Kingdom, the United States, and Australia have established an unprecedented security alliance in the Asia-Pacific.
For the first time, it will allow Australia to build nuclear-powered submarines using US technology.
According to observers, the Aukus contract, which will also embrace AI and other technologies, is one of the largest defense cooperation in decades.
The arrangement has been branded "extremely irresponsible" by China.
It "seriously undermines regional peace and stability and intensifies the arms race," according to Zhao Lijian, a spokeswoman for the Chinese foreign ministry.
The countries are accused of having a "Cold War mentality and ideological prejudice," according to China's embassy in Washington.
The agreement also caused a rift with France, which has now lost a contract to build 12 submarines with Australia.
"It's really a stab in the back," said French Foreign Minister Jean-Yves Le Drian on France Info radio.
On Wednesday, US President Joe Biden, UK Prime Minister Boris Johnson, and his Australian counterpart Scott Morrison held a joint virtual press conference to launch the new cooperation.
While China was not specifically named, the three presidents made several references to regional security issues, which they stated had "grown significantly".
China is "embarking on one of the biggest military spends in history".according to UK Defence Secretary Ben Wallace, speaking to the BBC.
"It is growing its navy [and] air force at a huge rate. Obviously, it is engaged in some disputed areas," he said. "Our partners in those regions want to be able to stand their own ground."
Beijing has been accused of inflaming tensions in disputed areas such as the South China Sea in recent years.
On Thursday, UK Prime Minister Boris Johnson said the agreement would "preserve security and stability around the world" and generate "hundreds of high-skilled jobs".
He also stated that the United States' relationship with France was "rock solid."
According to commentators, the Aukus alliance is the most significant security agreement between the three countries since World War II.
The partnership will concentrate on military capabilities, distinguishing it from the Five Eyes intelligence-sharing cooperation, which also includes New Zealand and Canada.
While Australia's submarines are the main focus, Aukus will also include cyber capabilities and other subsea technology.
"This is a historic opportunity for the three nations, with like-minded allies and partners, to protect shared values and promote security and prosperity in the Indo-Pacific region," the joint statement read.
"This really shows that all three nations are drawing a line in the sand to start and counter [China's] aggressive moves in the Indo-Pacific," said Guy Boekenstein from the Asia Society Australia.
Western governments have expressed concern about China's infrastructure investments on Pacific islands, as well as China's trade penalties against countries like Australia.
In the past, Australia and China, its largest trading partner, had cordial relations. However, the relationship has deteriorated in recent years as a result of political conflicts.
However, tensions have arisen with France as a result of Australia's cancellation of the A$50 billion (€31 billion; £27 billion) plan to build 12 submarines.
"We had established a relationship of trust with Australia, this trust has been betrayed," Mr Le Drian said.
These submarines are much faster and more difficult to detect than fleets powered by traditional engines. They can stay submerged for months, launch missiles farther, and carry more cargo.
Analysts believe that having them stationed in Australia is crucial to US dominance in the region.
For the first time in 50 years, the United States is sharing its submarine technology. Previously, it had solely shared technology with the United Kingdom.
After the United States, the United Kingdom, France, China, India, and Russia, Australia will be the seventh country in the world to operate nuclear-powered submarines.
Australia has stated that it has no plans to acquire nuclear weapons.
Meanwhile, New Zealand announced that Australia's submarines would be prohibited from entering its seas, in accordance with an existing policy prohibiting the presence of nuclear-powered submarines.
Despite being a member of the Five Eyes, New Zealand has been wary of partnering with either the US or China in the Pacific.
Jacinda Ardern, the Prime Minister of New Zealand, said her country has not been approached about joining the deal.
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