"China is the second largest defence spender in the world next to the United States and recently displayed new modern capabilities including nuclear weapons," NATO Secretary General Jens Stoltenberg said ahead of their talks on Wednesday.

"This provides both opportunities but also challenges," he added.

The leaders are meeting at a luxury golf resort in Watford, 25km northwest of London, for three hours of formal talks.

The summit started on Tuesday with a reception hosted by Queen Elizabeth II. Earlier, several leaders held bilateral meetings.

Other issues on Wednesday's agenda include the fight against terrorism, arms control and relations with Russia, Stoltenberg said.

The 29 allies are to formalise around 50 decisions adapting NATO to a changing global security environment. This includes recognising space as a fifth operational domain alongside land, air, sea and cyber.

They will issue a joint declaration reiterating allies' commitment to collective defence, nuclear deterrence, increased defence spending and NATO's open door policy which should see North Macedonia soon join as its 30th member.

The alliance has been shaken by French President Emmanuel Macron's recent criticism about the "brain death" of NATO, in the wake of US and Turkish military action in northeastern Syria that threatened advances made against the Islamic State extremist group.

The issue dominated Tuesday's talks, as US President Donald Trump lashed out at Macron's "very, very nasty" and "insulting" remark. The French president refused to back down, however, arguing that NATO must prioritise these strategic issues over disputes about burden sharing.

The recent disagreements have raised questions about NATO's iron-clad mutual defence clause, which is particularly important to countries close to Russia, such as the Baltic states and Poland.

Estonian Prime Minister Juri Ratas stressed on Wednesday that the alliance remains strong.

"NATO's deterrence is 100 per cent credible," he said, adding that trans-Atlantic relations are a "cornerstone" for security across the alliance.

NATO is "the most important alliance in the world," added Polish President Andrzej. "This alliance guarantees freedom and security."

British Prime Minister Boris Johnson, who is hosting the summit in the midst of an election campaign, said the commitment to NATO was "rock solid," stressing that the alliance provided "safety in numbers."

"There is far, far more that unites us than divides us," Johnson added.

In their summit declaration, the leaders are to pave the way for a "forward-looking reflection process" to strengthen NATO's political dimension.

Meanwhile, Stoltenberg said he was confident of resolving a spat with Turkey, which has threatened to block new defence plans for Poland and the Baltic states if NATO allies do not recognise the terrorist threat it perceives from Kurdish groups in north-eastern Syria.

"I am confident that we will be able to also find a solution to the issue related to updating the revised defense plans," Stoltenberg told journalists, adding that he had discussed the issue with Turkish President Recep Tayyip Erdogan the previous night.

Australian Associated Press