Every year, the Stockholm International Peace Research Institute (SIPRI) releases data on arms exports. In its most recent report, issued in March, SIPRI calculated that China sold 4.6 % of international weapon exports from 2017-21.
Interestingly, this compared to China’s 6.4% share of the global arms market in the preceding five-year period. This represented a 31% drop for China in terms of global arms sales, considerably lower than the 4.6% drop in global arms sales in 2017-21 compared to 2012-16.
In fourth place from 2017-21, China trailed only the USA, Russia and France. However, it came in ahead of traditional heavyweights such as Germany, Italy and the United Kingdom. Nearly half of Chinese weapon exports – 47%, in fact – went to closest ally Pakistan, while Beijing’s next largest clients were Bangladesh and Thailand at 16% and 5% respectively.
Islamabad’s dependence on China is in large part due to deteriorating relations with other countries, particularly the USA. Important Pakistani buys include J-10C and JF-17 fighters, SH15 155mm truck-mounted howitzers, VT4 tanks, HQ-16 and HQ-9 SAMs, Type 054A/P frigates and Hangor-class submarines.
In all, some 79% of Chinese arms exports were destined for Asia in 2017-21. In this timeframe, 48 different countries procured Chinese equipment. Given the relative strength of China’s position on the arms export table, it is perhaps surprising that China also appeared fifth in the international list of arms importers, behind India, Saudi Arabia, Egypt and Australia.
In 2017-21, China soaked up 4.8% of global arms imports, compared to 2012-16 when it imported 4.4%. SIPRI reported that 81% of China’s most recent imports came from Russia, while 9.1% emanated from France and 5.9% from Ukraine.
At this point, it is important to issue a caution about SIPRI’s data. The appearance of France is odd, and is mostly because SIPRI attributes helicopter sales to France, even though Airbus Helicopters claims not to be selling or licensing military helicopter sales to the People’s Liberation Army (PLA) anymore.
SIPRI noted: “Chinese arms imports remained stable between 2012-16 and 2017-21, and mainly came from Russia in both periods. However, China’s arms imports are likely to decrease in the next few years as its industry is now capable of producing most types of major arms.”
China is known as a supplier of affordable and functional military equipment, including small arms, armored vehicles, artillery, naval vessels, aircraft and missiles. This image has begun to change as China starts exporting higher-end equipment as it climbs higher up the value chain. Examples are the sale of 36 J-10C fighters to Pakistan, and the recent delivery of HQ-22 (FK-3) surface-to-air missiles (SAM) to Serbia.
It remains to be seen how dramatically President Vladimir Putin’s invasion of Ukraine will impact Russian arms sales. From 2016-21, Russia was the world’s second-largest arms supplier, accounting for 19% of global exports. However, this represented a 26% drop compared to the preceding five years.
Undoubtedly, Russian sales will be hit by its war. Some countries will be put off dealing with Moscow and the fear of Western sanctions, plus Russian industry will struggle to produce equipment at rates it did previously as it faces the impact of sanctions. Electronic componentry and microchips will be more difficult to source, for instance. There are already unverified reports that some Russian arms plants have been forced to cease production as they struggle to source components.
Russian defense industry’s growing plight may open the door to some countries changing allegiance from Russia to China when they next go about buying military equipment. However, this is unlikely to represent a major boom for Chinese military exports.
In a piece for The Jamestown Foundation, John S. Van Oudenaren and Yani Najarian wrote: “Given Russia’s clientele of authoritarian or hybrid regimes in Asia, the Middle East, Africa and Latin America, China would seem a logical candidate to fill in the gap. Upon closer examination, however, many of the major buyers of Russian arms appear unlikely to replace these purchases in favor of Chinese imports. Particularly since major Western arms exporters such as the US and France have shown little compunction about exporting advanced military technology to authoritarian regimes in the Middle East and Africa, and are likely to capture much of any market share lost by Russia.”
Furthermore, it should be remembered that Russia’s major arms clients include India and Vietnam, both of which will never buy from China. Others like Egypt and Algeria could be more amenable to buying from China, however.
Buying Chinese does come with attendant customer risks, however. China, like Russia, is not renowned for aftersales support, and equipment can rapidly decline into non-functional machinery. The more sophisticated the equipment it sells, the more maintenance support it will require from China.
As an example, Jordan put its Chinese-manufactured CH-4 armed drones up for sale less than two years after buying them. Other nations such as Morocco, Nigeria and Turkmenistan have also moved on from Chinese armed drones to Turkish ones.
A RAND Corporation study entitled “Defense Acquisition in Russia and China” stated: “The design of Chinese defense contracts also does little to encourage transparency and accountability. The language of contracts is simplistic and perfunctory, without clear technical or schedule obligations, which is unsurprising given that there is no formal legal authority in the defense industry to adjudicate contract fulfillment.”
China itself is under American and European military sanctions, and this certainly affects exports. Right now, Thailand is awaiting its first S26T submarine from China, with delivery delayed, first by COVID-19, and then by the fact that Germany refuses to sell diesel engines to China for the vessel.
Nonetheless, when it does export military equipment, money earnt can be plowed back into more weapons and equipment for the PLA. The same principle applies to other activities such as commercial shipbuilding, which benefits naval shipbuilding as a natural byproduct.
China is a major producer of cargo vessels, with one state-owned firm – the China State Shipbuilding Corporation (CSSC), which controls more than 100 subsidiaries – accounting for 21.5% of the global shipbuilding market.
As well as its commercial activities, CSSC claims it is the “main force” in developing naval weapons for the PLA Navy. The PLAN is already the world’s largest navy in terms of hull numbers, and its warships continue to grow in sophistication and capability.
The US-based Center for Strategic and International Studies (CSIS) reached some interesting
conclusions about crossovers between the commercial and naval arms of CSSC activities. Indeed, it stated, “CSSC is a linchpin in Beijing’s military-civil fusion strategy, which aims to upgrade the PLA and level up China’s military science and technology industries while simultaneously strengthening instruments of national power across the board.”
In November 2020, then President Donald Trump issued an executive order prohibiting US individuals and companies from doing business with 31 Chinese firms with links to the PLA, one of which was CSSC. Four of its subsidiaries are the Dalian, Jiangnan, Hudong-Zhonghua and Huangpu Wenchong shipyards. From 2019-21, these four shipyards received contracts for at least 211 commercial vessels, 64% of which were overseas orders.
Right now, Jiangnan shipyard is building China’s Type 003 aircraft carrier, whose launch has
been delayed because of Shanghai’s lockdown and COVID-19 prevention measures. Immediately adjacent to the carrier is a container ship being built for the Evergreen Marine Corporation, one of three under construction for the Taiwanese company at Jiangnan. Evergreen has bought at least 44 commercial vessels from China since 2018.
This is somewhat ironic, with Taiwan, which is under severe military threat from China, funding Chinese ship construction. CSIS noted: “It should raise more than a few eyebrows in Taipei that Taiwan’s premier shipping company is pouring money into the coffers of shipyards assembling warships for the Chinese navy.”
Taiwan is not the only repeat customer for commercial vessels. French shipping firm CMA CGM has ordered at least 46 vessels since 2017. Technological know-how is changing hands too. For example, French-based naval engineering company Gaztranport & Technigraz SA reached several agreements to exchange technology with Chinese shipbuilders. Even Japan has ordered 13 LNG carriers for K-Line and Mitsui OSK since 2019.
CSIS observed: “At face value, sharing capital and technology with CSSC subsidiaries may seem innocuous, but it should raise red flags for nations concerned about China’s growing military power.
Facilitating better resource-sharing between military and civilian ventures is a critical element of China’s military-civil fusion strategy, and many of China’s shipbuilding facilities are being used for both commercial and military operations. Foreign capital can also aid in offsetting the research and development costs of military assets. Workers trained to construct commercial vessels may even be able to transfer some of their skills when working on PLAN warships.”
China, now facing tighter sanctions on dual-use technologies, was once open about its desire to obtain foreign technologies. However, foreign companies are yet to fully waken up to the fact that they are helping advance Chinese naval shipbuilding. It took time for countries like the USA to realize that Chinese telecommunications firms like Huawei might harbor nefarious aims, but this cold dose of reality needs to extend more widely.
The CSIS warned: “With CSSC’s lack of transparency and its central role in supporting the PLAN, foreign companies should exercise more caution when engaging with it and other Chinese shipbuilders. For democracies, especially those in the region that must weather the brunt of China’s rising assertiveness, these ties are more than just worrying. They present a tangible threat to national security.”
There are alternatives, with both Japan and South Korea possessing shipbuilding industries. CSIS said, though, “The shift will not be easy or immediate. Short-term capacity issue will arise. But in managing hard choices vis-a-vis China, especially those critical to national security, the United States should be prepared to steer the lead ship.”
China’s defense industry is essentially a monopoly for state-owned enterprises (SOE). While this can be an advantage when government-to-government sales are negotiated with buyers, there are also disadvantages.
The aforementioned RAND report noted: “…China’s defense industry still lacks much real competition. SOEs dominate each of the major defense industry’s sectors, and a long-established system of compartmentalization means there is little crossover of SOEs between sectors. Contracts are single-sourced for the majority of military equipment, with only non- combat-related contracts undergoing a formal bidding process. PLA leadership admitted as recently as 2014 that these institutional features – more than funds or technology – are the biggest impediments to China’s research and development process.”
China has long relied on the assimilation of foreign processes and technology, often through illicit means such as intellectual property theft. RAND added, “China’s reliance on intellectual property theft means its weapons are years behind, but the Chinese recognize that shortcoming and are investing in and growing their organic capabilities through joint ventures and acquisition of foreign technology.
These business partnerships help China’s large SOEs assimilate new processes and technologies and point to China being on a path to mitigating some of its historical shortcomings in research and development execution … China’s inability to manufacture highly sophisticated parts continues to limit its status as a first-rate developer and producer of state-of-the-art military materiel, but progress is apparent.”
As Russia’s defense industry faces an uphill struggle in years to come, Moscow may increasingly turn to China to fill capability gaps in areas such as armed drones. If this does occur, it will represent a major role reversal. Moscow has long been concerned about China’s penchant for reverse engineering Russian equipment such as missiles and fighters. However, the country may soon be desperate for any foreign exchange that it will gladly do business on Beijing’s terms.