China on the Global Arms Market: a New Phase of Expansion
China is now the world’s third-largest arms exporter, according to SIPRI. The country controlled 5 per cent of the global arms market in the 2010-2014 period, according to the Swedish institute. That estimate, however, does not accurately reflect the real state of affairs, and is mostly a product of SIPRI methodology. No figures for Chinese arms export revenues have been released, but they are almost certainly much lower than the export revenues of French, British, German or Israeli defense contractors. All these countries not only export finished weapons systems, but are also engaged in close defense industry partnerships with the United States and European NATO members.
Nevertheless, China’s rise in the SIPRI arms export ranking is an accurate reflection of the ongoing upwards trend in Chinese arms exports. That trend is generated not only by growing unit shipments but, even more importantly, by the growing range of Chinese defense products offered to foreign customers, as well as the increasingly diverse destinations of these exports.
For a long time China’s arms trade focused on a very small number of export markets, with about a half of Chinese arms exports destined for Pakistan. In fact, Pakistan was the only large country that regarded China as its main defense supplier. It sourced almost the entire range of finished weapons systems, as well as technology licenses for local manufacture, from Chinese suppliers. It also pursued large joint R&D projects with the Chinese. Pakistan has long been, and remains, the launch customer (and often the only customer) for such complex Chinese weapons systems as fourth-generation fighters, AWACS planes, guided air bombs, WZ-10 specialized attack helicopters, and electronic warfare systems.
The Chinese defense industry’s growing capability has undoubtedly been one of the factors driving the country’s exports to Pakistan. China has now launched its own production in many segments (such as AWACS planes) where it was previously dependent on imports. As a result, it is now in a position to offer such systems for export. The main reason for China’s dominance on the Pakistani market, however, is that Pakistan lacks any real choice. The leading global defense suppliers are wary of dealing with Pakistan so as not to anger India; in some cases they also have their own political reasons to avoid any such dealings.
Most of the other big Chinese customers – such as Myanmar and Sudan - are also in a difficult international situation and have limited options. Even they, however, are trying not to become too dependent on the Chinese. Myanmar, for example, signed a contract with Russia for 20 MiG-29 fighters in 2009, choosing Russian planes over China’s FC-1 fighters.
In the rest of the export markets, Chinese suppliers have until recently been well-represented only in a few individual segments. These included 155mm howitzers, heavy MLR systems, anti-ship missile systems, short-range SAM systems, combat trainers, light transports, and small arms. Chinese exports of barrel and rocket artillery systems have been especially successful. China has managed to win its first defense customer in the CIS in 1999 when Armenia bought a batch of WM-80 heavy MLR systems.
In the 2000s the Chinese also won contracts for PLZ-45 155mm howitzers from Kuwait and Saudi Arabia. Neither country had previously imported any Chinese ground weapons systems. Other popular Chinese exports included the K-8 combat trainer jet, which was used by several poor African and Asian states as a light striker, and the Y-12 light transports, which are cheap and easy to operate. Exports of Chinese tanks have had a mixed record, but sales of wheeled armored vehicles (especially to African countries) have been relatively large.
On the whole, in the 2000s China managed to ramp up its arms exports, but remained dependent on a limited number of markets. Besides, most of its exports consisted of relatively simple technology, mainly ground weapons systems. In the 2010s, however, that situation changed very radically. China has won many new customers, including those that had previously depended solely on Russian or Western suppliers. It has also secured a presence in several market segments that had hitherto been controlled almost entirely by the United States, the EU countries, or Russia.
China has already become – or is on the verge of becoming – a major exporter of long-range SAM systems that directly compete with the Russian S-300/S400 systems and America’s Patriot PAC 3. It has also launched exports of its fourth-generation K-1 fighters to countries other than Pakistan (at least one firm contract is signed with Myanmar). There has been an especially impressive growth in Chinese exports of MALE-class UAVs, which are now operated by several African, Middle Eastern, and former Soviet states. These drones have already seen real action in Nigeria and Iraq.
In fact, exports of MALE drones are especially indicative of the general trend. China has launched mass production of two such UAVs, both of them capable of carrying a broad range of guided weaponry, such as specially developed missiles and guided bombs. One of these drones, the Yilong-1 (made by AVIC) is already in service in at least seven countries, according to the Chinese. These include such traditional Western defense customers as Saudi Arabia, as well as the United Arab Emirates and Uzbekistan. The second Chinese drone of this class, the CH-3 Rainbow (made by CASIC) is being used in real action in Nigeria (against the Boko Haram rebels) and Iraq.
Exports of MALE-class UAVs also generate related contracts for satellite communication links, without which these drones cannot be operated effectively. The Yilong and Rainbow versions offered to foreign customers are equipped with satellite data links. It is not clear how many UAVs can be kept in the air at any given time with the current capacity of China’s satellite fleet. Nevertheless, since China’s own army does not operate nearly as many drones as the U.S. Armed Forces, the country probably has enough spare satellite capacity to offer its foreign customers. The second crucial requirement for operating UAVs is satellite navigation. China’s Beidou sat nav system already has enough satellites to provide coverage over large parts of Asia, with global coverage to follow by 2020.
As a result, the rapid rise of the Chinese space industry in recent years will enable China to compete with the United States head to head in the UAV market in the not too distant future. In February 2015 Washington announced simplified export rules for drones; the reasons for this move must have included Chinese competition. Russia, meanwhile, is clearly lagging behind the Chinese in this area. None of the Russian attack UAV programs has even reached mass production. Moscow is working hard to close this gap using its wealth of expertise and advanced capability in manned aircraft - but so far it has little to show for its efforts.
In late 2014 there were reports about Chinese exports of small batches of the HQ-9 SAM system to Turkmenistan and Uzbekistan. It is not entirely clear whether those reports were accurate. Both countries need to replace their old and obsolete S-200 (SA-5 Gammon) systems. Turkmenistan did not show off any HQ-9 systems at a large Independence Day military parade in October 2014 – but that may change in 2015.
Turkmenistan and Uzbekistan are both trying hard to keep Russia at arm’s length in their foreign policy, constantly maneuvering between the great powers. Both view China as an extremely important trade and economic partner. If confirmed, their imports of complex and sensitive defense technology from China would seem entirely natural and logical. Any shifts in a country’s foreign-policy and foreign-trade priorities inevitably lead to changes in its choice of defense suppliers.
The Central Asian states don’t have any reasonable alternative to their current balancing act, and Moscow can do very little to stop them from ramping up their defense imports from China. It must be said, however, that as part of the same balancing act the Central Asian states will try to maintain a certain level of arms imports from both Russia and the West. The leaders of these states are well aware of the dangers of allowing unchecked Chinese expansion; they still remember the lessons of history, including the expansionism of the Qing dynasty.
As a result of China’s continued rise as an economic superpower and the gradual invigoration of its foreign-policy stance, the same balancing act is increasingly being played by other developing countries, including those on the other side of the globe. Shortly ahead of Argentine President Cristina Kirchner’s visit to China in February 2015, the two countries signed a memorandum of understanding on defense industry cooperation in October 2014.
Argentina is expected to import five Project P18 corvettes and a batch of VN1 wheeled APCs from China. A working group has been set up to explore the possibility of importing Chinese fighter jets, presumably FC-1s. Argentina is an important economic partner of China, and has received about 17bn dollars worth of Chinese loans. It has also acquired a local production license for the Changhe Z-11 light helicopter (which the Chinese developed using the Eurocopter AS350 Ecureuil design).
The long saga over the Turkish contract for China’s HQ-9 SAM systems, and Ankara’s announcement of the plan to build a national missile defense system using Chinese technology, may have had the sole purpose of strengthening Turkey’ positions at the talks with the Americans and the Europeans. Nevertheless, these developments demonstrate that China’s rise as a major economic power and arms exporter has made life easier for arms buyers all around the world.
In the 2000s the growth in Chinese arms exports was due mainly to achievements by the parts of the Chinese defense industry that had finally, after trying long and hard, brought relatively advanced weapons systems to market. These days, however, the actual defense technology factors are becoming less important. Growing Chinese arms exports are now becoming inevitable simply because China has turned into an economic superpower and one of the most influential actors in the global arena - as demonstrated, for example, by the ongoing Ukrainian crisis.
Chinese expansion on the global arms market will go hand in hand with the growth of China’s economic clout, the progress of its economic initiatives (such as the Silk Road Economic Belt and the Maritime Silk Road), the country’s growing role in international politics, and the ramping up of its global military presence. That expansion will probably affect the traditional Western defense markets to a no lesser extent than the markets hitherto dominated by Russia, since many of the Russian defense customers are Asian countries worried by China’s growing might. Meanwhile, another Cold War between Russia and the West, with mutual attempts to derail each other’s projects and initiatives, will play into the hands of Chinese arms exports.
Centre for Analysis of Strategies and Technologies (CAST)