China's military-industrial complex

Discussion in 'China' started by ice berg, Sep 27, 2012.

  1. ice berg

    ice berg Senior Member Senior Member

    Joined:
    Nov 18, 2011
    Messages:
    2,145
    Likes Received:
    289
    Insight: China builds its own military-industrial complex | Reuters

    By David Lague and Charlie Zhu
    HONG KONG | Sun Sep 16, 2012 5:14pm EDT
    (Reuters) - When China turned to Russia for supplies of advanced weapons through the 1990s, it kick-started Beijing's military build-up with an immediate boost in firepower.

    It also demonstrated the failure of its domestic defense sector which was still turning out obsolete 1950s vintage equipment for the People's Liberation Army from a sprawling network of state-owned arms makers.

    Now, after more than two decades of soaring military spending, this once backward industry has been transformed -- China is creating its own military-industrial complex, with the private sector taking a leading role.

    With Tiananmen-era bans on Western military sales to China still in place, an innovative and efficient domestic arms industry is crucial for Beijing as it assembles a modern military force capable of enforcing claims over Taiwan and disputed maritime territories.

    China has locked horns recently with its Southeast Asian neighbors over conflicting claims to strings of islets in the South China Sea. Tensions have also flared with Japan over uninhabited islands in the East China Sea, even as the United States executes a strategic military pivot towards the Pacific.

    Well funded defense groups have rapidly absorbed the technology and expertise needed to build complex weapons, freeing China from its former heavy reliance on Russian and other foreign equipment, Chinese and Western experts say.

    "A country's defense sector should reflect the strength of the country's economy," says Wu Da, a portfolio manager at Beijing-based Changsheng Fund Management Co Ltd which invests in listed Chinese defense stocks.

    But, he adds, the sector is so shrouded in secrecy it's been hard to assess how viable it is.

    "Some of the Chinese defense groups are already quite strong after so much military spending in recent years but you don't know exactly how well they are doing financially or technologically because China does not want others to know."

    That could start to change.


    INJECTING ASSETS

    Beijing is enlisting the private sector to accelerate the rise of its best defense contractors, issuing new guidelines in July aimed at encouraging private investment in a sector traditionally sheltered from competition and public scrutiny.


    Listed subsidiaries of top Chinese military contractors now intend to buy at least 20 billion yuan ($3.15 billion) in assets from their state-owned parents in the second half, according to their recent filings with the Shanghai and Shenzhen stock exchanges.

    This would double the value of military related assets injected into these listed companies since 2007 with more in the pipeline, as Beijing presses ahead with an ambitious program to privatize most of a vast arms industry employing more than a million workers at more than 1,000 state-owned enterprises.

    The long term goal is to transform some of the leading contractors, such as China State Shipbuilding Corporation (CSSC), Aviation Industry Corporation of China (AVIC) and China Aerospace Science and Industry Corporation into homegrown versions of American giants Lockheed Martin and Northrop Grumman or Britain's BAE Systems.

    AVIC, which is aiming to quadruple its sales to one trillion yuan ($157.7 billion) by 2020 from 250 billion yuan in 2011, plans to inject 80 percent of its main businesses into some of its listed companies by the end of next year.

    Beijing has made repeated calls to speed up listings of all but the most sensitive military businesses. The authorities have also promised to allow public bidding for unclassified and minor defense contracts in a sector that is likely to enjoy strong growth if China continues its sustained military build-up.

    China's top 10 defense groups with estimated combined assets of 2 trillion yuan ($315 billion) have listed more than 70 subsidiaries, including over 40 with defense-related businesses. About 25 per cent of the assets of the top 10 are now held in the listed companies, according to market analysts.

    Some of these stocks have been strong performers. Sustained military outlays and the expectation of asset injections have insulated them from the country's current economic slowdown. They also tend to spike in price at times of increased tension between China and its neighbors over disputed territory.

    The plan to buy more of their parent's military related assets would allow these listed companies to raise extra funds for research and development, the companies say.

    AVIC subsidiary Hafei Aviation Industry Co Ltd plans to issue shares this year to buy 3.3 billion yuan ($520.5 million) in assets from its parent, including helicopter manufacturing companies.

    "AVIC's injection of (its) helicopter business into the listed company will be a key experiment of China's strategic upgrade and transformation of its domestic defense and science industry," Hafei said in a July prospectus.

    FALLING MILITARY IMPORTS

    The growth of the domestic arms industry has allowed China to steadily reduce military imports. International arms transfer figures from the Stockholm International Peace Research Institute (SIPRI) show China's defense imports fell 58 per cent between 2007 and 2011.


    In this period, China slipped to fourth place in the ranks of global arms buyers after holding top position in the five years to 2006.

    "The PLA has clearly turned away from acquiring foreign developed platforms," says Scott Harold, a China analyst for the Santa Monica, California-based Rand Corporation.

    After double digit, annual increases in outlays over most of the last 20 years, China's military spending is now second only to the United States.

    In March, Beijing announced its defense budget for this year would increase 11.2 per cent to $106 billion but some foreign analysts believe this understates the country's overall military budget.

    In its annual report on the Chinese military, the Pentagon in May estimated Beijing's total 2012 spending would be between $120 billion and $180 billion. Washington will spend $614 billion on its military this year.

    Private data analyst, IHS Jane's Defense Budgets, forecasts that Beijing's annual outlays will reach almost $240 billion by 2015, more than the combined budgets of all nations in the Asia Pacific region and four times Japan's military spending.

    About 30 per cent of China's military budget goes to weapons and equipment, according to Beijing's most recent defense White Paper published last year.

    CASH OVERCOMES INEFFICIENCIES

    Military experts say that alongside reorganization and streamlining launched in the late 1990s, this avalanche of cash has sharply improved the output from key sectors of the Chinese defense industry despite the inefficiencies of many big state-owned companies, widespread corruption and a lack of official or public oversight.

    "There is just something about money, and the more of it the better," says Rand Corp's Harold.

    Russian weapons, including Su-27 fighters, Kilo-class submarines and Sovremenny-class cruisers, remain some of the PLA's most potent hardware.

    However, some Chinese-made equipment is now thought to be comparable to their Russian or Western counterparts, military experts say, although they acknowledge that accurate information about the performance of PLA weapons remains scarce.

    Over the last decade, China has launched two classes of locally designed and built conventional submarines that are now the mainstays of the PLA's underwater fleet.

    It has also built versions of the Su-27 combat aircraft and begun mass production of its J-10 fighter that some experts rank with the U.S.-made F-16 in performance. China reportedly has developed its first stealth fighter, the J-20, but details of its capabilities remain unclear.

    Chinese factories also appear to have made rapid progress in developing a range of advanced missiles. These include up to 1,000 ballistic and cruise missiles deployed against Taiwan and new mobile launchers for the PLA's nuclear weapons.

    Even in more basic equipment, China's arms industry appears to have made significant improvements. In little over a decade, shabby uniforms and poor quality footwear have been replaced with smart, comfortable looking camouflage uniforms, lightweight helmets and solid combat boots.

    Ground troops carry new assault rifles and small arms, while modern tanks, armored personnel carriers and artillery have been introduced to replace equipment derived from Soviet designs of the 1950s.

    Arms trade experts conclude that China's factories are now capable of satisfying most of the PLA's needs - and that of other nations as well.

    In the 10 years to 2011, China's foreign military sales increased 95 per cent, making it the sixth largest arms supplier behind the UK, SIPRI figures show. Sales of jet fighters, warships and tanks to political ally Pakistan, however, account for much of this increase.

    TECHNOLOGY WEAKNESS

    Despite clear progress, some glaring weaknesses remain in Chinese defense technology, military experts say.

    The PLA still appears reliant on imports of high performance jet engines from Russia for its most advanced fighters despite decades of research and development aimed at developing local power plants.

    It also depends on dual-use, imported engine technology from Europe for its warships, submarines and armored vehicles.

    Domestic aerospace companies have so far been unable to build big military transport aircraft that are important for military mobility in a country as big as China. These companies also remain heavily dependent on European, U.S. and Russian designs and technology for locally built helicopters.

    Beijing is pinning its hopes on competitive market forces to help close these gaps as it continues its military spending spree.

    That means more business for listed arms makers such as China Shipbuilding Industry Ltd which raised 8 billion yuan ($1.26 billion) in May from a convertible bond issue to buy military assets from its parent, the giant China Shipbuilding Industry Corp.

    "With the construction of our country's navy steadily pushed forward, we expect our company's income from defense business to keep increasing," the company said in a May stock exchange statement.

    "About 30 per cent of China's military budget goes to weapons and equipment, according to Beijing's most recent defense White Paper published last year."- Anyone know the percentage for India?
     
    huaxia rox and J20! like this.
  2.  
  3. J20!

    J20! Senior Member Senior Member

    Joined:
    Oct 20, 2011
    Messages:
    1,746
    Likes Received:
    664
    Location:
    Some where in Li Na's imagination
    Awesome article Bergy! A lot of things I didn't know like that 30% figure.

    Privatizing the defense industry is a good move considering the extra capital available for research and development, and thus more refined technology on our front-line equipment.

    Regarding our weaknesses in indeginous defense production, I think transport helicopters are a much bigger issue than jet engines are. With all new production J11B's, J11BS's and J15's all being fitted WS10A's we can see light at the end of the jet engine tunnel, but the helicopters being produced for the PLA are still all foreign. Mi17's and Z8's fit active requirements but the Z9 is now being used in the PLAN in roles better suited for medium weight helicopters which can only be satisfied in the foreseeable future by the Z15 of which we haven't seen a flying prototype of from Harbin, all we see is the EC175 from which its based.

    It is interesting that we spend basically the entire Indian defense budget on new equipment alone, which translates into very rapid modernization of all three arms of the PLA.
     
  4. cir

    cir Senior Member Senior Member

    Joined:
    Dec 28, 2010
    Messages:
    1,996
    Likes Received:
    269
    JH-7B maiden flight successfully carried out。:thumb::p
     
  5. Zebra

    Zebra Senior Member Senior Member

    Joined:
    Mar 18, 2011
    Messages:
    6,007
    Likes Received:
    2,250
    Can you post any image of it, please.
     
  6. Zebra

    Zebra Senior Member Senior Member

    Joined:
    Mar 18, 2011
    Messages:
    6,007
    Likes Received:
    2,250
    May be this one.

    [​IMG]
     
  7. Zebra

    Zebra Senior Member Senior Member

    Joined:
    Mar 18, 2011
    Messages:
    6,007
    Likes Received:
    2,250
    Last edited: Sep 28, 2012
  8. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    China's biggest weakness is its inability to make modern engines for all types of military equipment. Unless it can find a willing OEM, it won't be able to export much.
     
  9. J20!

    J20! Senior Member Senior Member

    Joined:
    Oct 20, 2011
    Messages:
    1,746
    Likes Received:
    664
    Location:
    Some where in Li Na's imagination
    China IS the 6th largest exporter of military tech, and that's without indigenous engine exports...
     
  10. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    That is a bold face lie. The largest export orders, usually going to Pakistan, have foreign OEM engines.

    JF-17 = Russia
    Al Khalid = Ukraine
    K-8 = Ukraine
    FFGs = France
    Z-9 = France

    If you subtract all these sales, Chinese exports don't even make it into the top 20.
     
  11. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    BTW... China IS NOT the 6th largest exporter.
     
  12. huaxia rox

    huaxia rox Senior Member Senior Member

    Joined:
    Apr 4, 2011
    Messages:
    1,401
    Likes Received:
    103
    weaknesses mentioned r the results of

    1 cultrure revolution...... which basically ruined the whole prc weaponery industry...some strategic weapon projects and developments may be the only survivor......how ever this damage is being healed with time and efforts now can be seen....

    2 strategic thinking....for a long time (not just during CR) CPC and PLA have tended to focus on strategic weaponery buildups.....u cant say this is totally right or wrong but the result is till now we can just begin to try AC and stealth figher jets......while the a bomb is 20 years before the us when finished.....AC and stealth r like a centry and 30-40 years behind.....

    3 corruption.....we all know many of those high ranking officers dont need audi and every thing.....billions r spent on that sort of stupid things......if saved ws-20 engine would have rolled out now....
     
  13. ice berg

    ice berg Senior Member Senior Member

    Joined:
    Nov 18, 2011
    Messages:
    2,145
    Likes Received:
    289
    The journey of a thousand miles begins with a single step. With the ws-10 been mass produced now, it is only matter of time and effort.

    The likes of US and USSR had decades of experiences. China will be catching up.
     
  14. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    Lets take the WS-10 for example. Even if the manufacturing defects have been solved, it is still a substandard engine. It takes 40 seconds to go from idle to military thrust. A modern engine like the M88-2 only takes 8. The only application for WS-10 is dual engine fighters that may only conduct BVR attack. If any fighter with it gets into a dog fight it will not stand a chance. Thus you will never see WS-10 as an export or single engine alternative and you decrease combat power of PLAAF in the name of indiginisation .

    US, Russia, Europe... we are not standing still. China is actually falling behind still trying to develop a 70s engine that doesn't even have proper acceleration for its outdated class. There are still more questions of WS-10. What is the TBO? Service Life? These are all important questions.
     
  15. G90

    G90 Regular Member

    Joined:
    Feb 25, 2012
    Messages:
    239
    Likes Received:
    13
    By this standard, french export NONE:rofl:
     
  16. G90

    G90 Regular Member

    Joined:
    Feb 25, 2012
    Messages:
    239
    Likes Received:
    13
    China get two stealth fighters and the entire EU get NONE, the entire Russia get a punched su-27, as for the engines, first, China's WS-15 will soon appear to shock you just as J-20, and btw, france dont have any high-thrust jet engine like WS-10 yet, so dont group yourself with USA, OK, you cheap joker :rofl:
     
  17. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    The value of Turbomeca's helicopter engine sales are worth more than all of China's defence exports. :rofl:
     
  18. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    Lets see, the T/W ratio of the M88-2 > WS-10, its TBO and service life dwarfs it. Its acceleration exceeds it by a factor of 5. Don't group yourself with France which develops true stealth UCAVs, real AESA radar and 5th gen avionics to your poorly copied aircraft shells and failed engines. :rofl:
     
  19. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    forget it!

    money is the base of industry tech R&D.

    Case is quite simple and obvious : either UK or France alone can not afford the R&D of a 5G bird,while CHina can afford 2 or even more ones...

    China might still lag behind EU in some fields, for time being.
    however ,truth is that time and sustainable investment can fix it....
     
  20. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Joined:
    Dec 17, 2009
    Messages:
    10,397
    Likes Received:
    2,314
    Considering Thales alone allocates 20% of its revenue to R&D, I don't see how anything compares. That is probably why it is the world's most successful defence electronics manufacturer. All French companies allocate large portions of the budget to R&D, then there is state funding, then there is international funding. I wouldn't be suprised if all French defence firms and state R&D funding doesn't beat out China R&D budget.
     
  21. badguy2000

    badguy2000 Respected Member Senior Member

    Joined:
    May 20, 2009
    Messages:
    4,957
    Likes Received:
    613
    and France government borrowed trillions $ of debts.....hahaha

    guy,you parents obviously live a better and eaier life than my parents,
    but I am sure my kids will live a better and cozier life than your kids...period..
     

Share This Page