China's arms trade
China's military trade: take the road of independence
Since the founding of the People's Republic of China in 1949, the history of China's military trade development can be divided into three stages, namely, the initial stage dominated by military aid, the initial stage of "Soviet-style equipment substitution" and the development stage of "self-developed equipment". The background and specific characteristics of each stage are shown in the chart below.
Although China's support for the national defense industry is constantly strengthening, and the overall quality of the development of the military industry has also made great progress, from an objective point of view, there is still a certain gap in equipment quality, customer coverage, price competitiveness and other aspects in the field of some high-end weapons and equipment, compared with the United States, Russia and France and other traditional military trade powers. Foreign arms trade is concentrated in the Middle East, Southeast Asia, South America, Africa and other countries, with few political attachés, and attention is paid to maintaining world peace.
The project process of China's military trade
For China's military enterprises, a complete military trade project includes seven processes: scientific research projects, military product research and development, market promotion, contract signing, complete production, product delivery and service guarantee.
Participants in China's arms trade
The main participants in China's military trade projects mainly involve three types of enterprises: military enterprises, military trade enterprises and intermediaries.
Military enterprises: the main body responsible for the research and development, production, delivery and after-sales service of military trade products, including China's top ten military central enterprises, other state-owned enterprises and some civilian military enterprises.
Military Trade Companies: Companies that have obtained the right to export military products in accordance with the law and engage in military export business activities within the approved business scope are the only channels for the export of military products, including 10 enterprises, including Long March International, Precision Machinery Import and Export, China Aviation Technology, North Industries, and Poly Technology.
Middleman: A company that has obtained the right to operate military products in the user's country in accordance with the law and is engaged in military business activities within the approved business scope.
China's military trade has entered the next period of trade surplus
(1) Trade deficit period (2002-2009): During this period, China's military trade imports were relatively large, of which most of them were high-end information-based weapons and equipment of the "three voyages" (aviation, aerospace and navigation) such as aircraft (including unmanned aerial vehicles), engines, missiles and ships.
(2) Trade surplus period (2010-2017): During this period, China's military trade exports grew rapidly, and the export products were mainly aircraft (including UAVs), missiles, armored vehicles and other weapons and equipment.
(3) Trade balance period (2018-2021): During this period, China's military trade exports have declined, imports and exports are in a state of balance as a whole, and the proportion of exports of high-end information-based weapons and equipment of the "three airlines" has increased.
(4) Trade surplus period (2022-present): In the past two years, with the treacherous international situation, the exports of traditional military trade countries such as Russia have shrunk, and at the same time, benefiting from the improvement of China's national defense science and technology industry system and the improvement of domestic substitution capabilities, China's military trade exports have increased significantly, driving a significant increase in net exports.
China's military trade has entered the next period of trade surplus
Export growth: According to SIPRI data, China's military trade exports in the past decade (2014-2023) are 16.690 billion TIV, an increase of 64.60% compared with the military trade exports (10.140 billion TIV) in the previous decade (2004-2013), a significant increase. From the perspective of subdivisions, the export trend of weapons and equipment such as aircraft (including unmanned aerial vehicles), air defense weapons and equipment, ships, armored vehicles, naval weapons and equipment, and missiles has increased significantly. The top five export recipients are Pakistan, Bangladesh, Thailand, Algeria and Myanmar. In each of the past five years, the total purchase of Chinese military products by the above five countries accounted for more than 70 percent of China's arms exports that year.
Shrinking imports: China's military trade imports in the past decade (2014-2023) are 11.095 billion TIV, a decrease of 42.75% compared with the previous decade (20042013) (19.381 billion TIV), mainly due to the import indicators of aircraft (including drones), missiles, ships and other weapons and equipment. From the perspective of weapons and equipment, engines are still the main products imported by China's military trade, accounting for 64.82% of the total in the past five years.
Trends
The proportion of China's military trade market is expected to continue to increase - product competitiveness will be enhanced
The competitive advantage of China's military trade products in the international market is constantly improving. On the whole, after decades of investment, China's military industry has basically possessed the technical foundation and material conditions for "internal circulation", and the next 10 to 15 years will be the harvest period and blowout period for the construction of weapons and equipment. During the "14th Five-Year Plan" period, the changes in the supply side and the demand side are strongly supporting the development of the industry, especially in the three dimensions of quantity, price and efficiency, the military industry is undergoing deep-seated changes, and the overall industry presents a healthy and benign industry ecology of exchanging price for quantity and creating profits with efficiency.
At present, the focus of the international arms trade market is on high-tech weapons and equipment, especially the increasingly strong demand for "high-quality, high-priced" weapons and equipment, which makes China's arms trade competitive advantage in the international market constantly improving. Since 2023, China has signed a contract with the United Arab Emirates to export L15 trainer aircraft, deliver ships to Thailand, and assist Egyptian satellites, which also confirms that the competitiveness of China's military trade products in the international market is constantly improving.
The proportion of China's military trade market is expected to continue to increase - capacity spillover
In the short term, the main factors restricting the recovery of China's military trade exports may also include strong domestic demand during the 14th Five-Year Plan, resulting in more domestic demand in the production capacity.
However, focusing on the production capacity of the supply side, the production capacity of the military industry in the past relied on national financial support, and the main body of implementation was mainly military central enterprises, with less participation of socialized capital, and the willingness of private enterprises to expand production was not strong, and the expansion capacity was also insufficient. With the support and encouragement of direct financing and the maturity of the registration system, the expansion of the military industry has ushered in a source of living water, and the production capacity is expected to be fully released after 2024, and it is expected to spill over after the realization of internal demand.
The parallel development of high-precision weapons and equipment and high-efficiency cost-to-cost ratio
Taking the aviation field as an example, since World War II, due to the continuous breakthroughs in technology in the aviation field, the development of aviation equipment to high-precision and sophisticated has become a major trend in the previous decades.
However, since the outbreak of the Libyan war, the use of low-quality equipment in the subsequent Syrian war and the Yaanaqa military conflict has gradually become a key part of determining the direction of the war, but this trend has not aroused enough extensive international thinking at the time. Since the outbreak of the Russia-Ukraine conflict, low-cost equipment has become the "protagonist" of this rare high-intensity and high-intensity war after the Cold War to a certain extent.
Considering that Russia and Ukraine, especially Russia, as a traditional military power, have relatively comprehensive advanced equipment technology reserves and industrial chains, battlefield situational awareness and strategic analysis institutions around the world have re-examined the judgment that "the activity of low-cost weapons and equipment is essentially a helpless move forced by technological limitations" in previous wars. The Atlantic Council of the United States made it clear in September 2022 that "the Russia-Ukraine conflict is a wake-up call for the United States." The transition from a small number of sophisticated and expensive equipment to a large number of small, low-cost systems should be accelerated... Although the United States has always focused on the procurement of sophisticated and expensive equipment, relatively inexpensive and readily available technology is more important for future air and space warfare."
The parallel development of high-precision weapons and equipment and high-efficiency cost-to-cost ratio
The essence of the "sudden emergence" of low-cost equipment is still the pursuit of the ultimate cost-effectiveness ratio of weapons and equipment, which is consistent with the core of the previous high-precision development of aviation equipment. In the NATO "Red Flag" military exercise in which F-22 participated for the first time, the 5th generation aircraft F-22 had a combat loss ratio of 36:1 to the 4th generation aircraft, which shocked the field of aviation equipment, and the fact that the thousand-yuan consumer UAV has completed part of the functions of the tens of millions of dollars of "Cha Da Yi" UAV to a certain extent has also opened a new chapter in low-cost and cost-effective aviation equipment. The thousand-yuan UAV partially completes the role of the 10-million-level reconnaissance and combat UAV in terms of efficacy, and the cost of shooting down is much higher than its procurement value, which is the reason for its large-scale application in the recent war.
As the Slovak Institute for Global Security Policy research shows, "the widespread use of drones is also changing the requirements for air defense, and it makes no sense to use expensive missiles to strike chain drones or swarms of drones, requiring lower-cost missiles, other kinetic energy or electromagnetic countermeasures systems".
