The Wire is tracking trends in China data, and this week we explore how China is becoming a bigger player in the arms business. 

After China’s violent suppression of pro-democracy protests in June 1989, the United States and European Union imposed arms embargoes and other restrictions on the sales of weapons to China. With a dwindling list of international suppliers, China began developing its own capabilities. Beijing also ramped up its defense spending, which has risen from $21 billion in 1990 to $261.1 billion in 2019.¹The defense budget was announced as $177.5 billion in March 2019. The $261.1 billion figure is estimated by SIPRI.

In global arms sales, the U.S. and Russia are the world’s dominant exporters. But in the past few years, China has gained a substantial foothold. Defense consulting firm Avascent estimates that Chinese firms could compete with the West for $275 billion in arms sales over the next decade. 

China is a Major Arms Seller

China is already among the top five arms exporters in the world, and has been a net exporter of arms for seven of the past ten years, according to data from the Stockholm International Peace Research Institute (SIPRI), an independent research organization focused on conflict, arms, arms control, and disarmament. 

China’s continued arms sales growth will depend largely on sustained demand from the Middle East and Indo-Pacific nations, partly driven by sales of drones and precision-strike weapons, according to the U.S. Department of Defense’s 2019 China Military Power Report. 

China faces little competition in drones sales because most other UAV, or unmanned aerial vehicles, exporters, including the U.S., have signed treaties preventing them from selling certain types of weapons. China has also shown a willingness to transfer the technology required for its customers to build their own unmanned systems, though it will not include the latest technology in these transfers, according to Avascent. 

Precision strike weapons are another area of strength. In the past few years, China has exported guided rockets and ballistic missile systems to unidentified buyers. With the development of new, technologically-advanced weapons, such as the much-hyped DF-17 hypersonic missile (on display at last year’s big PLA parade for the 70th anniversary of Communist Party rule), comes the possibility that China’s buyers will replace their older missiles with new, more advanced weapons.

Though Chinese technological capabilities have improved, experts say its advanced weapons systems lag far behind those of the United States. Furthermore, the technological weakness of China’s arms exports has caused some countries to strip out components from Chinese weapons systems and replace them with Western versions.²Pakistan opted for Russian engines in the JF-17 fighter jets it buys from China.

Chinese Defense Firms Claim Eight Spots in Global Top 25

China’s defense industry is composed of nine major companies and one research institute. Eight of the companies are now in the global top 25. 

China’s defense firms are all state-owned, and they tend to focus on one area, such as aircraft or shipbuilding, in contrast with top western and Russian companies, which produce a wide range of products. 

In 2019, China’s two major shipbuilding companies merged to form a single company under the name China State Shipbuilding Corp., which brings that company to ninth on the list. 

China is now the world leader in armed drone sales, according to SIPRI data released in 2019. 

China’s drones are popular partially because of their cost-effectiveness. Armed drones like the sought-after Wing Loong UAV, made by China Aviation Industry Corp. (AVIC), are priced at $1 to 3 million, versus U.S. drones of the same class, which are usually priced in the tens of millions.

China has sold Wing Loong drones to more than a dozen countries across the Middle East, Africa, and Asia.

China’s Major Buyers are Developing Countries

China sells primarily to countries in Africa, the Middle East, and Southeast Asia. Sales to these countries complement China’s other strategic efforts in these regions, such as the Belt and Road Initiative projects. 

A large fraction of Chinese arms exports go to a small number of countries. Pakistan is the largest buyer, accounting for 35 percent of sales in the past five years. The country purchases high-end JF-17 Thunder combat aircraft from China. 

Chinese military equipment is typically less expensive than American or Russian equipment, and China is willing to finance purchases with loans and other enticements, such as gifts, donations, and flexible payment options, according to the U.S. Department of Defense. 

Chinese arms also come with few strings attached. For instance, the country does not place many restrictions on the end uses of its equipment, and since it is not a signatory to some treaties that forbid such sales, it’s even able and willing to sell to countries that are subject to international arms restrictions or sanctions. 

China, for example, has faced scrutiny for the appearance of its arms in conflict zones in sub-Saharan Africa, including sales to the South Sudanese government. 

Countries buy Chinese arms and technology for other reasons as well — to diversify their supplies, to satisfy immediate security needs, or to support local industrial bases (e.g. by partnering with Chinese firms on R&D). 

However, China faces challenges to expanding its customer base. It has largely been selling to countries that can’t afford western and Russian arms, or to nations hit by sanctions. Wealthy arms importers, such as the Gulf states, have not been as interested in buying, except for a handful of deals to sell unmanned aerial vehicles to Saudi Arabia and the UAE.

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Graphics and design contributed by Hiram Henriquez from Miami.