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China rises from Russian customer to competitor in arms industry

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China rises from Russian customer to competitor in arms industry
Beijing's ability to package guns and economic deals threatens Moscow's revenue

Chinese J-20 stealth fighter jets perform at an airshow in 2018: The military is reportedly replacing the jets' Russian engines with domestic ones. © AP

DIMITRI SIMES JR. Contributing writerJanuary 22, 2021 13:51 JST

MOSCOW -- In a flashy recruitment video released by China's People's Liberation Army Air Force last week, four J-20 fighters are seen soaring through stormy skies, deftly maneuvering between lightning strikes.

Lost in the dramatic digital imagery was an important detail: For the first time ever, the Chinese jets will be powered by domestically made engines instead of Russian ones.

Beijing's decision to replace the J-20's engines, noted by the state mouthpiece Global Times, is just the latest sign that China is rapidly closing the military gap with its northern neighbor. For decades, China leaned heavily on Russian weapons to modernize its armed forces. But that has begun to change, as China builds its own powerful defense industry and even starts to challenge Moscow in the global arms market.

By some measures it may already have the advantage -- a shift likely to change the dynamics of the countries' at times awkward but increasingly close relationship.

Data published by the Stockholm International Peace Research Institute in December puts China ahead of Russia as the world's No. 2 arms producer in the period from 2015 to 2019. The U.S. remained No. 1.

The leading arms research center found that four of the top 25 arms manufacturers in 2019 were Chinese. This quartet, three of which were in the top 10, accounted for 16% of overall arms sales and earned $56.7 billion. By contrast, only two Russian companies cracked the top 25, making up just under 4% of the total and generating $13.9 billion.



Some Russian defense industry officials and analysts dispute SIPRI's findings, arguing that it is impossible to accurately calculate China's arms sales volume since it keeps information about its military-industrial complex under wraps. They also protest SIPRI's decision exclusion of Russian state technology conglomerate Rostec, one of the country's largest arms exporters, in its top 25 ranking.

Even so, few in Moscow deny that China is gaining ground fast, not just in terms of the quantity of arms produced but also quality.

Vadim Kozyulin, director of the Asian Security Project at the PIR Center, a Moscow-based think tank, told Nikkei Asia that China has already surpassed Russia in developing unmanned aerial vehicles, certain kinds of warships and possibly even hypersonic missiles -- an area of great pride for the Kremlin in recent years.

"We see that China is producing new weapon models very rapidly, releasing a new generation every 10 years like the Soviet Union once did," he said. "Under these circumstances, it is difficult for Russia to compete because we have a smaller budget which is only decreasing."

For much of the post-Cold War period, Russia has been China's primary arms supplier.

The two neighbors began cooperating in the early 1990s, when China had just launched an ambitious campaign to upgrade the PLA's outdated weaponry. Beijing initially looked to the West as a potential source of advanced military technology, but those hopes were dashed after the U.S. and Europe imposed an arms embargo against China in response to the 1989 Tiananmen Square crackdown.

China soon found a replacement in Russia. The collapse of the Soviet Union in 1991 devastated Russian arms manufacturers. Old sources of revenue such as domestic military spending and lucrative contracts with foreign client states quickly dried up. China's emergence as a prospective customer provided Russia's ailing defense industry with a much-needed economic lifeline.


From 1992 to 2007, China imported 84% of its weapons from Russia, with the PLA procuring combat aircraft, air defense systems, destroyers and submarines.

Much to Moscow's chagrin, Beijing also reverse-engineered many of its Russian purchases.

Some of China's newest arms, most notably J-11 fighter jets and HQ-9 surface-to-air-missiles, appear to be nearly identical to earlier variants bought from Russia. In December 2019, Rostec publicly accused China of illegally copying a broad spectrum of Russian military technologies over the course of nearly two decades.

Despite these concerns, arms trade between the two countries continued to flourish. From 2014 to 2015, Moscow agreed to provide Beijing with six battalions of the S-400 air defense system and 24 Su-35 fighter jets, some of Russia's most advanced weapons.

Now, it is not clear how much longer China will need Russian arms. In the span of just 20 years, China's weapons sector has gone from fledgling industry to global heavyweight. Not only can Beijing meet most of its own military needs, but it also exports to customers ranging from Pakistan to Serbia.

China's rise as an arms producer has been bolstered by a rapid increase in military spending. According to SIPRI, China's defense budget expanded by 85% over the past decade, reaching $261 billion in 2019. Although Russia did raise its military spending under President Vladimir Putin in the past, the increase was far more modest, and defense expenditures have been gradually declining since 2015.



A visitor checks out the CM-401 anti-ship missile system at the China International Aviation and Aerospace Exhibition, also known as the Zhuhai Airshow, in 2018. © Reuters
No less significant is Beijing's emergence as a technological power. China is home to 1.87 million scientific researchers, the most in the world, and a growing number of high tech giants such as Huawei, Tencent and ZTE.

Despite recent efforts by the Kremlin to stimulate the domestic tech sector, Russia has not enjoyed similar success. Experts warn that Russia is falling behind in key emerging technologies such as artificial intelligence, and that unless that changes, its defense industry will have a difficult time keeping up with China and the U.S.

"Russia doesn't have giants like Microsoft or Huawei that produce technologies that can be used for civilian and military purposes," said Kozyulin of the PIR Center. "Instead, the government itself has to create everything from scratch, which is very costly."

As China has become more advanced, Russia has begun exploring opportunities to codevelop weaponry with Beijing. In 2016, the two countries partnered to develop and produce over 200 next-generation heavy lift helicopters for the PLA by 2040. Another major collaboration was announced in August, when Russia arms officials revealed that Moscow and Beijing had begun working on developing a new non-nuclear submarine.




"It's pretty clear that Russia is transitioning to a technology transferring and subcontracting role, since although China can now make many of its own systems, it still lacks Russia's tremendous amount of engineering experience and ability to develop a lot of key components," said Michael Kofman, director of the Russia program at the Washington-based CNA military research center.

But other experts are skeptical that such an arrangement is sustainable in the long run. Siemon Wezeman, a senior researcher at the SIPRI Arms and Military Expenditure Programme, argued that Moscow could be falling too far behind to keep Beijing interested.

"I expect the Russians to be completely out of the picture for the Chinese as a provider of technology within five to 10 years," he said. "The Russians will be looking to see if they can somehow get their hands on Chinese technology because the Russians are falling behind, and in some cases they're not getting anywhere anymore."

Wezeman added that in the long run, it is even possible that China will push Russian arms manufacturers out of their traditional markets in Africa, the Middle East and Latin America. He warned that China is well-positioned to outcompete Russia in these markets, since unlike Moscow, Beijing can bundle arms deals together with lucrative economic agreements.

"There is no real reason for those countries to go with the Russians if they can get something similar or better from the Chinese," Wezeman said. "In a way the Chinese probably have more to offer, not only in terms of the weapons, but also all kinds of other arrangements."

 

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