[Pakistan] proposed to develop the Sabre II not because Pakistan wanted the Sabre II. It was an excuse to get the U.S. to lower the price of the F-16. If the U.S. lowered the price of the F-16, the Pakistani military could save up to 100 million U.S. dollars and profit tremendously from the deal.
When Pakistan abandoned the Sabre II program China wished to continue the project and renamed it the "Super 7" project. China was willing to take the risk and reassured Pakistan that it was willing to pay for the cost of initial R&D. Grumman stated that they will not invest in the initial development phase but are willing to provide technological assistance. The Chinese (experts) left Beijing in 1988 to start the second round of cooperation with Grumman.
In 1989, the United States terminated military and economical exchanges with China. The cooperative effort between China and Grumman, the Super Seven Project, was terminated as well. Although the Super Seven project did not succeed, the Chinese aviations industry, for the first time, was able to garner the attention of the American aviations industry and engage in limited cooperation.
Although it was no longer possible to cooperate with the Americans on the Super Seven project, China's CAC decided to continue developing the plane by itself.
Aviation expert: We can't use American engines and radars so we looked for European and Soviet replacements. "If the west isn't bright, the East is bright" (referring to look for help elsewhere).
May 17, 1990, the Chinese development team flew to Leningrad to discuss engine purchase with Mikoyan. The official talks began on May 30th. No one expected that just two months after the Chinese development team left Russia the Soviet Union ceased to be and the city where the agreement was made, Leningrad, was renamed St. Petersburg. Fortunately, the Russian side wished to continue the talks. The "Super Seven" received the Russian engine, a major fighter jet component. Pakistan once again expressed interest in the project and invited the Chinese development team to visit. Pakistan watched the Super Seven project closely even after the Sabre II project was cancelled in 1987. One of the key advocates of the Sabre II project, Major General Faluk(???), became the Air Force Chief of Staff. He is in charge now. General Faluk met the Chinese team in his office on the 28th. China once again opened the "gates of cooperation" with Pakistan.
Expert: Pakistan's Air Force Chief of Staff, the equivalent of a Si Ling in our country (the commander in chief is the president in Pakistan, was our old friend. He used to be the vice chief of staff and we got to know him very well back when we developed Sabre II. When we visited him he was very happy to get a plane like this. We were able to reestablish our relationships with Pakistan this way.
Pakistan's interest in the Super Seven reignited. While they seriously needed this type of light-weighter fighter plane there is another reason for the renewed interest. The Americans failed to deliver the second delivery of 70 F-16s. As a result Pakistan was forced to readjust their strategy.
Aviation expert: This is because Pakistan didn't have its independent aeronautic industry. I've visited Pakistani factories a few times before and it was apparent that they could only maintain and produce small aircrafts (commercial planes like the Cessna). As for military planes at the time they could only maintain them. The Pakistanis hope that they could build up their own aeronautics industry. They want to take advantage of this joint-venture and learn something from China. Only China could help them.
June 28ths, 1999, Pakistan signed the official document on a joint China-Pakistan fighter development program. The Xiaolong Fighter, as it was called in China, was named the JF-17 "Lightning" in Pakistan. The project was interesting since the Pakistani military was willing to pay for 50% of the development cost while the CAC and CAIC paid for the other 50%. The prototype was developed by CAC and CAIC. The Super Seven project, which has been delayed by a decade, was going full speed ahead.
Expert: This is the first time that China is using foreign investment to develop a military plane that will be exported. Previously Chinese fighter developments were funded by the nation(government). The country will assign a mission while the customers will specify their demands before we start developing the plane in question. This time things are different. The funding provided by our customer is very limited and is from abroad so we created a risk management program. A few venture capitalist companies also sponsored our development. This is another innovation. Lastly we were willing to task risks developing a military aircraft. We would never have dared to do that in the past. This is the result of the 20 years of economic liberalization and "thought liberation".
Expert: If you succeed and we sell the planes for a profit, everyone enjoy the profits. If the development of the plane ultimately failed, our companions are responsible for the money that they invested early on.
In 2001, China and Pakistan finished the initial development for the plane and the plane entered its vital phase. Pakistan wanted a prototype to take off by 2003.
