China, war shop of the world? Arms industry poised to be global player

PUBLISHED : Saturday, 17 October, 2009, 12:00am
UPDATED : Saturday, 17 October, 2009, 12:00am

The military parade Beijing staged this month was not just a show of its growing military strength but an opportunity for the fledgling arms industry to tout its wares.

China is still only a fringe player in the global market for arms exports, and the value of its weapon sales in 2007 was a tiny fraction of that of the United States. But observers say the mainland's defence industry has huge potential to expand and could become a major global supplier.

The People's Liberation Army showcased many of its latest weapon systems in the parade on October 1 to mark the 60th anniversary of the People's Republic.

While experts agree most Chinese-made weapons are still inferior to Western ones, they are impressed with the progress the mainland has made. In contrast to the National Day parade 10 years ago, most weapons on display this time were locally designed and produced.

'From the National Day parade we can see that mainland arms makers are now able to produce sophisticated and comprehensive weapon systems, from aviation to ships to missiles to electronic warfare,' said Cheung Tai-ming, a PLA expert at the School of International Relations and Pacific Studies at the University of California, San Diego.

He said the National Day parade was a good opportunity for window shopping by foreign buyers. Mainland defence companies would have seen it as a good introduction for their foreign clients.

Cheung, who has spent years monitoring China's defence industry and released a well-received book this year on the subject, said that while the industry's prime objective was still to modernise and equip the PLA, it was more prepared now to serve foreign clients.

'They are now moving forward into the international arms market,' he said. 'They have learned to modify the equipment to better serve the different demands of foreign clients. What they have been doing over the past couple of years shows that they are targeting developing countries such as Pakistan.'

Asia is not the only target. Chinese defence companies have recently won several orders from Africa for artillery, rocket launchers and missiles, the Canada-based Kanwa Defence Review reported this week.

More sophisticated weaponry is being hawked too. Beijing-based publication Elite Reference reported that the CH-3 unmanned aerial vehicle, or drone, is being sold to a foreign country, which it did not name. The CH-3 was one of the latest weapon systems on display in the parade.

Only a handful of countries are capable of producing such aerial drones, and the report said the mainland's entry to the market had ended a Western monopoly.

While Chinese weapons in general are still a generation behind the latest US models, the gap is closing. Chinese weapons are cheaper than Western ones - a big factor for many developing countries in Africa and Asia - and, best of all, available with no strings attached.

Andrei Chang, chief editor of the Kanwa Defence Review, said China's share of the international arms market had grown rapidly in the past few years. Its two biggest makers of hi-tech weapons, China North Industries and China Precision Machinery Import-Export Corporation, were targeting African markets.

'China has got many new clients in developing countries, especially in Africa,' Chang said. 'It's difficult to put an accurate figure on its market share, because many deals didn't involve cash but were done through exchanges of labour, energy and other materials.'

He said lower prices and flexible payment options were the mainland industry's two key selling points.

'China not only needs oil. They are also willing to exchange weapons for copper, zinc and even fishing rights,' Chang said.

Cheung said Chinese companies were more prepared to deal with countries that some Western powers were reluctant to sell weapons to.

'Some of their clients, such as Myanmar and some African countries, could not buy arms elsewhere,' he said.

The biggest obstacle to the expansion of overseas sales is political: Beijing does not want to be seen as a troublemaker. It understands that arms sales could backfire if it upsets its relations with big Western powers.

'Beijing knows it is crucial to keep a balance. It is careful not to sell weapons to countries like Iran, because such deals will surely put it in a difficult diplomatic position,' Cheung said.

Beijing learned the hard way after it was heavily criticised by Western governments and media for its arms deal with Sudan, which has been under a Western arms embargo since March 2005 because of its appalling human rights record.

China defended the deals and said they were made before the ban. But the incident showed there was a political price to pay if it was not careful.

'China does care about its international status,' Chang said. 'Hardly any of its new clients are subject to international arms embargos.'