Can Xi Jinping’s arms production shake-up create China’s version of Lockheed or Boeing?

Group headed by President Xi Jinping aims to overhaul nation’s antiquated weapons production system and increase ties between military and industry, say analysts

PUBLISHED : Thursday, 26 January, 2017, 10:20am
UPDATED : Thursday, 26 January, 2017, 11:36pm

China’s creation of a commission headed by President Xi Jinping to increase integration between the nation’s military and industry shows Beijing’s determination to shake up the country’s bureaucratic and antiquated weapons production system, analysts said.

Military observers believe the ultimate goal of the commission is aimed at cultivating defence manufacturers in China similar to Lockheed Martin and Boeing in the United States.

But they warned that interest groups that monopolise China’s defence industry and concerns over the protection of intellectual property rights will be two key obstacles hindering any reforms.

The state-news agency Xinhua reported on Sunday that Xi would head the newly established Central Commission for Integrated Military and Civilian Development.

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Xu Zengping, a member of China’s political advisory body the Chinese People’s Political Consultative Conference who proposed Beijing should set up such a body, said he was pleased his idea had been adopted.

“The long-term goal of the new commission is to develop a nimbler and efficient weapons production system, similar to the defence and commercial giants like the US’s Lockheed Martin and Boeing,” Xu said.

“I think the first step is to come up with measures and let state-owned enterprises and private companies complement their advantages to each other because it will take a long time for China to break the monopoly of stated-owned enterprises in its defence industry, ” said Xu, a People’s Liberation Army basketball star-turned-businessman who bought China’s first aircraft carrier in 1998.

China’s state defence companies want to be more commercially minded, but rely heavily on government support, according to Richard Bitzinger, a military expert at the S. Rajaratnam School of International Studies in Singapore.

Bitzinger said China’s defence industry has been segregated from the rest of the economy and he doubted whether the government will be able to develop a military-industrial complex like the US.

He cited the example of state-owned Commercial Aircraft Corporation of China, or Comac, to show some of the limitations of the industry.

“Comac has been doing a horrible job with its two commercial aircraft programmes, the ARJ21 and the C919,” he said.

“Comac will always remain small and quite narrowly focused on developing and building a few commercial airplanes that will in turn be sold mainly to Chinese airlines,” he said.

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Xu suggested in his proposal that state defence firms transfer must share part of their intellectual property rights with private companies after signing strict contracts to protect the secrets.

The central government also needs to encourage private companies to take part in defence research and development projects by offering preferential polices and funds, said Xu.

Professor He Qisong, a defence expert at Shanghai University of Political Science and Law, said intellectual property rights were a key problem that Xi needed to tackle.

“A lack of respect for intellectual property is the key obstacle hindering the development of military and civilian integration. It’s very difficult to convince the military, or those state-owned defence enterprises to trust private companies,” He said.

Ironically, China’s state defence giants themselves have been criticised by their Russian counterparts for allegedly copying imported weapons from Moscow. These include fighter jets, missile systems and warships.

Bitzinger said Beijing has been trying to improve its exploitation of advanced commercial technologies for military use for more than 20 years, but with limited results.

Xi’s predecessors Mao Zedong, Jiang Zemin and Hu Jintao successfully converted some military technologies and facilities, such as airports and missile launch centres into dual-use centres, or outsourced non-sensitive military supplies to private companies for production.

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“It is extremely challenging to look for and decide which technologies might be most open to exploitation, connecting the right military industry with the right civilian one,” Bitzinger said.

“There is the problem of IPR: some commercial technologies may have foreign fingerprints on them, which restricts their reuse in military production. All of these things retard [greater civilian and military integration],” he said.