[The sale was especially unusual because
the Chinese missile defense system, known as the HQ-9, would be difficult to
integrate with existing NATO equipment. China Precision is also subject to
sanctions from the United States for selling technologies that the United
States says could help Iran, Syria and North Korea develop unconventional
weapons. A State Department spokeswoman said this month that American officials
had expressed to the Turkish government “serious concerns” about the deal,
which has not yet been signed.]
 |
Sim Chi Yin for The New York Times
Members of Aviation Industry Corporation of China displayed a model of the JF-17 jet
at an exposition in Beijing last month.
|
For years,
Turkey’s military had relied on NATO-supplied Patriot missiles, built by the
American companies Raytheon and Lockheed Martin, to defend its skies, and the
system was fully compatible with the air-defense platforms operated by other
members of the alliance.
There were
other contenders for the deal, of course. Rival manufacturers in Russia and
Europe made bids. Turkey rejected those — but not in favor of the American
companies. Its selection last month of a little-known Chinese defense company, China
Precision Machinery Export-Import Corp oration,
stunned the military-industrial establishment in Washington and Brussels.
The sale was
especially unusual because the Chinese missile defense system, known as the
HQ-9, would be difficult to integrate with existing NATO equipment. China
Precision is also subject to sanctions from the United States for selling
technologies that the United States says could help Iran, Syria and North Korea
develop unconventional weapons. A State Department spokeswoman said this month
that American officials had expressed to the Turkish government “serious
concerns” about the deal, which has not yet been signed.
Industry
executives and arms-sales analysts say the Chinese probably beat out their more
established rivals by significantly undercutting them on price, offering their
system at $3 billion. Nonetheless, Turkey’s selection of a Chinese state-owned
manufacturer is a breakthrough for China, a nation that has set its sights on
moving up the value chain in arms technology and establishing itself as a
credible competitor in the global weapons market.
“This is a
remarkable win for the Chinese arms industry,” said Pieter Wezeman, a senior
researcher at the Stockholm
International Peace Research Institute, which tracks arms sales and
transfers.
In the past,
Chinese companies have been known mainly as suppliers of small arms, but that
is changing quickly. From drones to frigates to fighter jets, the companies are
aggressively pushing foreign sales of high-tech hardware, mostly in the
developing world. Russian companies are feeling the greatest pressure, but
American and other Western companies are also increasingly running into the
Chinese.
“China will be
competing with us in many, many domains, and in the high end,” said Marwan
Lahoud, the head of strategy and marketing at European
Aeronautic Defense and Space, Europe’s largest aerospace company.
“Out of 100 campaigns, that is, the commercial prospects we have, we may have
the Chinese in front of us among the competitors in about three or four. They
have the full range of capabilities, and they are offering them.”
The Stockholm
institute released a report this year on global weapons transfers that found
the volume of Chinese conventional weapons exports — which included high-end
aircraft, missiles, ships and artillery — jumped by 162 percent from 2008 to
2012, compared with the previous five years. Pakistan is the leading customer.
The institute now estimates that China is the fifth-largest arms exporter in
the world, ahead of Britain. From 2003 to 2007, China ranked eighth.
China’s foreign
arms sales are also rising fast in dollar terms. According to IHS Jane’s, an industry consulting and
analysis company, Chinese exports have nearly doubled over the past five years
to $2.2 billion, surpassing Canada and Sweden, and making China the world’s
eighth-largest exporter by value.
The total
global arms trade revenue in 2012 was estimated to be $73.5 billion, and the
United States had a 39 percent share, according to IHS Jane’s.
Xu Guangyu, a
retired major general in the People’s Liberation Army and director of the China
Arms Control and Disarmament Association, said in an interview that the push by
Chinese companies to develop and sell higher-tech arms was “a very normal
phenomenon.”
“In arms
manufacturing, China is trying to increase the quality and reduce price,” he
said. “We’re driven by competition.”
Mr. Xu said
that besides pricing, Chinese companies had another advantage: they do not
“make demands over other governments’ status and internal policies.” He added:
“Our policy of noninterference applies here. Whoever is in the government,
whoever has diplomatic status with us, we can talk about arms sales with them.”
Chinese
officials know that China’s encroachment on Western-dominated military markets
raises concerns. When asked about the missile-defense sale to Turkey, a Chinese
Foreign Ministry spokeswoman said, “China’s military exports do no harm to
peace, security and stability,” and do not “interfere with the internal affairs
of recipient countries.”
The largest
Chinese arms production companies, all state-owned, declined interview
requests. Their finances are opaque, though there are some statistics on their
Web sites and in the state news media.
The China
North Industries Group Corporation, or the Norinco Group, said on
its Web site that its profits in 2012 were 9.81 billion renminbi, or about $1.6
billion, a 45 percent increase from 2010. Its revenues in 2012 were 361.6
billion renminbi, or about $59 billion, a 53 percent increase over 2010.
Another company, the China South Industries Group Corporation, or CSGC, said on
its Web site that it had profits of about $1 billion in 2011, on revenue of
about $45 billion, both big increases over 2008.
China’s
investment has been heaviest in fighter planes — both traditional and stealth
versions — as well as in jet engines, an area in which China had until now been
dependent on Western and Russian partners, said Guy Anderson, a senior military
industry analyst in London with IHS Jane’s.
“China has been
throwing billions and billions of dollars at research and development,” he
said. “They also have a strategy of using the gains they get from foreign
partnerships to benefit their industrial sector. So they should not have any
trouble catching up with their Western competitors over the medium term, and
certainly over the long term.”
He estimated
that China was still a decade away from competing head-to-head with Western
nations on the technology itself. But Chinese equipment is priced lower and
could become popular in emerging markets, including in African and Latin
American nations.
“We are in an
era of ‘good enough’ — the 90 percent solution that will do the job at the best
possible price,” Mr. Anderson said. “In some cases, that may even mean buying
commercial equipment, upgrading it slightly and painting it khaki.”
New customers
for Chinese equipment include Argentina, which in 2011 signed a deal with the
Chinese company Avicopter to build Z-11 light helicopters under license. Mass
production for the Argentine military began this year, and 40 helicopters are
expected to be built over the next several years. The value of the contract has
not been made public.
Companies
selling drones, another focal point in the Chinese arms industry, are
ubiquitous at arms and aviation shows. At an aviation exposition in Beijing in
late September, one Chinese company, China
Aerospace Science and Technology Corporation, had on display a model
of a CH-4 reconnaissance and combat drone, with four models of missiles next to
it.
Though the
drone had been “designed for export,” one company representative said, there
were no foreign buyers yet. The company was still being licensed by the
government to sell the aircraft abroad. He added that the drone was not yet up
to par with some foreign models, and that the engine was a foreign make, though
other parts — including the missiles — had been developed in China.
The Aviation Industry Corporation of China, or
AVIC, had on display a model of a Wing Loong, the best-known Chinese drone
export, which sells for about $1 million, less than similar American and
Israeli drone models. An article in People’s Daily said the export certificate
for the Wing Loong, or Pterodactyl, was approved in June 2009, and it was first
exported in 2011.
At the Paris
Air Show in June, Ma Zhiping, president of the China National Aero-Technology
Import and Export Corporation, told Global Times, another state-run newspaper,
that “quite a few countries” had bought the Wing Loong, which resembles the American-made
Predator. Clients were in Africa and Asia, he said.
Two fighter
jets made by Chinese companies are being closely watched by industry analysts
and foreign companies for their export potential. One is Shenyang Aircraft’s J-31, a fighter jet that
Chinese officials say has stealth abilities. A People’s Daily report last month
said that the J-31 was being made by Shenyang, an AVIC subsidiary, mostly for
export, citing an interview with Zhang Zhaozhong, a rear admiral in the Chinese
Navy. In March, the airplane’s chief designer, Sun Cong, told People’s Daily
that the J-31 could become China’s main next-generation carrier-borne fighter
jet.
The other jet
is the JF-17, a less-sophisticated aircraft that an American official said had
been in the works for about two decades in an “on-again, off-again” project.
The jet was ostensibly the product of a joint venture between Pakistan
Aeronautical Complex and China’s Chengdu Aircraft Industry Corporation, also an
AVIC subsidiary, but China did the real work, said the official, who spoke on
the condition of anonymity because of the secrecy surrounding military
projects. So far, Pakistan is the only client, and the official said he
believed Pakistan had made a “political decision” to buy it.
China is Pakistan’s biggest
ally, and each relies on the other to help counter India. Besides
the JF-17, the two nations have had official joint production agreements on a
frigate, a battle tank and a small aircraft.
A defense
official from Japan, a territorial rival of China that monitors its arms trade
closely, said Chinese jets still had big shortcomings that could hurt
international sales; most notably, China cannot make reliable engines or
avionics, he said. The JF-17 uses a Russian engine.
“I believe they
can make a few very good engines in the laboratory, but they can’t make it in
the factory, kind of mass produce it in factories, because of lack of quality
control and maybe experience,” he said.
He added that
Chinese engineers had been trying to develop an engine, the WS-10, a copy of a
Russian model, but had been having problems.
It is not
uncommon for customers to overcome weaknesses in Chinese manufacturing by
buying Chinese platforms and outfitting them with better Western equipment.
Algeria placed an order last year for three Chinese corvettes, but is
outfitting the ships with radar and communications equipment from Thales
Nederland, a unit of the Thales Group, based in France. Thailand has been
awarding contracts to the Saab Group, based in Sweden, to upgrade Chinese-built
frigates, said Ben Moores, a senior analyst at IHS Jane’s.
This year, a
Chinese company was competing against foreign counterparts, including at least
one American company, for a $1 billion Thai contract for naval frigates, but
lost to Daewoo of South Korea.
As China moves
to catch up with established Western rivals, competing not only on price but
also with comparable technology, Hakan Buskhe, chief executive of Saab, said
his company and others would be likely to find themselves under pressure to cut
their own research and development costs to lower pricing — a trend that could
benefit North American and European governments looking to squeeze more ability
out of shrinking defense budgets.
“We need to be
able to develop more for less,” he said.
