China’s Changing Arms Trade

THE 143% RISE in China’s arms exports in the past five years over the previous five comes as scant surprise. Defence and aerospace have been prioritized as a strategically significant national industries as Beijing seeks to lessen its dependence on foreign technologies (military and civilian) while at the same time maintaining double-digit growth in defence spending to upgrade its military.

The Stockholm International Peace Research Institute (SIPRI) tracks the numbers. It reckons that several Chinese arms-producing enterprises are now large enough to count among the world’s top 100 arms firms. However, it excludes firms like Avic, Norinco, Poly Technologies and China South Industries from its ranking because of the lack of transparency into the data. Nonetheless, the arms trade is providing a steady stream of earnings to help fund the modernisation of the People’s Liberation Army, and, no doubt, to enrich PLA-linked enterprises.

The latest annual SIPRI arms trade numbers also put the scale of China’s arms exports in to an international context. China has nosed into third place in the arms national arms-exporters rankings, and is roughly on par with France, Germany and Britain, all off whom have a 4%-5% global market share. The United States (31% global market share) and Russia (27%) still dominate the arms trade. That said, China has doubled its global market share over the past decade.

China's arms exports, 2005-2014, ($m, Constant 1990 dollars)

SIPRI looks at five-year runs of arms sales to iron out annual fluctuations. Individual arms contracts can necessarily be large. Our charts, drawing on SIPRI’s data, show annual figures to give a sense of the ebb and flow of the arms trade. For example China’s arms sales in 2014, at an estimated around $2 billion in nominal terms (SIPRIs numbers are constant 1990 dollars), were down from the previous year’s $3.7 billion. Sales in the two largest categories, aircraft, which would include drones, and armored vehicles, halved; on the five-year perspective they increased by one and a half fold and two and a half fold respectively. In the fastest growing category, air defence systems, SIPRI recorded no sales last year for the first time in four years.

China's arms exports, by category, 2010-14, $ millions, constant 1990 dollars

China’s three biggest customers for arms last year — Pakistan, Bangladesh and Venezuela — accounted for two-thirds of all sales. On a five-year view, China’s top ten customers also included Myanmar, Tanzania, Morocco, Nigeria, Indonesia, Iran, and Sudan, by SIPRI’s count. Chinese weapons have a reputation for being cheap and reliable.

China, Arms imports and exports, 2005-2014

However, the expansion of China as an arms exporter over the past five years may not be as significant as the change in the country’s arms trade balance. The expansion of the domestic arms industry has let Beijing cut its bill for arms imports by 42% between the two five-year periods. As the chart shows, import substitution is moving apace. With the exception of last year, China has been running a modest arms trade surplus since 2009. Its days as a honey pot for what are now its rival arms makers may well be over.

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