The 5 state-owned defence companies behind China’s booming arms industry

A new research paper on Chinese drone exports — revealing that 11 out of the top 18 countries had obtained armed drones from China between 2011 and 2019 — has brought into focus the country’s booming defence industry that is hinged on its major state-owned companies.
The paper was written by researchers at the University of Pennsylvania and Texas A&M University and excerpts of it were published by Foreign Affairs on 20 November.
But it isn’t just drones that China is exporting. The country is also globally selling submarines, fighter jets, assault rifles and ammunition. The paper noted that countries that bought armed drones from China include Saudi Arabia, the UAE, Egypt and Uzbekistan.
A SIPRI report of last year stated that China was one of the largest exporters along with the United States, Russia, France and Germany, over the past five years.
It has exported 16.2 billion units of ammunition — mostly to countries in Asia, the Middle East and Africa — over the past 12 years, according to SIPRI data.
The London-based think-tank International Institute for Strategic Studies reportedly said seven state-owned Chinese defence firms each had more than $5 billion in revenue in 2016. These seven companies were among the top 20 defence companies of the world by revenue.
According to the report, the China South Industries Group (CSGC) had earned the biggest revenues of about $22 billion in arms sales in 2016.
A list published annually by Defence News stated that six Chinese defence firms are among the world’s top 15 defence companies for 2020.
Srikanth Kondapalli, professor in Chinese studies at Jawaharlal Nehru University, told ThePrint that at the moment, Beijing is still fifth in the global arms bazaar, and ranks after the US, Russia and other European countries.
He said Chinese defence products come much cheaper and so they are emerging as a major supplier for under-developed markets, except Saudi Arabia, which is more an experimental buy than quality-based.
“Cumulatively, however, the burgeoning defence industry of China could put pressure on India,” he said. “They are supplying submarines to neighbouring countries, including Pakistan and Bangladesh, and it is a concern as they break commercial shipping. The latest submarines the Chinese are selling to Pakistan is more sophisticated.”
The other concern, he added, is the licence manufacturing in Pakistan as it required some transfer of skills. Aside from submarines, Chinese production of ballistic missiles is also a concern for India as they are not part of the Missile Technology Control Regime (MTCR). According to the MTCR, the signatories cannot export Category I system missiles — those that can travel more than 300 km and carry a payload of over 500 kg.
“When India is ready for defence exports in some years, it would be difficult since the market would be saturated with cheaper Chinese products,” Kondapalli said.
Hera are the details of five major Chinese defence companies and how they are contributing to Beijing’s booming defence economy:

Aviation Industry Corporation of China (AVIC)

The state-owned conglomerate, which has over a 100 subsidiaries, manufactures fighters, attack helicopters and transport and surveillance planes. It has also manufactured a range of unmanned aerial vehicles (UAVs) or drones in recent times.
Some of the most well-known aircraft and equipment manufactured by AVIC and its subsidiaries include the J-20, J-10, JF-17 and FC-31 fighters; the Y-20 and Y-9 transports; the Z-9, Z-10, Z-19 and Z-20 helicopters; the PL-5, PL-9 and TY-90 missiles; the LS-6 bomb and the Wing Loong I & II drones.
The key AVIC machines in China’s PLA Air Force (PLAAF) include the J-20 stealth fighter and the Z-19E attack helicopter.
AVIC also makes the JF-17, a light multi-role fighter jointly developed by China and Pakistan, which is equipped with beyond-visual-range (BVR) air-to-air missile capability as well as air-to-surface attack capability.
AVIC’s inventory also has a range of UAVs such as Harrier, SW1, Nighthawk for intelligence surveillance reconnaissance (ISR) roles and other activities. Wing Loong I & II can also be used as combat drones UCAVs.

China North Industries Group Corporation Limited

State-run corporation China North Industries Group Corporation Limited (popularly known as NORINCO) manufactures conventional and advanced defence equipment such as armoured assault vehicles, precision strike equipment, long range equipment, defence aircraft, anti-missile equipment, small arms such as assault rifles and sniper rifles among a plethora of other arms products.
It is also in other businesses such as heavy duty equipment production, special chemical, and railway engineering services.
Some of the defence products developed by it include the Type 98 (PF-98) — a 120 mm anti-tank rocket system developed by the company for the Chinese PLA as a successor to the Type 78 and Type 65 recoilless gun, Type 69 85 mm rocket propelled grenade (RPG), which is a common individual anti-tank weapon and The WZ 523 wheeled APC.
Air-to-ground missiles such as the Blue Arrow-7 (BA-7), an optically guided missile for UAV platforms, precision strike systems such as the Red Arrow 7, 8 and 9 series Anti-Tank Missile System, and the 105 mm Gun-Launched Missile, Anti-aircraft and anti-missile systems such as the LD2000 anti-aircraft system among others are manufactured by the firm.
The company’s defence revenue for 2019 was $14,771.60 million.
The United States had in 2003 imposed economic sanctions against the company for allegedly selling missile-related goods to Iran, a claim which was denied by China.


The state-owned China Aerospace Science and Industry Corporation (CASIC) comprises six research institutes, 17 wholly-owned or holding companies and subordinate units.
According to CASIC’s website, the firm has established a complete technology R&D and production system for air defence missile weapon system, aerodynamic missile weapon system, solid launch vehicle and space technology products.
It further states that CASIC implements the concept of the “Belt and Road Initiative”, and cooperates with international partners to carry out a series of international business projects in countries in Central Asia, South Asia, Southeast Asia, West Asia, Europe and Africa through strategic cooperation, and overseas mergers and acquisitions.
CASIC had also developed a production system for air-defence missile weapon system, cruise missile weapon system and ballistic missile weapon system, as well as solid launch vehicles, and space technology products.
CASIC also makes responsive tactical micro-satellites, and associated tactical satellite launch vehicles. According to reports, the company outlined plans to expand in both domestic and international markets, which is part of the group’s growth strategy during China’s 14th Five Year Plan (FYP) between 2021–25.
The company made $12,035.25 million in defence revenues last year.

China South Industries Group (CSGC)

According to the report by the London-based think-tank International Institute for Strategic Studies, the China South Industries Group (CSGC) had earned the biggest revenues of about US$22 billion among other Chinese defence companies in arms sales in 2016.
The state-owned company, founded in 1999, manufactures multiple defence products, including light weapons, advanced ammunition, counterterrorism equipment. It also operates new energy development, oil exploitation, and other businesses. The PLA is its biggest consumer.
According to this report, it earned 301 billion yuan (US$44 billion) in revenue and made 21 billion yuan (US$3 billion) in profit last year from sales of both weapons and civilian products such as cars and motorbikes.

China Shipbuilding Group

The company was formed last year with the merger of the state-owned China Shipbuilding Industry Corporation (CSIC) and China State Shipbuilding Co (CSSC). CSIC oversaw shipyards in the north and west of the country while CSSC took responsibility for those in the south and east.
Shipbuilding company CSIC was producing nuclear submarines, conventional submarines, surface ships, oil tankers, chemical tankers, bulk carriers, container ships, engineering ships, and other products. China Shipbuilding Industry also offers ship repairing services.
CSSC was producing oil tankers, bulk carriers, conditioner vessels, deep water survey ships, and marine equipment. China State Shipbuilding also operates logistics businesses.
The group, however, is among 24 Chinese companies and individuals to be blacklisted by the United States for its role in developing infrastructure in contested areas of the South China Sea.
CSIC was listed as one of the top Chinese defence companies by Defence News for 2020.


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