Table of Contents
China’s defence-industrial sector is being transformed by reforms introduced in the interest of enhancing its competitiveness and capacity to meet the ambitious conventional arms requirements of the People’s Liberation Army (PLA). China’s defence-industrial base is becoming more decentralised, with increasing scope for local state-owned enterprises (SOEs) and privately owned enterprises to contribute to research and development (R&D) and production. This chapter assesses the long-term implications of this structural transformation. The progressive ‘marketisation’ of R&D and production is strengthening China’s capacity for sustained defence-industrial development and helping to narrow its capability gap with major industrialised states, but ingrained attitudes and procedures and enduring concern about the political implications of defence-industrial dependence limit the scope for structural reform. China is not in a position to exploit the full defence potential of its impressive industrial and technological progress in the near term, but its long-term prospects are more positive.
Defence-industrial development has figured prominently in China’s efforts to enhance its security in the face of perceived threats to its sovereignty, territorial integrity and national interests. The development of indigenous defence industries capable of supplying modern arms constituted a central pillar of the self-strengthening movement pursued by the Qing Dynasty in the late nineteenth and early twentieth centuries. Similar efforts were a feature of the 1916–28 ‘warlord period’, when competing military leaders struggled for local and national power, and the Nationalist Government of the Republic of China devoted considerable resources to defence-industrial development during World War II.
The new Chinese Government moved quickly to restore and expand the defence-industrial base after 1949. Technological development ‘to serve construction of…national defense’ was enshrined in Article 43 of the Common Program of 1950, which constituted the initial de facto constitution of the People’s Republic of China (Wang 1993:37). By 1950, the defence-industrial sector encompassed 45 factories employing some 100 000 workers (Shambaugh 2002:226). By the end of the decade, China was self-sufficient in terms of a comprehensive range of arms required by the land, air and naval branches of the PLA, with notable exceptions such as major surface combatants and long-range strike aircraft. Though the level of support for defence R&D and production has waxed and waned under the People’s Republic and there have been a number of major policy shifts, the need to maintain key defence-industrial capabilities has never been in doubt.
China’s post-1949 defence-industrial model was broadly similar to that of the Soviet Union. Defence-industrial activity was the exclusive domain of the State and China’s defence-industrial base featured highly centralised control and a very bureaucratic structure. All arms production undertaken by SOEs and defence-related R&D were either allocated to a research institute answering to one of the Ministries of Machine Building responsible for various aspects of China’s arms programs or undertaken by academic institutions that answered to the State. There was no apparent requirement to ensure that arms production was economically viable, though the substantial arms requirements of the PLA undoubtedly often resulted in considerable economies of scale. Since the 1950s, for example, China has produced more than 14 000 military aircraft and 50 000 aircraft engines, mostly for the PLA (Matthews and Bo 2002:36). The absence of a profit motive meant that no resources were devoted to developing arms tailored to the particular requirements of export customers.
Where the Chinese defence-industrial model differed from that of the Soviet Union was with respect to the importance attached to technological progress. Defence R&D and production in China were characterised by modest technological objectives. While the Soviet defence industry was geared to the requirements of providing a comprehensive range of arms that was relatively technologically advanced, if not necessarily on a par with comparable Western systems, China’s sights were set on much less ambitious requirements. At no point did China strive to even approach foreign arms in qualitative terms, choosing instead to focus on the large-scale production of relatively unsophisticated arms. The Chinese defence industry established a reputation for the quantity of production of arms that were obsolescent, if not obsolete, and for progressing to new product generations long after their introduction elsewhere.
The objective of autonomy has been central to Chinese defence industrialisation. In this, China is by no means unique, but the form that this takes here has been distinct, and reflects China’s particular security imperatives and policy objectives. These have been conditioned by its past difficulties in securing arms supplies and by the ideological basis of the ruling Chinese Communist Party. China was the subject of a Western arms embargo between the early 1950s and 1980s and, after 1960, was the target of what effectively constituted a Soviet arms embargo as well. The characteristic features of China’s established defence-industrial model testify to the importance attached to self-reliance (‘zili gengsheng’), which is seen in China as an ‘indispensable component…of national security’ (Park and Park 1988:119). China long pursued a general developmental approach summed up by the slogan of ‘walking on two legs’. This emphasised the importance of relying on China’s own capabilities, regardless of the level of efficiency or even the effectiveness that this involved.
The defence-industrial strategy of the People’s Republic has been distinguished by the dedication and persistence with which the objective of autonomy has been pursued. In many states, practical efforts to promote defence-industrial autonomy are restricted to production capacity, but in China the long-term development of autonomy with respect to R&D and production is considered crucial. This has involved developing and maintaining a capacity to supply the complete range of arms required by the PLA, including in terms of the local production of all arms components. Studies of the Chinese defence industry generally see its defence industrialisation as being driven by the objective of maximising self-sufficiency (see, for example, Shambaugh 2002:226). It is noteworthy, for example, that China moved to reconstitute its defence-industrial capabilities in the 1950s despite its success in securing large-scale arms transfers from the Soviet Union. China developed its defence industries as a means of ensuring a domestic capacity to meet the material requirements of the PLA. Interest in providing arms as military assistance to friendly states constituted an objective of secondary importance, and there was no apparent interest in the commercial opportunities of arms exports until the 1980s, when China emerged as a major supplier of arms to the Middle East.
The importance attached to defence-industrial autonomy was manifest in the relative isolation of Chinese R&D processes. Defence-related R&D in China did benefit from foreign input, but technological flows were unidirectional and did not involve arrangements that had the potential to generate long-term dependent ties, including collaborative R&D arrangements. This included technology transfers from the Soviet Union during the 1950s. After the termination of Soviet defence-industrial support in 1960, China continued to exploit foreign sources of arms-related technology, but this was limited to the reverse engineering of arms and components, either in terms of the outright copying of foreign designs or the derivation of technological insights contributing to the development of more advanced arms in China. This involved the opportunistic exploitation of opportunities as they arose, rather than any regularised ties. Only towards the end of the Cold War did China supplement such efforts with selective purchases of technology and subsystems from other states. Until recently, none of China’s external defence-industrial arrangements threatened its efforts to maintain independent arms R&D and production capabilities. The effective isolation of China’s defence-industrial base eliminated the prospect of dependence on potential adversaries, which China had been unable to overcome despite its best efforts during the self-strengthening movement.
China’s defence-industrial approach came at some cost. China’s reluctance to engage other states on defence-industrial issues other than the terms that it did was inherently limiting in qualitative terms, particularly given China’s relatively low technological base and the limited resources it was in a position to devote to defence-industrial development. That China was able to meet its defence-industrial needs with so little foreign support was due in large part to its unique arms requirements. For most of the history of the People’s Republic, China pursued a strategy of ‘people’s war’, which emphasised drawing an attacker deep into the Chinese hinterland, where superior numbers and geography could be exploited to China’s advantage. This approach obviated the requirement for conventional arms that were on a qualitative par with those of China’s potential adversaries. This factor, along with the difficulty involved in supplying China’s large military establishment with sophisticated arms and developing the logistical capacity to support them, meant that less-advanced arms that were within the developmental and production capacity of Chinese industry were sufficient.
Even so, China struggled to meet its limited requirements in terms of more complex categories of arms such as combat aircraft. Here, while there was progress in absolute terms, in relative terms China’s defence-industrial capacity regressed over time. The 1960s saw China producing the J-6 fighter, which was a derivative of the early 1950s-vintage Soviet MiG-19, but 20 years later it had advanced only to the point where it was producing the J-7, based on the Soviet MiG-21 design from the late 1950s. While the leap involved in progressing from the technological generation of the MiG-19 to that of the MiG-21 was considerable, its failure to advance further than this meant that China steadily fell behind its potential adversaries. China’s struggle to advance technologically in areas such as aerospace was exacerbated by the severe anti-intellectualism of the Cultural Revolution, which saw the closure of many academic institutions.
China’s defence-industrial approach came under threat only when it became apparent that it was incapable of meeting its changing arms requirements, which resulted from its evolving military strategy. By the 1980s, the utility of the strategy of people’s war was being questioned. Its limitations were demonstrated by the Gulf War of 1990–91, when American-led forces soundly defeated numerically superior, relatively well-equipped Iraqi forces within a matter of days. This highlighted the potential conferred by conventional military capabilities that were beyond the scope of China’s defence industries to support.