China’s defence industry has undergone major transformation since the late 1990s and continues to do so, as its companies and research institutes re-organize in order to improve their performance as far as military systems R&D, as well as related production capabilities. Moreover, the government continues its efforts to improve the business ‘environment’ and to eliminate bureaucracy, while the industry works on reducing development timelines and on enhancing its quality standards.
As of 1998, a comprehensive strategy for improving indigenous industrial capabilities in the defence sector has been in place. This strategy aimed to achieve modernization in key capabilities’ areas, as well as attaining greater civil-military industrial integration, so as to make better use of under development dual-use technologies, as also the acquisition of advanced foreign defence equipment and materiel. The 1998 reforms, also lead to the establishment of the new COSTIND (or SCOSTIND as is referred to by some, so as to distinguish from the previous COSTIND), i.e. the State Commission for Science, Technology and Industry for National Defence. COSTIND was to be responsible for the country’s defence industry, including related policy and objectives formulation, its restructuring, development, disciplinary management, regulations, quality control, international cooperation and R&D. In addition, the State Council, in 1999, implemented a number of structural reforms within defence industries, so as to promote competition and efficiency, and to align the defence industry’s output to the PLA’s operational requirements.
All 5 major state-controlled defence groups of that time, were split into two entities, via which, in parallel, both defence and civilian products would be produced, elevating the level of domestic competition and military production output. COSTIND was to coordinate the activities of the 10 resulting entities, namely consisting in:
- China National Nuclear Corporation
- China Nuclear Engineering & Construction Group Corporation
- China Aerospace Science and Technology Corporation
- China Aerospace Machinery and Electronics Corporation
- China Aviation Industry Corporation-I
- China Aviation Industry Corporation-II
- China State Shipbuilding Corporation
- China Shipbuilding Industry Corporation
- China North Industries Group Corporation
- China South Industries Group Corporation
Through this ‘radical’ approach, ‘unobstructed’ access to both defence and dual-use technologies was to be made possible, which in turn could be used to boost indigenous military production. In addition, revenues from commercial sales, could serve so as to fund defence-related activities.
In addition, COSTIND was tasked with the administration of a number of institutes of higher education, with ties to the local Aerospace and Defence industry’s activities, including:
- The Beijing University of Aeronautics and Astronautics
- The Beijing University of Science and Technology
- The Nanjing University of Aeronautics and Astronautics
- The Northwestern Polytechnical University
- The Nanjing University of Science and Technology
- The Harbin Institute of Technology
- The Harbin Engineering University
In 2008, a new ‘super’ ministry, was established by the government, namely the Ministry of Industry and Information Technology (MIIT). MIIT was tasked with empowering greater civil-military integration and overseeing the development of advanced technologies. COSTIND that was integrated under the MIIT, was renamed and restructured at that time, into the State Administration for Science, Technology and Industry for National Defence (SASTIND), with much the same responsibilities as the former COSTIND.
The continued pursuit of integration between the defence and civilian sectors’ activities, was aimed at leveraging the results of the expanding science and technology base of the country, for the benefit of local defence production. To this end, a number of local defence entities, have since established research institutes with academic departments, a few of which are able to issue advanced degrees for their students. In this fashion, related scientific research can be targeted at innovative military technologies and deliver scientists and engineers who will further support and ‘fuel’ future defence-oriented R&D and production programs.
Nowadays (2016), the Chinese aerospace & defence industry comprises of a highly complex ‘network’ of closely interconnected companies, which is spearheaded by the following prominent entities:
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Main Aerospace & Defence Products and Services |
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China Aerospace Science and Technology Corporation (CASC) |
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China Aerospace Science and Industry Corporation (CASIC) |
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Aviation Industry Corporation of China (AVIC) |
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China North Industries Group Corporation (NORINCO) |
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China South Industries Group Corporation (CSGC) |
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China State Shipbuilding Corporation (CSSC) |
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China Shipbuilding Industry Corporation (CSIC) |
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China National Nuclear Corporation (CNNC) |
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China Nuclear Engineering Corporation (CNEC) |
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China Electronics Technology Group Corporation (CETC) |
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It is further understood that major Chinese information technology companies, operating in the civil sector, such as Huawei Technologies Co., Datang Telecom Technology & Industry Group and ZTE (Zhong Xing Telecommunication Equipment) Co., maintain close ties with the PLA and collaborate with its various branches, on associated R&D programmes.
Another organisation that plays a ‘pivotal’ role in the development of innovative technologies for use by the domestic defence industry, is China’s Academy of Sciences (CAS). More specifically, the CAS’s Institute of Mechanics, established with the aim to pursue innovation and advanced-technologies’ integration in the aerospace, oceanic, environmental, and energy domains, focusses amongst other items, on nano/micro-scale mechanics, microsystems, high temperature gas dynamics and supersonic flight technologies, as well as advanced manufacturing. The institute further operates as of March 2014, the reportedly largest worldwide hypersonic wind tunnel (the JF-12). This wind tunnel allows the simulation of flying conditions at speeds from Mach 5, up to Mach 9.
Another similar entity, is the Chinese Academy of Engineering (CAE). This organisation is tasked with conducting strategic studies, providing consultancy services to support governmental decision-making with respect to ‘key’ matters in the engineering and technological sciences fields, as well as to promote the development and take-up of associated research results.
With China projected to become the largest civil aviation market in the coming decades, the major aircraft manufacturers are all heavily investing in the country, with the aim to grab a ‘bigger slice of the pie’.
Airbus has established an A320 Family Final Assembly Line in Tianjin, since 2008, as part of a joint venture with the Tianjin Free Trade Zone (TJFTZ) and the Chinese Aviation Industry Corporation (AVIC). In 2016, the set-up of a further A330 Family Final Assembly Line, on the same site, was underway. In terms of helicopter production, likewise, Airbus Helicopters (and its predecessors) had/have established several cooperation agreements for the licensed production in China of the AS365 Dauphin/Z-9, the EC120/HC120 Colibri, the H175/AC352, and most recently, the H135 helicopters. In June 2016, a Chinese consortium ordered 100 H135 helicopters, becoming the first customer from China for the helicopter, resulting in the formation of an industrial partnership for the launch of an H135 Final Assembly Line, in Qingdao. This historic agreement followed the production contract for the development of the H175 signed in 2014, covering more than 1,000 units over 20 years. The H175 (known as the AC352 in China), is being developed as part of a cooperation between Airbus Helicopters and Chinese manufacturer Avicopter.
In addition, Airbus has established within the country, in cooperation with local partners, the following facilities:
- A Customer Support Centre in Beijing, which can dispatch any of some 25,000 spare parts, to airlines in the Asia-Pacific region.
- A Logistics Centre in Tianjin, so as to improve related supply chain management.
- A Training Centre in Beijing, which operates 5 Full Flight Simulators (FFS), 3 for the A320 Family, 1 for the A330/A340 Family and 1 for H225 helicopters.
- An Engineering Centre in Beijing and a Composite Manufacturing Centre in Harbin.
On the other hand, Boeing is to follow in the steps of Airbus, as was agreed in September of 2015, with the set-up of a plant in China (location to be determined), to be responsible for the completion (install interiors and paint exteriors) of the B737 aircraft destined for the Chinese market, in compensation for a major deal signed with 3 Chinese entities, to procure some 300 B737 aircraft. In addition, prior to this agreement, Boeing activities in China, contributed some 800 million to 1 billion USD on an annual basis to the nation’s economy, through the sourcing of parts, components and assemblies for its various aircraft models, through joint venture revenues, related operations, training and R&D investment. Specifically, Chinese companies build horizontal stabilizers, vertical fins, aft tail sections, doors, wing panels, wire harnesses and other parts for the Next-Generation 737 aircraft, the rudder for the 737 MAX, trailing edge wing ribs, horizontal stabilizers, vertical fins, ailerons, spoilers and inboard flaps for the 747-8, the rudder, wing-to-body fairing panels, leading edge and panels for the vertical fin, as well as other composite parts for the Boeing 787 aircraft.
Furthermore, the US light aircraft manufacturer Cessna and the Brazilian regional and business jet manufacturer Embraer, have both enjoyed leading positions in China in their respective market segments, after launching associated manufacturing activities in China (for the Cessna 162 and 208, and the ERJ 145 and the Legacy 650, respectively), in collaboration with AVIC subsidiaries.
In addition to this very auspicious business ‘environment’ created through major foreign investments in the local economy, as well as the rapid indigenous capabilities’ development, the local government continues its efforts to remove related political and bureaucratic obstacles, for example by opening up bidding for state-funded military R&D work, for private domestic firms also, since August of 2016. All the above are expected to further boost the growth of the Aerospace & Defence market in China, as well as the level and the extent of the corresponding domestic manufacturing capabilities, over a horizon of at least the next couple of decades (i.e. up to 2040).