Wei-chin LEE

A Chinese military submarine in Shanghai. Besides making efforts to modernize its naval fleet, China’s defense industry has been working on advanced weapons systems such as cruise missiles and satellite-positioning systems. PHOTO BY JOAN LEBOLD COHEN.

The defense industry is an essential pillar of China’s industrial development and military modernization, producing everything from warships to washing machines. Although it has made significant achievements in structural rearrangement, technological advancement, and weaponry development in recent years, it still faces considerable challenges, such as adapting to a huge labor surplus and the gradual shift from government planning.

Upon its establishment in 1949, the People’s Republic of China was faced with a hostile Western world and came to rely on the Soviet Union for military and technological assistance. This resulted in adopting for China’s defense industry the Soviet organizational model, which dictated that each factory and industrial sector should be as self-sufficient as possible, even at the expense of efficiency. In 1960, the abrupt end of Soviet assistance forced China’s defense research and production to stand alone, adversely affecting the country’s overall industrial development.

Perceived threats from abroad between 1965 and 1971 led to a massive “third-front” (or third-line) construction model, an effort to build a huge self-sufficient industrial base in the remote southwestern and western regions. (The “first front” usually refers to coastal areas, which would be hard to defend; the “second front,” inland from the first front, might have to give way to the “third front,” still farther inland and thus more suitably defended in a protracted war.) Approximately 50 to 55 percent of China’s defense industry was located in provinces such as Sichuan, Shanxi, Hubei, Yunnan, and Guizhou. By 1975, the percentage of domestically manufactured weapons was 71, 75, 89, and 97, respectively, for tanks, aircraft, naval ships, and cannons.

In 1977, after the Cultural Revolution, the defense industry adopted the policy of “combining the military with the civilian” and “using the civilian to support the military” to fulfill the overall goal of economic reform and modernization. Under the joint supervision of the Central Military Commission and the State Council, the Commission of Science, Technology, and Industry for National Defense (COSTIND) was established in 1982 to ensure better coordination in defense-industry leadership. In that year as well, the machine-building ministries were renamed to indicate their functional responsibilities. For example, the Second Machine Building Ministry became the Ministry of Nuclear Industry. The 1980s also witnessed the production of civilian goods by the defense industry, thus involving it in dual functions and profit-making activities.

The significance of high-tech weapons during the Persian Gulf War (1990–91) renewed China’s interest in technological development. In March 1998, COSTIND was headed for the first time by a civilian bureaucrat, a change regarded as an attempt to avoid the military’s heavy-handed interference in the operation of China’s defense industry. While the General Armaments Department (GAD), newly created within the People’s Liberation Army, oversaw weapons research, the military was expected to pay more for weapons and equipment from COSTIND’s defense factories, due to further involvement in the market economy. On 1 July 1999, corporations in the main defense industrial sectors were split for further specialization. For example, the nuclear industry was divided into the China National Nuclear Corporation and the China Nuclear Engineering and Construction Group Corporation.


The defense industry’s nearly unrivaled access to supplies and its rarely challenged methods of marketing have gradually responded to market trends following China’s economic reforms. In the 1980s, a shift in emphasis from preparation for war to preservation of peace necessitated the reorganization of the defense industry. Conversion to civilian production mitigated the pain caused by the cuts in military spending and symbolically showed China’s willingness to contribute to global peace. The Chinese government claimed that its military-industrial complex produced and exported $7 billion worth of goods in 1997. Thirty thousand state-owned defense factories engaged in the aerospace, aviation, ordnance, shipbuilding, and nuclear industrial sectors and built everything from warships to washing machines.

While data varies for different sectors, civilian goods in the late 1990s approached 80 percent of the gross output value of China’s defense industry. In 1997, for example, China’s defense industry claimed credit for producing 50 percent of motorcycles and 30 percent of color televisions in the domestic market. The goal was for the defense industry to be increasingly self-sustaining, efficient, and innovative. In addition, loosening state control has given defense factories flexibility in interaction with foreign business communities for dual-use technology acquisition in various category-neutral areas such as information and communications technologies.

Another phenomenon of the 1990s was the formation of big-business conglomerates to link firms vertically and horizontally so that they could participate in economies of scale. One such conglomerate is the China North Industries Corporation, reported in 1997 to have more than three hundred affiliated units with fixed assets of at least $7.5 billion. Another example is China Poly Group, a diversified conglomerate actively engaging in a variety of activities such as tourism, real estate, infrastructure construction, arms exports, and technology acquisition.

Indigenous efforts and access to foreign know-how may enable the defense industry to close technological gaps between China and the world’s other major powers. China’s defense industry has been working on advanced weapons systems such as cruise missiles and satellite-positioning systems. In 1999, China successfully launched and recovered an unmanned spacecraft. As long as China’s economic boom continues and the government increases the budget for military procurement, the defense industry has great potential for growth.

In the 2000s, as a result of the emphasis on selective modernization in key industries based on China’s own assessment of the technological advantage and gradual adoption of market mechanisms, China’s defense industry has indeed begun to show its qualitative achievements in several industrial sectors. In the shipbuilding industry, Chinese destroyers (“Luzhou” class and “Luyang II” class), conventional submarines (e.g., “Song” class and “Yuan” class), and nuclear-fueled attack submarines (e.g., “Shang” class and “Jin” class) built in the 2000s have been more seaworthy and better prepared for surface and undersea warfare, for regional area denial capability (the ability to prevent adversaries from access to a region), and for the pursuit of long-term objectives of global interest. In addition to the official introduction of the “homemade” J-10 fighter plane and domestically assembled SU-27SKs, China’s aerospace industry rolled out a regional jet, the ARJ21, in 2007. The successful launching and landing of the “Shenzhou 5” spaceship (2003) and “Shenzhou 6” spaceship (2005) demonstrated China’s ability to send astronauts into space. These spaceflights also offered significant insight
about China’s missile technology and space-related weapons systems. Meanwhile, China’s nuclear industry has developed and deployed more than ten varieties of ballistic missiles, such as JL-2 (Julang-2), submarine-launched missiles (SLBMs), and Dongfeng (DF)-31/31A ICBMs with an estimated capability of reaching the North American continent. Finally, the joint force of China’s booming information technologies (IT) companies, state research institutes, and ambitious national defense science and technology funding like the National High-tech R&D Program (863 Program, 1986) and the National Basic Research Program (973 Program, 1997) has benefited both the civilian IT sector and the defense industrial establishment. With significant advancement in the production of fiber-optic cable, small-size reconnaissance satellites, and other microelectronic technologies, the military has strengthened Chinese military’s C4ISR (command, control, communication, computer, intelligence, surveillance, and reconnaissance) capability at different levels of the “battle-space” management system. Given China’s rapid economic growth and significant improvement in military equipment and weaponry, a broad overview and sweeping generalization about China’s defense industries would not give a judicious evaluation of their technological capability. Future studies of China’s defense industry will require sector-by-sector examination.

China’s close linkage to the world economy under various trade regimes regulated by the WTO has enabled the defense factory to gain access to a vast array of new civilian dual-use technology spin-offs for the innovation of weapons. Several EU members have found ways to deliver dual-use or “non-lethal” military equipment and parts to China. For instance, tanks and armored vehicles manufactured in China have been mostly powered by German-designed engines manufactured under the licensed production right. The same applies to Chinese submarines, which have adopted German diesel engines and a French sonar system. The policy of “combining the military with the civilian” and “using the civilian to support the military” still persist in the twenty-first century. The Chinese government reported that the sector for civilian goods contributed 78 percent of the revenues of the defense industry in 2007. Meanwhile, China’s White Paper on National Defense issued in 2006 asserted that patent applications by China’s military industrial complex have increased at an average annual rate of over 40 percent in recent years.


The legacy of central planning has hurt the economic vitality of China’s defense factories. Many defense plants have found themselves with duplicate production, oversupply, and brain drain to lucrative private enterprises. For the “third-front” defense factories, inconvenient sites and worn-out infrastructure have scared off new investors. Although defense factories have been successful in joint-venture deals with companies like Mercedes-Benz (now Daimler Chrysler), Suzuki, and McDonnell Douglas, by 1998 fewer than six hundred joint ventures had been forged, despite years of courtship.

Overall, the viability of China’s defense industry relies as much on public-policy design, the political will of leaders, and military circumstances as on economic development. Problems like a bloated labor force and ever-increasing costs for technological innovation must be solved. Most important, a defense industry long accustomed to government planning must make a difficult shift to a market mentality in consolidating and rationalizing its industrial layout and operation.

Even with the 1998 structural separation of COSTIND from the military, the image of the defense industry’s symbiotic association with China’s military persists. This mammoth military-industrial complex poses a hindrance to the central authority. Eventual loosening of military control over the defense industry and the stipulation for more transparent arms-transfer procedures seem to be two main tasks for a robust development of the defense industry. The COSTIND’s decision in 2007 on military-enterprises shareholding reform—allowing state-owned companies and qualified foreign investors to acquire or merge military factories—was the latest drive to encourage further civilianization of the defense industry in the market economy. It will be interesting to evaluate how China can achieve a balance between the civilian sector and defense industry and the integration of civilian technology into weaponry R&D as the nation strives to enhance its military capability.

In order to ensure its economic subsistence, the Chinese defense industry needs to rely on income from arms exports. With recipients like Iran and Pakistan, China’s aggressive arms-transfer policy made China the eighth largest supplier for the 2002–2006 period. Arms exported by China during this period were estimated at $2.1 billion, approximately 6.6 percent of that of the United States. In carrying out normal arms trade, China stressed its compliance with three basic principles—the enhancement of the self-defense capability of importing countries, noninterference of importing countries, and nonimpairment of regional and global peace, security, and stability. It also promulgated the Law on Control of Guns in 1996, issued regulations on the administration of arms export in 1997, and started to revise arms export regulations in 2002. Nevertheless, its nontransparent practices have frequently led to international accusations and diplomatic disputes for exporting weaponry to some sensitive and unstable areas, such as Sudan, Zimbabwe, and Myanmar in recent years. Establishment of a stronger monitoring mechanism to prohibit its weaponry from transferring to controversial destinations will be a major challenge for the healthy development of China’s defense industry in the future.

Further Reading

Brömmelhörster, J., & Frankenstein, J. (Eds.). (1997). Mixed motives, uncertain outcomes: Defense conversion in China. Boulder, CO: Lynne Rienner.

Medeiros, E. S., Cliff, R., Crane, K., & Mulvenon, J. C. (2005). A new direction for China’s defense industry. Santa Monica, CA: RAND Corporation.

Feigenbaum, E. A. (1999). Soldiers, weapons, and Chinese development strategy: The Mao era military in China’s economic and institutional debate. China Quarterly, 158: 285–313.

Folta, P. H. (1992). From swords to plowshares? Defense industry reform in the PRC. Boulder, CO: Westview Press.

Frankenstein, J. & Bates, G. (1997). Current and future challenges facing Chinese defense industries. In D. Shambaugh & Richard Yang (Eds.), China’s military in transition (pp. 130–163). Oxford, U.K.: Clarendon Press.

Gurtov, M., & Byong-Moo Hwang. (1998). China’s security: The new roles of the military. Boulder, CO: Lynne Rienner.

Walsh, K. A. (2006). Civil-military dynamics in Chinese defense industry and arms policy: An approaching tipping point. In Nan Li (Ed.), Chinese civil-military relations: The transformation of the People’s Liberation Army (pp. 61–88). London: Routledge.

Source: Lee, Wei-chin. (2009). Defense Industry. In Linsun Cheng, et al. (Eds.), Berkshire Encyclopedia of China, pp. 593–597. Great Barrington, MA: Berkshire Publishing.

A mi
litia runs drills in Du Fu’s Garden, Chengdu, Sichuan. PHOTO BY JOAN LEBOLD COHEN.

Defense Industry (Guófáng g?ngyè ????)|Guófáng g?ngyè ???? (Defense Industry)

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