Will Chinese military sales eventually displace U.S. defense companies in the international market? A well-researched article last week pointed out that in the last 10 years, China’s foreign military sales increased 95%, making it the world’s 6th largest arms supplier. The same article says that China is “creating its own military-industrial complex, with the private sector taking a leading role.”
The article focuses mainly on China’s dramatic military expansion, which is worrisome enough on its own. However, rather than focus on China’s military capabilities, let’s look at the commercial side: Will the expansion in China’s military exports threaten or displace U.S. military sales?
As the article points out, in recent years the quantity of Chinese arms sales has exploded. China has made major sales to Bangladesh, Pakistan, North Korea, Iran, sub-Saharan Africa, and many others. South America, traditionally a U.S./European customer, got into the game with the purchase of Chinese aircraft (Bolivia and Venezuela), radars (Ecuador), and helicopters (Bolivia). Even Peru, a strong U.S. ally, was convinced by Chinese defense contractors to cancel a $114M contract with a U.S/Israeli/European consortium. “This contract cancellation shows that the Chinese contractors are becoming more sophisticated players in the Latin America arms market,” said R. Evan Ellis, an assistant professor at National Defense University in Washington.
Although Chinese exports are growing, U.S. military exports still hold major competitive advantages:
- Post-sale support: Especially when offered through FMS, U.S. weapons sales are typically part of a “total package” deal, including spare parts, training, and post-sale support. The Chinese usually offer none of this.
- Quality and dependability: U.S. defense products work, while Chinese products may not. This is not just a preconception: the Chinese radars purchased by the Ecuadorian Air Force never actually worked.
- Compatibility and interoperability: For those countries that already own U.S. weapons systems and/or operate alongside U.S. forces, is much better off sticking with American-made. Chinese systems are difficult (if not impossible) to be properly integrated with U.S. hardware.
- Communication: English as a second language is far more common than Chinese. Around the world, armed forces are much more likely to speak and read English, making it MUCH easier for them to read operating manuals and seek maintenance support.
- New technologies: U.S. companies are constantly innovating; Chinese companies are generally reverse-engineering. China has yet to introduce any new technology or groundbreaking new system.
- Financing: The Chinese often sell arms in exchange for promises of natural resources – oil, minerals, etc. – which may allow cash-strapped countries to make deals they otherwise couldn’t afford. On the other hand, the USG can help purchasing countries by arranging a Foreign Military Sales (FMS) payment schedule that matches their financial requirements. In addition to this, the USG also has the Foreign Military Financing (FMF) program, where it essentially gives countries grants to purchase U.S.-made military equipment.
To keep things in perspective, in 2011 the total value of Chinese arms exports were only 13.6% of U.S. exports. While there has been a clear trend of explosive growth in Chinese exports, the U.S. defense industry still holds numerous advantages, and its dominance in the industry will continue.