Nov 19, 2010
By Robert Wall London
By Robert Wall London
When it comes to future
military export markets, the rise of China remains one of the big variables.
Even though
the nation ranks as the second biggest military spender globally, it is not
among the top 10 exporters or importers of military equipment. The latter situation
stems partly from an arms embargo imposed by the West after the 1989 Tiananmen
Square uprising.
But there is clear
market potential. The U.K., for example, saw
15% of its security-related exports in 2009 go to China, the second biggest
single market after the U.S. (Security exports are not affected by the
embargo.)
As an exporter, China
may also be a growing force. It previously tried to challenge the likes of
Russia, France, the U.K. and U.S. in the export market, but those attempts
failed largely because of inferior equipment and lackluster commercial
strategies. Chinese combat aircraft
exports in 2005-09 represented only 4% of the global total, according to the
Stockholm International Peace Research Institute (Sipri).
Nevertheless, there is
growing momentum behind Beijing’s activities, as evidenced by recent sales of
radar equipment to Venezuela and Ecuador, where Chinese companies defeated
offerings from Russia, notes Siemon T. Wezeman, Sipri’s senior fellow for arms
transfers. The offerings “were technically attractive enough” to best the
competition, he says.
The Pentagon also points
out that China sold a communications satellite to Nigeria and is trying to woo
customers in Pakistan, Bolivia, Laos and Vietnam.
But China’s ambitions still face roadblocks. Take the case of the
JF-17 fighter. Despite its breakthrough order with Pakistan—the first batch of
single-engine fighters has been delivered—dependence on Russian engines is a
problem. Wezeman notes that in Egypt, where Russia wants to sell MiG‑29s, the
powerplant issue has been a handicap in trying to sell the JF-17.
Consequently, China is
now working on a domestically developed turbojet. “The more Russia puts a hold
on equipment transfer, the more the Chinese are pushing” to develop their own
offerings, Wezeman says.
Industry observers,
meanwhile, expect Beijing to try to capitalize on its growing foreign-policy
reach into new markets such as Africa, particularly since the price of many
Chinese offerings may be attractive to those buyers. The JF-17 is marketed at less than $25 million, and China is also
offering an impressive array of air-to-air and air-to-ground weapons to arm the
fighter.
A breakout
order for the J-10 also has been in the works with Pakistan, although no firm
delivery plans for the $40-million aircraft have been disclosed
Playing the offset
game—essential for success in the global arms market—is another area where
China is likely to become more sophisticated. One export offering China is
betting on is the L-15 jet trainer. Catic officials see Ukraine as a potential
buyer and signal that they may offer offshore assembly.
However, Western
industry officials are still skeptical that Chinese equipment can compete with
their offerings in terms of technical sophistication. But in the missile
domain, the country is starting to gain traction, experts concede.
Whereas China poses a
potential threat as an arms exporter to rival manufacturers, it has enormous
potential as a buyer if the current arms embargo is lifted.
One European industry
official speculates that with European coffers shrinking and companies looking
increasingly to exports to sustain their revenues and workforces, pressure will
mount to back off from the blanket ban on weapon exports.
Companies’ eagerness to
court China was underscored recently by Italy’s Finmeccanica. After the U.S.
government issued a waiver to allow Lockheed Martin C-130s to land in China to
help in combating potential oil spills, CEO Pier Francesco Guarguaglini
signaled he would want to sell C-27Js to Beijing if the U.S. eased its arms
export ban.
The move drew a quick
response. Italian officials were called to the Pentagon to hear U.S. misgivings
about a C-27J sale. (In the past, China was a strong market for Italy, with
deals including defense electronics and torpedoes.)
Companies also have
found other workarounds, such as selling advanced helicopters as commercial
equipment. For example, Eurocopter and Avic are co-developing the EC175 (called
the Z-15 in China).
But Wezeman believes the
embargo will likely stand for some time, and Washington’s pressure on allies
will prevent a flood of equipment from entering the Chinese inventory.
With Andy Nativi in Genoa.
No comments:
Post a Comment