China’s military modernization has been a central plank of President Xi Jinping’s policy agenda. Historically, China’s arms makers have focused almost exclusively on supplying the People’s Liberation Army (PLA). However, over the last decade, they have begun to look for overseas markets to supplement sales and support Beijing’s geopolitical goals. Arms sales are an often-overlooked aspect of China’s global security and economic footprint and can present challenges to European arms makers in overlapping markets. European policymakers and corporates need more knowledge and awareness of this issue. This edition of the China Global Competition Tracker looks at China’s arms industry and its footprint overseas. First, MERICS Lead Analyst Helena Legarda examines Beijing’s strategy of arms sales overseas and how it might develop in the future. Next, Lead Analyst Jacob Gunter looks into Norinco, one of China’s key land equipment makers, as a representative example of the overseas push by China arms industry.
China aims to expand its overseas arms sales, but is beset with headwinds
China has established itself as a major arms exporter, building on years of military modernization policies that have strengthened its defense industry. Beijing has set its sights on exporting arms as China is now able to produce most of its military equipment domestically, reducing its dependence on imports from Russia and elsewhere. Sales teams from China’s ten major defense SOEs operate across the globe in search of new customers and in support of Beijing’s geopolitical ambitions.
The strategy is paying off. China had 5.8 percent of all global arms exports between 2019 and 2023, making it the fourth largest supplier of conventional weapons, after the United States, France and Russia. Roughly 40 countries purchased Chinese military equipment in the 2019-2023 period, despite the Covid-induced drop in China’s share of global arms exports in those years. Today, Chinese weapons are gradually becoming dominant in South Asia, Sub-Saharan Africa and Southeast Asia, and are making inroads in Central Asia and the Middle East. There are economic and geopolitical implications for European governments and arms industries, though the intensity of the competition should not be overstated. Chinese arms exporters still face serious limitations that could constrain further sales growth.
An indiscriminate, cost-effective provider
China’s success in expanding its overseas arms sales rests on the attractiveness of its offer to developing nations. First, Beijing exports nearly every category of conventional military equipment, from unmanned aerial vehicles (UAVs) and missile systems to submarines, naval vessels and fighter aircraft. Chinese weapons providers also benefit from Beijing’s absence from key international arms control pacts intended to regulate trade in conventional weapons (the Wassenaar Arrangement) and missile technology and delivery systems (the Missile Technology Control Regime). Despite the growing export restrictions on armed UAVs imposed by Beijing, this means that Chinese firms are able to sell certain platforms, such as some types of armed drones, that European or US firms are banned from exporting. Nonetheless, Beijing does not allow export of China’s most advanced variants, to preserve its military advantage. So far, platforms such as China’s 5th generation J-20 fighter remain exclusively for PLA use.
Chinese platforms sell for less than Western equivalents and their makers often offer flexible payment conditions. Buyers may also perceive Chinese weapons exports as having fewer strings attached than Western ones.
Chinese firms sell indiscriminately. They have demonstrated their willingness to sell equipment to all kinds of governments and regimes, without regard for their human rights record, degree of stability, or likely intentions for using the weapons. China has continued selling weapons to Myanmar throughout the ongoing civil war, for example, and there is some evidence of Chinese-made drones originally sold to nearby countries being used during the war in Yemen. Chinese providers reportedly do not demand end-user certificates, which are meant to prevent weapons sales from being diverted to other actors and to ensure authorized users use them only for authorized purposes.
Chinese arms makers’ indiscriminate sales approach is one reason why most Chinese arms manufacturers appear on the United States’s sanctions lists. Some Chinese firms’ (such as Norinco’s) military support for Iran triggered some of the earliest such sanctions in 2003. The list expanded rapidly under the Trump and Biden administrations. Chinese arms makers tend to be listed for their part in modernizing the People’s Liberation Army (PLA) and assistance towards Russia’s war in Ukraine. The EU has no equivalent sanctions on China’s arms industry, although it has maintained an arms embargo on China since 1989.
Pushing to grow
China is pushing to expand its global market share, zeroing in on geopolitically important regions such as South and Southeast Asia, the Middle East and Sub-Saharan Africa. Sales bring clear economic benefits to its defense sector state-owned enterprises (SOEs) and the sluggish national economy. Data from the Stockholm International Peace Research Institute (SIPRI) shows arms revenue made up 27 percent of Norinco’s total revenue in 2022, and 25 percent at the Aviation Industry Corporation of China’s (AVIC). Although these are far lower shares than Lockheed Martin’s 90 percent or Raytheon’s 59 percent, they are nonetheless significant numbers for some of China’s largest SOEs.
China’s arms exports are also a tool in Beijing’s geopolitical arsenal, as arms exports can lay the foundation for closer ties on other issues. Beijing is able to use arms sales to build influence and closer partnerships with nations in the Global South, which serves its strategic goal of forging a coalition of countries to push back against Western dominance.
China’s share of arms imports in the Americas and the Middle East remains small: US and European suppliers continue to be dominant in those regions, but Beijing is rapidly making inroads in Africa and in Asia. China’s share of total arms exports to all of Africa has remained largely stable since 2009 (at around 12 percent), unable to compete with the United States and Europe. But the dynamics are shifting in Sub-Saharan Africa, where China has become the top supplier, overtaking Russia. China’s share of arms exports to South and Southeast Asia is also growing rapidly, partly thanks to sharp drops in Russian exports since the start of full-scale war against Ukraine.
