By Shai Oster
September 25, 2014
China’s New Export: Military in a Box
At the Africa Aerospace and Defence expo in September, weapons buyers from across the continent descended on Air Force Base Waterkloof in the South African capital of Pretoria for a bit of shopping. There they were wooed by Chinese defense gear giant Norinco, which has honed its pitch to an art.
Namibia Deputy Defense Minister Petrus Iilonga, wearing Prada sunglasses and a Lenin pin, studied models of battle tanks before representatives from Norinco, a state-controlled conglomerate also known as China North Industries Group, ushered him into a room marked VIP for some personal salesmanship. Nearby, the Tanzanian military chief, General Davis Mwamunyange, furrowed his brow while a company official in a charcoal suit and orange tie described a truck with a radar device mounted on the back. “Just about a month ago, we did a live test on this one,” the Chinese official confided.
Norinco has even devised a novel way to make buying weapons easier: It bundles together starter kits of basic defense gear—everything from rifles to howitzers, laser-guided bombs, armored personnel carriers, tanks, and drones—for governments that want to quickly outfit their armed forces. Chinese state media has dubbed the package a “military set meal.”
More than three decades after Chinese leader Deng Xiaoping and the Communist Party founded Norinco, in the wake of a humiliating border war with Vietnam that ended in a stalemate, the company sits atop a military-industrial complex that increasingly rivals the U.S. war machine in firepower and influence.
Norinco’s sales grew an average of more than 20 percent annually over the past five years, according to data compiled by Bloomberg and armaments researcher IHS Jane’s. That’s faster than those of Lockheed Martin (LMT), maker of the F-35 Lightning II fighter, and General Dynamics (GD), which produces the Abrams battle tank—or any other major defense contractor. The Beijing-based company’s $62 billion in revenue last year and 275,000 employees embody the clout of China’s defense industry. The party has poured hundreds of billions of dollars into the military, molding Mao-era weapons makers into growth-driven conglomerates eager to court buyers of bargain-priced weaponry. The sprawling Norinco’s nondefense units often also benefit, gaining an entree to sell their products to the same customers. The company declined to comment.
“The Chinese systems are simply cheaper, they are reliable, and they are tailored to the conditions of developing countries,” says Anthony Cordesman, a national security analyst at the Washington-based Center for Strategic and International Studies. “As the systems get more sophisticated, they will undercut Europe and the U.S. and compete with Russia.”
With foreign sales of $7.4 billion over the past five years, China overtook France in 2013 to become the world’s fourth-largest arms exporter, according to the Stockholm International Peace Research Institute. Besides Norinco, the country’s arms makers include Aviation Industry Corp. of China, Poly Technologies, and China South Industries Group. Norinco is the biggest of the bunch.
The company’s rise parallels those of network equipment maker Huawei Technologies and mobile phone producer Xiaomi, Chinese businesses that have used aggressive pricing and solid technology to compete globally with the biggest in their fields. Still, the creation of this powerhouse has broader implications: Armaments aren’t smartphones.
In March, China said it would increase the People’s Liberation Army’s funding by 12.2 percent to 808 billion yuan ($132 billion), a sum exceeded only by the $572 billion U.S. defense budget. Greater military strength has allowed President Xi Jinping to pursue China’s territorial claims with vigor. He’s sent fighter jets to patrol a new aircraft identification zone over some East China Sea islands claimed by Japan and dispatched ships to chase Vietnamese vessels away from an oil exploration rig in the disputed South China Sea. According to U.S. Department of Defense reports and Norinco literature, the company supplies laser-guided missiles to China’s air force, deck-mounted guns to its navy, and missiles to its army that are able to reach Taiwan, which China regards as a rebel province.
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