25.China’s Road to Reforms in the Defence Sector

(Published in Defence ProAc Biz News Sep-Oct 2013)

China’s Road to Reforms in the Defence Sector

The Chinese modernisation plan for its armed forces has made significant progress during the past decade; this is largely attributable to its defence budget which has been growing in double digits during the past two decades. The budget for the current year is ~$116 billion; the implications are a clear indicator of the Chinese will to sustain modernisation of their armed forces on a fast track. The Chinese defence industry has been able to produce armament comparable in quality with other nations in the Asia-Pacific region. It is also true that it has got tagged with copying, reverse engineering or modifying existing armament, rather than achieving inventive breakthroughs by developing weapons which can outshine or at least compete with the world leaders.

China has been pursuing a calibrated up gradation of its forces by incorporating modifications to existing weapons and selectively procuring advanced technological systems. This approach gives it sufficient margin to incrementally familiarise its forces with modern weapons as well as hone the capabilities on modernised systems. A wise move which retains the armed forces in a state of preparedness for any contingency rather than grapple with woes of ill mastered technologies in the face of adversary.

The rise of China’s military has undoubtedly raised wide spread concerns across the oceans, which also does not appear wholly justified for the simple reason that booming economies are followed by proportionate increases in armed might and the fact that benefits of acquired technologies in the civilian sector invariably percolate into to the defence sector and vice versa. Paradoxically there is a rush by the very same countries to partake the trade benefit cake offered by the growth of China. China is also planning for a revolution in military affairs spear headed by information technology in the decade to come as is borne out by their 15 year Defence and National Science and technology plans. By the end of this period China would be able to start its march to match the defence technology inventions of the world leaders like the US. It is also apparent that China is looking at a period of ‘peace and tranquillity’ and does not foresee any major conflict till it is able to match the lone super power. It is also a fact that China has carefully put in place enough weapons of deterrence in the conventional arena; be they submarines or carrier killer ASBMs; which would make the adversary think many a time before carrying out any misplaced venture. This posturing has been very effective as can be understood by the heated debates to ring in Sea Basing, Air Sea Battle concepts and a turn towards innovating counters to ASBMs as well as developing much longer range ship based missiles.


China commenced the reforms in its defence sector, in an earnest manner, in the mid nineties. At the core of the reform process is the will of the Chinese to become ‘Self Reliant’ in all sectors of defence. A two pronged strategy was adopted to tackle the woes of the defence industrial system by initiating both institutional and structural reforms.
Institutional reforms included regulated competition for defence conglomerates; thorough independent evaluation of technical and financial aspects of major weapons projects, weeding out corruption and grooming of a motivated workforce.

Structural reforms concentrated mainly on aspects of organisation and defence research. The underlying principle of organisational reforms was to integrate the defence and civilian economies so that mutual benefits accrue to both the sectors. Organisational changes included extended role of PLA in management of S&T programs, overhauling of defence conglomerates and restructuring of the Commission for Science, Technology and Industry for National Defence (COSTIND).


COSTIND was merged in to a Ministry of Industry and Informisation MII, and christened State Administration of Defence Science, Technology and Industry (SASTIND). The conglomerates were reorganised in to six defence sub sectors. In the space sector there are China Aerospace Science and Industry Corporation (CASIC) and China Aerospace Science and Technology Corporation (CASTC).The CASIC is responsible for development of guided missile systems, information technology and small satellites, the CASTC specialises in strategic and tactical missiles, launch vehicles and satellites. In the defence electronics sector, complete responsibility lies with China Electronics Technology Group Corporation. In ship building sector, civilian ship building is with China Shipbuilding Industry Corporation, where as China State Shipbuilding Corporation is the main supplier to PLA Navy for all types of war ships. In the ordnance sector, China Ordnance Equipment Group Corporation manufactures all civilian vehicles where as North China Industries Corporation meets the ammunition and vehicle requirements of the PLA. In aviation sector Aviation Industries Corporation One (AVIC 1) specialises in combat aircraft for PLAAF and Aviation Industries Corporation Two (AVIC 2) is responsible for civilian aircraft, helicopters and transport planes. Lastly in the nuclear sector, China Nuclear Engineering and Construction Corporation looks after construction of nuclear facilities and China National Nuclear Corporation is responsible for nuclear power generation and nuclear weapons.

Reforms in the defence research sector included, increased funding, debt restructuring, cost cutting, better financial management, competitive environment, integration of civilian and defence technologies, faster transition of research to production etc. The fundamental principle being to strengthen basic research so that transformation of the PLA in to a network centric force can take place based upon its original and unique research.

The Chinese defence industry had been grappling with serious quality related issues as its focus had been on enhancing production at the cost of quality of product, obviously the biggest sufferer was the PLA which was saddled with substandard weapons and equipment. This was also due to the fact that comprehensive technical standards and regulatory framework for implementing them was not available. Reforms addressed this aspect and the armament sector was the first beneficiary. A large number of standards and regulatory norms have been issued both by the armed forces and the civilian industry. The defence and civilian industry have realised that design, development and manufacture of complex weapon systems is not feasible without creating benchmarks, specifications and uniform quality standards. With the reforms being put in place PLA could demand quality products and reject items which did not meet its desired specifications this in turn forced the industry to adhere to laid down standards.

Acquisition of Foreign Technology. Tai Ming Chung has analysed the ways in which China has attempted to acquire foreign technology. In his analysis he brings out at least seven approaches that have been adopted by the Chinese Defence Industry. Firstly, China has been inviting large number of defence scientists and engineers as consultants for weapons projects and also for academic and professional interactions, which have provided exposure to the defence industry. Secondly, China has been purchasing complete systems for the PLA, which in turn provide detailed information about the system. Thirdly, China has resorted to import of sub-systems and units which could not be produced locally. Fourthly, it has entered in to licensed production of complete systems like aircrafts and missiles which were far ahead of Chinese technological capability. Fifthly, it has taken up joint design and development ventures of new generations of armament and defence equipment with the Russians. Sixthly, it has carried out industrial espionage at all levels to acquire technological knowhow of advanced military technologies. And lastly, it has blatantly carried out adaptation of Russian weapon platforms and indigenised them by reverse engineering or substitution. However all these efforts cannot be successful until the local industry has the capacity to absorb these in to their own R&D system and there after come up with innovation/invention at higher levels. Normally it is seen that even though countries undertake complete transfers of technology they are not able to innovate to the next level and finally go back to the foreign vendor for new upgrades.

Civil Military Integration (CMI). CMI has been a prominent thought process during the reforms of Chinese defence industry. Fundamentally it signifies the adaptation or direct use of products and technologies available in the civilian sector by the defence sector for incorporation into military equipment. Thus harnessing the capabilities of the innovative civil sector, and cutting down time frames and costs by adapting them for military use. This has some merit since a large number of IT products and software of higher generation are available commercially which can be easily inducted with minor modifications in to defence. Some low- tech commercially available hardware items can be directly assembled. However design, development and production of complex weapon systems would remain in the defence domain as it has no/little commercial application and may not be economically viable for the civil industry. There is little doubt that a harmoniously integrated civil and military industrial sector is beneficial to both sectors in leapfrogging technologies, adapting professional program management and advanced technical processes.

China has embarked on an ambitious programme of reforms by which it hopes to leapfrog technologies and eventually achieve ‘Self Reliance’ and become a world class manufacturer of weapons and armament. China was known for its aerospace and missile industry, post reforms, ship building and defence electronics appear to have made excellent progress. Whether China will succeed in its efforts or whether further course corrections would be required is difficult to say at this juncture, however what can be safely said is that China is determined to carry out reforms and achieve formidable civil military integration. The resolve is visible as during the past decade China has instituted harsh corrective measures on many occasions when it observed that the desired results were not forthcoming.

Some analysts have commented that stubborn insistence on self reliance becomes a self defeating goal, when developing/replicating weapon systems takes decades to fructify and the armed forces have to be satisfied with equipment which is generations older then what the adversary has. This has been evident in Asia -Pacific region, where state owned armament industries function inefficiently, are not cost effective, are reluctant to Implement stringent quality & manufacturing processes, and have virtually nonexistent R&D infrastructure.

India has the largest defence industrial base after China; however the successes in the weapon systems arena have been few and far between. If India is serious about becoming a reckonable technological power in the region, it is time to have a relook at the current constrictive concept of self reliance in a holistic manner and reform it to comprehensively include the Indian civil industry. With formidable indigenous space and software sectors it should not be difficult to integrate other sectors with the defence industry within the next decade, to vitalise the ailing defence sector.


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