With China now the second-largest spender on defense in the world, Chinese companies are logically going to rank among the largest defense firms. But quantifying that number has proven incredibly difficult thanks to the opaque nature of both government spending and the firms themselves.

 

Now, a London-based think tank has concluded that seven Chinese firms would rank among the top 20 defense companies in the world, each breaking $5 billion in defense revenues - a proportion that rivals any one nation outside the U.S.

 

Lucie Beraud-Sudreau and Meia Nouwens, two researchers with the International Institute for Strategic Studies (IISS), looked at eight key defense firms from China - the China Aviation Industry Corporation (AVIC), China Electronics Technology Enterprise (CETC), China North Industries Group Corporation (NORINCO), China South Industries Group Corporation (CSGC), China State Shipbuilding Corporation (CSSC), China Shipbuilding Industry Corporation (CSIC), China Aerospace Science and Technology Corporation (CASC), and China Aerospace Science and Industry Corporation (CASIC).

 

The researchers looked at the largest defense firms and key subsidiaries, excluding a pair of nuclear-focused Chinese companies, classifying each as defense- or civilian-focused. Then they used the differentiation to calculate how much of each company’s total revenues were derived from defense-related sales.

 

Compared to a 2016 list of defense companies maintained by the Stockholm International Peace Research Institute (SIPRI), the Chinese firms would rank as high as fifth overall and as low as 22nd. Compared to the 2016 numbers maintained and compiled by Defense News, the Chinese firms would rank similarly, with some light variation by a spot or two.

 

Although CSGC, with about $22 billion in defense revenue, is the largest Chinese firm, AVIC is perhaps the more interesting to focus on, as it’s symbolic of overall growth and the challenges facing Chinese firms, despite some eye-popping numbers.

 

Between 2010 and 2017, AVIC’s total revenue increased by a shocking 93 percent, from 210 billion Chinese Yuan renminbi (U.S. $31 billion) to 403.5 billion Chinese Yuan renminbi (U.S. $59.7 billion), according to IISS research.

 

37.5% of that revenue now stems from defense programs. But while AVIC has a massive, loyal customer base in the Chinese military, it is lacking in true innovation.

 

China’s “national research and development has been supplemented to a significant degree by an aggressive overt and covert trawl of Western technology - including through foreign company acquisitions and, it has been alleged repeatedly, through systematic hacking,” the researchers wrote, with areas such as aircraft engines representing an area where Western firms are still well-ahead.