India’s defence export strategy would have to balance China in the Indian Ocean Region. China has the economic might to sell arms cheaper. Their production scales would have to be matched. India has the advantage of endearing the smaller nations with a ‘no strings attached’ approach. India being a democracy makes it easier to deal with. Over dependence on China could be detrimental to smaller Asian nations and India must use this to her advantage.
China has emerged as supplier of weapon platforms to over 50 countries. Three of the world’s top ten arms companies are Chinese making China the world’s fifth largest weapons exporter. Its main customers are relatively poor countries in South and South-East Asia, Africa and Latin America. In each case, sales are linked to lower costs, sometimes cheap loans and even political leveraging. The intention is to initially establish a foothold in the local defence market. China is launching home-designed aircraft carriers and conducting research in quantum-technology communications. Chinese Unmanned Aerial Vehicles (UAVs) or drones are being used extensively in conflicts in both Libya and Yemen. Yet, lack of transparency and state-controlled media hype continue to confuse facts. Chinese arms companies are also benefiting from military modernisation programmes for the People’s Liberation Army (PLA).
Chinese Arms Industry
As per a Stockholm International Peace Research Institute (SIPRI) report of 2019, the top 25 global arms companies included four Chinese companies. Three in the top ten are the Aviation Industry Corporation of China (AVIC; ranked sixth), China Electronics Technology Group Corporation (CETC; ranked eighth) and China North Industries Group Corporation (NORINCO; ranked ninth). The fourth is China South Industries Group Corporation (CSGC; ranked 24th). These four have a combined estimated arms sales of $54.1 billion.
AVIC, the largest, mostly produces aircraft and avionics, with arms sales of $20.1 billion. NORINCO, with sales of $17.2 billion, is in fact the world’s largest producer of land systems. After the United States (US), China accounted for the second largest share of 2019 arms sales by the top 25 arms companies, at 16 percent. The six West European companies together accounted for 18 percent. Yet, the top five global arms companies are all based in the US – Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. These five together registered $166 billion in annual arms sales. In total, 12 US companies appear in the top 25 for 2019, accounting for 61 percent of the combined arms sales of the top 25.
China Emerges as a Significant Arms Exporter
Beijing has not only become a major defence spender, but is also turning into a top arms exporter. Besides armed drones, China is exporting fighter aircraft, missiles, small arms, and ships and submarines. SIPRI data shows that China was the world’s fifth largest arms exporter in 2016-20 accounting for 5.2 percent of the total global arms exports. The lion’s share of these exports, around 75 percent – went to Asia. 20 percent flowed into Africa. Pakistan, Bangladesh and Algeria were the largest recipients. The overall value of its trade still pales in comparison to the US whose exports averaged over $9 billion annually during the last ten years. Pakistan is the destination for over 50 percent of Chinese exports. Defence exports to Bangladesh, Myanmar and Sri Lanka are also of concern to India.
Filling the Gap Left by USA
Beijing has also been quick to concentrate on emerging technologies. This has enabled it to fill the void left by other suppliers. The US has put restrictions on sale of several high technology equipment including UAVs. China has made its UAVs available to countries such as the Pakistan, the UAE, Saudi Arabia and Egypt, among others. Serbia’s acquisition of the CASC CH-92 Wing Loong-armed drones made it the first European state to deploy Chinese combat drones, reflecting Belgrade’s deepening relationship with Beijing. Chinese weapons have also found their way into various conflict zones.
Chinese Arms Cheap and Cost-effective
Although Chinese arms are often less advanced than those sold by other countries, the US Department of Defence has noted that “Chinese arms are less expensive than those offered by the top international arms suppliers; but still have advanced capabilities.” China has historically supplied weapons to countries that are in the bad books of the United Nation. These include rogue states such as North Korea and Iran. China’s leap forward came when Venezuelan President, the late Hugo Chavez, went to China to diversify arms imports because of an uncomfortable relationship with the US. Venezuela bought the K-8 trainers and air search radars in 2008. They later bought transport aircraft, armoured personnel carriers and self-propelled artillery. China’s ability and willingness to supply modern military gear at highly competitive prices, makes purchases from it very appealing. The ideal targets for China are countries such as Venezuela and Bolivia that have been abandoned by the US for political reasons.
Chinese Arms Exports – Africa
The increasing Chinese arms sales throughout Africa are in sync with its ever-increasing number of peacekeepers deployed in Africa. China is now the largest single contributor of personnel to UN peacekeeping. It is also building infrastructure in Africa at knock-down prices. The Chinese-Pakistani made K-8 Karakorum jet trainer is now in service with Egypt, Ghana, Zambia, Zimbabwe, Namibia and Sudan. China claims with pride that K-8s comprise 80 percent of the jet trainer aircraft in Africa. The K-8 is particularly notable due to the ease with which it can be converted for light-attack role aircraft for counter-insurgency operations. China is actively working to strengthen its foothold in certain markets such as Algeria. The sales include C-28A frigates. China has sold offshore patrol vessels and other complex naval vessels to nations including Algeria, Nigeria, Angola, Ghana and Cameroon. Nigeria has just received the initial three JF-17 fighter jets.
Chinese arms have been used during conflicts in the Democratic Republic of Congo, Côte d’Ivoire, Sudan and Somalia. In July 2014, NORINCO delivered 100 guided missile systems, over 9,000 automatic rifles and 24 million rounds of ammunition to the South Sudanese government, whose actions have been widely criticised by the international community. To complement its sales of advanced arms, China has already built a large maintenance base in Africa with more under development. A naval base in Djibouti will soon be joined by aircraft maintenance and training facilities in Tanzania and the Republic of Congo. From modest duplicates of small weapons to complex maritime vessels, 66 percent of African nations currently utilise arms made by China.
Chinese Arms Imports from Europe
More than 99 percent of China’s total arms imports ($14.4 billion) come from Europe, while it exports back an insignificant $17 million of its own weapons. This trend is driven mostly by Russia, which supplies China with 68 percent of its foreign arms. France and Ukraine collectively supply an additional 20 percent of these imports. Aircraft engines are the main import. China has not yet been successful in producing aircraft engines. Between 2012 and 2019, China purchased over 420 aircraft engines from Russia and just 24 Sukhoi Su-35 fighter aircraft. Ukraine also provides China with propulsion systems. In 2011, Beijing acquired 250 Ukrainian turbofans for trainer and combat aircraft, along with 50 diesel-powered tank engines and three refurbished IL-78 air-refuelling planes. A sizable portion of China’s orders from France are also for engines. China has sourced French-built diesel engines for outfitting its naval vessels. There are indications that China has acquired helicopter engines from France. Russian arms sales to China which averaged $2.6 billion through the 2000s, reaching a peak of $3.2 billion in 2005. This figure dropped significantly, averaging $816 million between 2010 and 2018. As a result, China’s share of Russian arms imports declined from 47.7 percent of total sales in 2006 to 13.7 percent in 2018.
Arms Sales in Asia
82.8 percent of Chinese arms were sold to countries across Asia. 61.3 percent of China’s conventional weapons sales since 2008 have been to Pakistan, Bangladesh and Myanmar. Chinese arms sales across South and South-East Asia are still insignificant compared to the US. Close military ties have paved the way for China to supply Pakistan with more arms than any other country. These exchanges are often tied to political objectives. Since 2009, sales to Pakistan have averaged $584 million. The co-developed JF-17 aircraft and China’s ongoing construction of the Type 054AP class warship for the Pakistani Navy are significant. China will supply eight Hangor-class submarines; of these, four submarines will be constructed in China while the other four will be built in Pakistan.
Between 2008 and 2018, China sold $1.93 billion of weapons to Bangladesh. This constitutes 71.8 percent of Bangladesh’s military acquisitions over this period, making China the biggest supplier of arms to Dhaka. China supports these procurements by offering generous loans. Bangladesh’s entire tank fleet is of Chinese origin although 44 of these tanks were supplied through Pakistan. Similarly, small arms, artillery and air defence weapons are sourced from China. Again, a reasonable number of naval equipment including submarines is sourced from China. Discounted acquisitions included the 2013 transfer of two used Type-035G Ming-class submarines for Bangladesh.
Myanmar is the third largest market for Chinese arms exports in Asia. Major equipment includes an assortment of Chinese origin small weapons, tanks, artillery, and air defence guns. Lately, it has acquired 17 JF-17 Chinese origin aircraft from Pakistan along with 12 Rainbow UAVs, two Type 43 frigates and 76 Type-92 armoured vehicles.
Sri Lanka operates Chinese tanks, Armoured Personal Carriers (APC), artillery and air defence equipment for its Army. Its Navy operates a frigate and Shanghai class naval vessels. Its air force still operates vintage Chinese origin combat and trainer aircraft. Currently, Nepal operates limited Chinese origin military equipment comprising a few APCs and rifles. But increasing proximity to China may entail induction of a fair share of weapons and equipment in future.
China’s Modus Operandi for Arms Sales to India’s Neighbours
Growing Chinese influence in the South Asia region could pose a challenge for India. China has reportedly committed around $100 billion in the economies of Afghanistan, Bangladesh, the Maldives, Pakistan, Nepal and Sri Lanka. China is now the largest overseas investor in the Maldives, Pakistan and Sri Lanka. Chinese investment is concentrated in hard infrastructure related to power, roads, railways, bridges, ports and airports. Beijing has taken stakes in the Dhaka and Karachi stock exchanges and cultivated trade in Yuan between China and Pakistan. China is accused of extending excessive credit with the intention of extracting economic or political concessions when countries cannot honour their debts particularly through the Belt and Road Initiative (BRI). This increased backdoor influence could be a strategic disadvantage for India.
Such fears were amplified after Sri Lanka had to lease out its Hambantota Port to China for 99 years, after being unable to service its debt. Similarly, Pakistan has leased the Gwadar port to China. Strategic experts warn of a Chinese hand behind the strain in India-Nepal ties. Several South Asian countries seem enamoured by China’s “generosity” which India is unable to match. By 2018, China’s total trade with Maldives slightly exceeded that of India. China’s trade with Bangladesh is now about twice that of India. China’s trade with Nepal and Sri Lanka still behind lags India’s trade with those countries, but the gap has shrunk. Beijing is helping strengthen the Navies of Pakistan, Bangladesh and Sri Lanka in order to enhance its footprint in the Bay of Bengal and the Indian Ocean Region. Other than Pakistan that is leaning on China as a low-cost option to neutralise a more powerful India, most other countries are learning to play India and China against each other which gives them greater leverage.
Chinese Arms in Pakistan’s Inventory
Pakistan Army’s almost entire armoured fleet consists of Al Khalid, Al Zarar, T-85 and T-69 series of Chinese manufactured tanks. Pakistan Heavy Industries Taxila (HIT) has set up a production line in collaboration with China’s NORINCO to manufacture the Al Khalid tank which has also been exported to Bangladesh. The artillery weapons with Pakistan Army include towed 122 mm howitzer, 130 Type 59 guns which are supported by 122 mm MBRL and A100 MLRS 300 mm rockets, all made in China. The Pakistan Air Defence artillery has deployed Chinese LY-80 Low to Medium Altitude Air Defence System (LOMADS), FM 90 and FN 6 MANPAD missile system besides 12.7 and 14.5 mm Air Defence guns.
In 2007, as a part of a joint-venture project, China rolled-out a ‘designed for Pakistan’ Fighter JF-17 ‘Thunder’. Currently, the Pakistan Air Force (PAF) has around 120 JF-17 aircraft and the numbers are slated to increase to 300 later. Six ZDK-03 Chinese Airborne Warning and Control System (AWACS) aircraft have been inducted. 60 Chinese designed K-8 Karakorum intermediate jet trainers are currently in service and more are under production. The PAF has also received four CH-4 Recce-cum-strike drones which can carry up to four PGMs and reportedly have an endurance of 30 hours. The PAF has bought Chinese SD-10 (ShanDian-10) radar-guided, mid-range homing air-to-air missiles to equip the JF-17 fighters. China has transferred 34 M-11, road-mobile, Short Range Ballistic Missiles (SRBM) with related technology and manufacturing capability to Pakistan.
Despite Chinese pledges to the contrary, it has continued to provide Pakistan with specialty steels, guidance systems and technical expertise in the latter’s effort to develop long-range ballistic missiles. The Hatf, Shaheen and Anza series of missiles have been built using Chinese assistance. China helped Pakistan develop nuclear warheads that have directly contributed to Pakistan having nearly 150 nuclear warheads as on date. China has supplied Burraq and Shahpar series UAVs to Pakistan and plans to allow license production of Wing Loong UAVs. Chinese J-7 and J-17 Thunder fighter aircraft continue as front line platforms of the PAF. On the naval front, the platforms in the pipeline are Type 054A/Jiangkai II-class frigates, Yuan class submarines and anti-ship cruise missiles.
Make in India Initiatives
India is among the top five countries in military spending; it has the second-largest standing army in the world. As per the Union Budget for the financial year 2021-2022, the total allocation for Defence is around Rs 4.78 lakh crore ($65.45 billion). Currently, the Indian Capital budget is 28 percent of the total defence budget. Modern armed forces spend close to 50 percent. Even manpower-intensive China spends close to 35 percent of the budget on Capital acquisitions. India’s defence exports in 2020-2021 were Rs 5,711.30 crore ($770 million). India’s requirements on defence are met largely through imports. The opening of the defence sector for private sector participation will help foreign Original Equipment Manufacturers (OEMs) to enter into strategic partnerships with Indian companies. This will enable them to leverage the domestic markets as well as aim at global markets. Besides helping in building domestic capabilities, it will also bolster exports in the long term.
Between 2014 and 2019, the Ministry of Defence signed more than 180 contracts with the Indian industry. These contracts were valued over $25.8 billion. Favourable government policies can promote self-reliance, indigenisation and technology up gradation. Economies of scale will help exports. In a big push towards defence indigenisation, India recently placed restrictions on the import of an additional 108 military weapons and systems such as next-generation corvettes, airborne early warning systems, tank engines and radars under a staggered timeline of four-and-half years. The early negative list for defence imports comprising 101 items had included towed artillery guns, short-range surface-to-air missiles, cruise missiles and offshore patrol vessels, among others.
The new Defence Acquisition Procedure (DAP 2020) gives high preference to indigenisation and ‘Buy Indian – Indigenously Designed, Developed and Manufactured (IDDM)’. Certainly, at least ‘Buy and Make (Indian)’. The ‘Make’ Procedure has been simplified with provisions for funding of 90 percent of development cost by the Government to the Indian industry. There are provisions for Maintenance Transfer of Technology (MToT) to Indian partners and to allow foreign OEMs to select Indian Production Agency. FDI in the defence sector is allowed up to 100 percent under the Government route. The initial validity period of industrial licenses has increased from three years to 15 years. The ‘Make’ Procedure aims to achieve the objective of self-reliance by involving greater participation of Indian industries including the private sector. The Ministry provides financial support up to 70 percent of prototype development cost or a maximum Rs 250 crore per Development Agency.
Key Achievements so far include indigenous defence products like Akash Surface-to-Air Missile System, Dhanush Artillery Gun system, the Advanced Light Helicopter (ALH) variants and Light Combat Aircraft (LCA). Surface radars are another area of India’s success. Defence Research and Development Organisation (DRDO) achieved a major milestone with the launch of Medium Range Surface-to-Air Missile (MRSAM). The Strategic Partnership Model encourages the participation of the private sector in the manufacture of equipment such as aircraft, submarines, helicopters and armoured vehicles. A Defence Investor Cell is also functional in the Department of Defence Production. Self Reliant Initiatives through Joint Action (SRIJAN) is a web portal aimed at promoting indigenous production of defence goods imported by DPSUs, OFBs and SHQs.
India’s Aviation Defence Export Potential
To begin with, the two major platforms, LCA and ALH variants that India has succeeded in, the production and further development, must be ramped up and aggressively marketed abroad. There is a great market for Unmanned Aerial Systems (UAS). India must put manpower and funding resources in a big way into UAS. We already have joint ventures with some Israeli firms for UAS. There is a great market for a light commuter aircraft of NAL’s Saras class. Further development should be with a private sector partner. Once inducted in India, it will have export potential. India has a successful missile programme. Many countries have shown interest in the BrahMos cruise missiles. The Akash air defence system is another contender. Light arms also have a huge market that India can exploit.
While state-owned enterprises are leading defence manufacturing in India, there have been attempts to set up defence industrial parks, Micro, Small and Medium Enterprise (MSME) defence clusters and concerted technology creation hubs. The ‘Make in India’ theme is now for import substitution, sustained domestic demand, and for global exports. Many European countries have defence technologies, but no markets. India could join up with some for scaling up production. Some of these could also support marketing. West Asia is another region for India to seek cooperation and market. India’s private sector is exporting a large number of smaller defence components and defence-related software solutions. This gives great hope for India to develop Artificial Intelligence (AI) solutions.
India’s defence export strategy would have to balance China in the Indian Ocean Region. China has the economic might to sell arms cheaper. Their production scales would have to be matched. India has the advantage of endearing the smaller nations with a ‘no strings attached’ approach. India being a democracy makes it easier to deal with. Over dependence on China could be detrimental to smaller Asian nations and India must use this to her advantage.
To Summarise – Time to Act India
While the success of Chinese arms industry is commendable, it is also of concern to the world due to change in status quo that it brings with it. The deteriorating ties between the US and Pakistan, stemming from the perception that Islamabad is not doing enough to combat terrorism in Afghanistan, resulted in a sharp decline in US arms supplies, but has also pushed Pakistan into China’s lap. Pakistan is the key to success of Chinese BRI and a way for China to boost its military presence. In some ways, it is a project to colonise – the 21st century version of the East India Company.
The changed South Asian dynamics with China rapidly expanding its footprint necessitates action by India to be considered on an urgent basis. India has to get its defence production act of Atmanirbharta right quickly. It has to be a national effort between government, military and industry. India needs to focus on low-hanging fruits and force multipliers first and has to improve its project management approach. As China uses arms sales along with BRI as another tool to encircle and weaken India, it is wake up call for India, lest it becomes too late.