China Estimated to be Second Largest Arms Producer

artist impression of a Chinese destroyer
artist impression of a Chinese destroyer

Published Jan 26, 2020 6:13 PM by The Maritime Executive

New research from the Stockholm International Peace Research Institute (SIPRI) suggests that China is the second-largest arms producer in the world, behind the U.S. but ahead of Russia. 
In the past, a lack of transparency has meant that the value of Chinese companies’ arms sales has been either unknown or difficult to reliably estimate. For this reason, the SIPRI Top 100, an annual ranking of the world’s 100 largest arms-producing and military services companies, has so far not been able to include Chinese arms companies. However, SIPRI has identified credible information from 2015–17.

In 2017, of the 20 largest companies in the SIPRI Top 100, 11 were based in the U.S., six in Western Europe and three in Russia. With information about four Chinese arms companies, SIPRI says they would all rank among the top 20, with combined estimated arms sales totalling $54.1 billion. Three of the companies would be ranked in the top 10. 

The largest of the Chinese companies is Aviation Industry Corporation of China (AVIC), which with arms sales totalling $20.1 billion would rank sixth largest in the world. China North Industries Group Corporation (NORINCO), which would place eighth in the Top 100 with sales of $17.2 billion, is the world’s largest producer of land systems. 

Contrary to most other major global arms producers, Chinese arms companies specialize primarily in one arms production sector, for example AVIC produces mostly aircraft and avionics. Most of the large non-Chinese arms companies produce a wider range of military products across different sectors, covering aerospace, land systems and shipbuilding within one company. 

While this study covers at least one Chinese company in each of the aerospace, electronics and land systems sectors, it also gives a rough estimate of China's naval shipbuilding industry based on known delivery of military ships, contract costs of some of these military ships and values of equivalent ships produced in other countries.

In 2017, China’s two main shipbuilding companies, CSIC and CSSC, delivered about 13 major military ships (two T052 destroyers, three T054A frigates and eight T056 corvettes) and four submarines (one type 094 nuclear-powered ballistic missile submarine, one type 093 nuclear-powered submarine and two type 039 conventional submarines). By way of comparison, in 2017 Huntington Ingalls Industries, the largest U.S. shipbuilder, delivered three military ships (one aircraft carrier, one destroyer and one amphibious transporter) and one nuclear-powered submarine, and Naval Group, the largest European shipbuilder, delivered two military ships (one corvette and one frigate) and one conventional submarine. 

The 2017 arms sales of Huntington Ingalls were $6.5 billion and those of Naval Group were $4.1 billion. Although both companies also generate revenue from military-related services such as repairs and service, it is reasonable to assume that CSIC and CSSC also do so. Thus, the aggregate arms sales of CSIC and CSSC are likely to be at least as large, if not larger than the most prominent U.S. and European shipbuilders, says SIPRI. The arms sales of each are possibly around $10 billion. CSIC and CSSC would therefore also most certainly rank among the top 20 arms-producing companies in the SIPRI Top 100.

The report is available here.