Future of the Chinese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022

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Published: December 15, 2017 Report Code: GD-DF0455MR-ST

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The Future of the Chinese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022, published by Strategic Defense Intelligence, provides readers with detailed analysis of both historic and forecast defense industry values, factors influencing demand, the challenges faced by industry participants, analysis of industry leading companies, and key news.

Synopsis

This report offers detailed analysis of the Chinese defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.
In particular, it provides an in-depth analysis of the following –
– The Chinese defense industry market size and drivers: detailed analysis of the Chinese defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns
– Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country
– Porter’s Five Force analysis of the Chinese defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry
– Import and Export Dynamics: analysis of prevalent trends in the country’s imports and exports over the last five years
– Market opportunities: details of the top five defense investment opportunities over the next 10 years
– Competitive landscape and strategic insights: analysis of the competitive landscape of the Chinese defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis

Scope

– China is the second largest defense spender globally after the US. The country’s large military budget is primarily driven by its robust economic growth and its desire to match-up with the US in terms of military capabilities. Additionally, China shares its borders with 14 countries, and is involved in several border disputes which increase the need to invest in the recruitment and maintenance of a large number of troops to prevent infiltration or other hostile acts. The Chinese defense budget grew at a CAGR of 7.33% during 2013-2017, from US$115.9 billion in 2013 to US$153.9 billion in 2017.

– China’s military modernization plans require a huge capital inflow and the government is expected to meet the requirements of these programs over the forecast period. The country’s defense capital expenditure increased from US$37.9 billion in 2013 to US$50.4 billion in 2017, growing at a CAGR of 7.37%.

– Initiatives to combat organized crime and increase border security expenditure, and investments in infrastructure development, have driven the homeland security budget between 2013 and 2017. Over the forecast period, these factors are expected to continue to drive the country’s defense expenditure.

Reasons to Buy

– This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Chinese defense industry market trends for the coming five years

– The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period

– Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector

– A deep qualitative analysis of the Chinese defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts

China North Industries Corporation (NORINCO)
China Electronics Technology Group Corporation (CETC)
Aviation Industry Corporation of China (AVIC)
China National Nuclear Corporation (CNNC)
China Nuclear Engineering and Construction Corporation (CNEC)
China Aerospace Science and Industry Corporation (CASIC)
China State Shipbuilding Corporation (CSSC)
China National Electronics Import and Export Corporation (CEIEC)

Table of Contents

Table of Contents

1. Introduction 8

1.1. What is this Report About? 8

1.2. Definitions 8

1.3. Summary Methodology 10

1.4. About Strategic Defense Intelligence 11

2. Executive Summary 12

3. Market Attractiveness and Emerging Opportunities 14

3.1. Current Market Scenario 15

3.1.1. Primary Threat Perception 15

3.1.2. Military Doctrine & Strategy 17

3.1.3. Military Fleet Size 19

3.1.4. Procurement Programs 24

3.1.5. Social, Political and Economic Environment and Support for Defense Projects 26

3.1.6. Political and Strategic Alliances 27

3.2. Defense Market Size Historical and Forecast 28

3.2.1. Chinese defense expenditure is expected to increase at a CAGR of

7.81% over the forecast period 28

3.2.2. Race over military supremacy, territorial disputes, peacekeeping missions, increasing tension with the US, and research and development are the main factors driving Chinese defense expenditure 31

3.2.3. Chinese defense budget as a percentage of GDP is expected to remain stable 33

3.3. Analysis of Defense Budget Allocation 35

3.3.1. China to allocate a high percentage share towards revenue expenditure over the forecast period 35

3.3.2. Defense capital expenditure is expected to increase at a CAGR of

7.82% over the forecast period 37

3.3.3. Per capita defense expenditure is expected to increase substantially during the forecast period 39

3.4. Homeland Security Market Size and Forecast 41

3.4.1. Chinese homeland security is expected to reach US$38.4 billion by 2022 41

3.4.2. Organized crime, terrorism threats, and cyber protection are expected to drive Chinese homeland security expenditure 44

3.4.3. China falls under the “highly affected” terrorism category 46

3.4.4. China is “highly affected” by terrorism as per the Terrorism Index 47

3.4.5. China has a terrorism index score of

6.1 49

3.5. Benchmarking with Key Global Markets 50

3.5.1. China is anticipated to be the largest defense spender in Asia over the forecast period 50

3.5.2. China has the second largest defense budget in the world 52

3.5.3. China allocates a lower share of GDP to defense compared to the US and other Asian countries 53

3.6. Market Opportunities: Key Trends and Growth Stimulators 54

3.6.1. Missile defense systems 54

3.6.2. Surface-to-air missiles 55

3.6.3. Multirole aircraft 56

3.6.4. Infrastructure construction 57

3.6.5. Transport Aircraft 59

4. Defense Procurement Market Dynamics 60

4.1. Import Market Dynamics 61

4.1.1. China is expected to import fewer weapons over the forecast period 61

4.1.2. Russia accounts for the majority of Chinese defense imports 62

4.1.3. Aircraft, engines, and naval vessels are the most imported military hardware 63

4.2. Export Market Dynamics 64

4.2.1. Defense exports are expected to grow over the forecast period 64

4.2.2. Pakistan emerged as the biggest importer of Chinese low-cost defense equipment exports 65

4.2.3. Chinese aircraft and naval vessel exports expected to increase 66

5. Industry Dynamics 67

5.1. Five Forces Analysis 67

5.1.1. Bargaining Power of Supplier: High 68

5.1.2. Bargaining Power of Buyer: Medium 68

5.1.3. Barriers to Entry: High 68

5.1.4. Intensity of Rivalry: Low 69

5.1.5. Threat of Substitution: Low 69

6. Market Entry Strategy 70

6.1. Market Regulation 70

6.1.1. The Chinese military-industrial complex opens up to private sector participation 70

6.1.2. Defense industry remains closed to foreign direct investment 70

6.2. Market Entry Route 71

6.2.1. Budget Process 71

6.2.2. Procurement Policy and Process 71

6.2.3. Foreign technology finds its way into the Chinese defense industry through civil-military integration 71

6.3. Key Challenges 73

6.3.1. Lack of competition and long production cycles continue to hamper the performance of the Chinese defense industry 73

6.3.2. Arms embargo imposed by the US and EU 73

7. Competitive Landscape and Strategic Insights 74

7.1. Competitive Landscape Overview 74

7.1.1. State-owned enterprises are the only major players in China’s defense industry 74

7.1.2. Foreign technology enters the Chinese defense market by supplying civil use products 76

7.2. Key Domestic Companies 77

7.2.1. China North Industries Corporation: Overview 77

7.2.2. China North Industries Corporation: Products 77

7.2.3. China North Industries Corporation: Recent Announcements and Strategic Initiatives 78

7.2.4. China North Industries Corporation: Alliances 79

7.2.5. China North Industries Corporation: Recent Contract Wins 80

7.2.6. China Electronics Technology Group Corporation: Overview 81

7.2.7. China Electronics Technology Group Corporation: Products 81

7.2.8. China Electronics Technology Group Corporation: Recent Announcements and Strategic Initiatives 82

7.2.9. China Electronics Technology Group Corporation: Alliances 83

7.2.10. China Electronics Technology Group Corporation: Recent Contract Wins 83

7.2.11. Aviation Industry Corporation of China: Overview 84

7.2.12. Aviation Industry Corporation of China: Products 84

7.2.13. Aviation Industry Corporation of China: Recent Announcements and Strategic Initiatives 84

7.2.14. Aviation Industry Corporation of China: Alliances 86

7.2.15. Aviation Industry Corporation of China: Recent Contract Wins 86

7.2.16. China National Nuclear Corporation: Overview 87

7.2.17. China National Nuclear Corporation: Services 87

7.2.18. China National Nuclear Corporation: Recent Announcements and Strategic Initiatives 88

7.2.19. China National Nuclear Corporation: Alliances 89

7.2.20. China National Nuclear Corporation: Recent Contract Wins 90

7.2.21. China Nuclear Engineering and Construction Corporation: Overview 91

7.2.22. China Nuclear Engineering and Construction Corporation: Services 91

7.2.23. China Nuclear Engineering and Construction Corporation: Recent Announcements and Strategic Initiatives 91

7.2.24. China Nuclear Engineering and Construction Corporation: Alliances 92

7.2.25. China Aerospace Science and Industry Corporation: Overview 93

7.2.26. China Aerospace Science and Industry Corporation: Products 93

7.2.27. China Aerospace Science and Industry Corporation: Recent Announcements and Strategic Initiatives 94

7.2.28. China Aerospace Science and Industry Corporation: Alliances 94

7.2.29. China Aerospace Science and Technology Corporation: Overview 95

7.2.30. China Aerospace Science and Technology Corporation: Products 95

7.2.31. China Aerospace Science and Technology Corporation: Recent Announcements and Strategic Initiatives 95

7.2.32. China Aerospace Science and Technology Corporation: Alliances 96

7.2.33. China State Shipbuilding Corporation: Overview 97

7.2.34. China State Shipbuilding Corporation: Products 97

7.2.35. China State Shipbuilding Corporation: Recent Announcements and Strategic Initiatives 98

7.2.36. China State Shipbuilding Corporation: Alliances 98

7.2.37. China State Shipbuilding Corporation: Recent Contract Wins 99

7.2.38. China National Electronics Import and Export Corporation: Overview 100

7.2.39. China National Electronics Import and Export Corporation: Products 100

7.2.40. China National Aero-Technology Import and Export Corporation: Overview 101

7.2.41. China National Aero-Technology Import and Export Corporation: Products 101

7.2.42. China National Aero-Technology Import and Export Corporation: Recent Announcements and Strategic Initiatives 102

8. Business Environment and Country Risk 103

8.1. Economic Performance 103

8.1.1. Gross Domestic Product per Capita 103

8.1.2. Gross Domestic Product (Current US$ Billion) 104

8.1.3. Exports of Goods and Services in LCU 105

8.1.4. Imports of Goods and Services in LCU 106

8.1.5. LCU per US$ 107

8.1.6. Market Capitalization of Listed Companies (US$ Billion) 108

8.1.7. Market Capitalization of Listed Companies (Percentage of GDP) 109

8.1.8. Goods Exports as a Percentage of GDP 110

8.1.9. Goods Imports as a Percentage of GDP 111

8.1.10. Services Imports as a Percentage of GDP 112

8.1.11. Services Exports as a Percentage of GDP 113

8.1.12. Net Foreign Direct Investment (BoP, current US$ Billion) 114

8.1.13. Net FDI as a Percentage of GDP 115

8.1.14. Mining, Manufacturing, Utilities Output 116

9. Appendix 116

9.1. About SDI 117

9.2. Disclaimer 117

Table

List of Tables

Table 1: China – Defense Modernization 18

Table 2: Chinese Army Strength 19

Table 3: Chinese Air Force Strength 20

Table 4: Chinese Navy Strength 22

Table 5: China – Ongoing Development and Procurement Programs 24

Table 6: China – Future Procurement Programs 25

Table 7: China Defense Expenditure (CYN Billion & US$ Billion), 2013-2022 29

Table 8: China GDP Growth and Defense Expenditure as a % of GDP Growth, 2013-2022 33

Table 9: China Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022 35

Table 10: China Defense Capital Expenditure (CYN Billion & US$ Billion), 2013-2022 37

Table 11: China Per Capita Defense Expenditure (US$), 2013-2022 39

Table 12: China Homeland Security Expenditure (CYN Billion & US$ Billion), 2013-2022 42

Table 13: Terrorism Index 47

Table 14: Benchmarking with Key Markets – 2013-2017 vs. 2018-2022 50

Table 15: Chinese Budget Formation Timetable 71

Table 16: Competitive Landscape of the Chinese Defense Industry 75

Table 17: Chinese Military-Industrial Complex – Competitive Landscape 76

Table 18: China North Industries Corporation – Product Focus 77

Table 19: China North Industries Corporation – Alliances 79

Table 20: China North Industries Corporation – Recent Contract Wins 80

Table 21: China Electronics Technology Group Corporation – Product Focus 81

Table 22: China Electronics Technology Group Corporation – Alliances 83

Table 23: China Electronics Technology Group Corporation – Recent Contract Wins 83

Table 24: Aviation Industry Corporation of China – Product Focus 84

Table 25: Aviation Industry Corporation of China – Alliances 86

Table 26: Aviation Industry Corporation of China: Recent Contract Wins 86

Table 27: China National Nuclear Corporation – Services Focus 87

Table 28: China National Nuclear Corporation – Alliances 89

Table 29: China National Nuclear Corporation – Recent Contract Wins 90

Table 30: China Nuclear Engineering and Construction Corporation – Services Focus 91

Table 31: China Nuclear Engineering and Construction Corporation- Alliances 92

Table 32: China Aerospace Science and Industry Corporation – Product Focus 93

Table 33: China Aerospace Science and Industry Corporation – Alliances 94

Table 34: China Aerospace Science and Technology Corporation – Product Focus 95

Table 35: China Aerospace Science and Technology Corporation- Alliances 96

Table 36: China State Shipbuilding Corporation – Product Focus 97

Table 37: China State Shipbuilding Corporation – Alliances 98

Table 38: China State Shipbuilding Corporation: Recent Contract Wins 99

Table 39: China National Electronics Import and Export Corporation – Product Focus 100

Table 40: China National Aero-Technology Import and Export Corporation – Product Focus 101

Figures

List of Figures

Figure 1: China Defense Expenditure (CYN Billion), 2013-2022 29

Figure 2: China Defense Expenditure (US$ Billion), 2013-2022 30

Figure 3: Chinese GDP Growth and Defense Expenditure as a % of GDP Growth, 2013-2022 34

Figure 4: Chinese Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022 36

Figure 5: China Defense Capital Expenditure (CYN Billion), 2013-2022 38

Figure 6: China Defense Capital Expenditure (US$ Billion), 2013-2022 38

Figure 7: China Per Capita Defense Expenditure (US$), 2013-2022 40

Figure 8: China Homeland Security Expenditure (CYN Billion), 2013-2022 42

Figure 9: China Homeland Security Expenditure (US$ Billion), 2013-2022 43

Figure 10: Terrorism Heat Map, 2017 46

Figure 11: Terrorism Index, 2017 49

Figure 12: Benchmarking with Key Markets – 2013-2017 vs. 2018-2022 51

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 52

Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 53

Figure 15: Chinese Missile Defense Systems Market Size (US$ Billion), 2017-2027 54

Figure 16: Chinese Surface-to-Air Missiles Market Size (US$ Billion), 2017-2027 55

Figure 17: Chinese Multirole Aircraft Market Size (US$ Billion), 2017-2027 56

Figure 18: Chinese Infrastructure Construction Market Size (US$ Billion), 2017-2027 58

Figure 19: Chinese Transport Aircraft Market Size (US$ Billion), 2017-2027 59

Figure 20: Chinese Defense Import Trend, 2012-2016 (TIV values) 61

Figure 21: Chinese Defense Imports by Country (%), 2012-2016 62

Figure 22: Chinese Defense Imports by Category (%), 2012-2016 63

Figure 23: Chinese Defense Exports Trend, 2012-2016 (TIV values) 64

Figure 24: Chinese Defense Exports by Country (%),2012-2016 65

Figure 25: Chinese Defense Exports by Category (%), 2012-2016 66

Figure 26: Industry Dynamics Porter’s Five Forces Analysis 67

Figure 27: GDP per Capita, 2015-2025 103

Figure 28: GDP Current US$ (US$ Billion), 2015-2025 104

Figure 29: Exports of Goods and Services (LCU Billion), 2005-2014 105

Figure 30: Chinese Imports of Goods and Services (LCU Billion), 2005-2014 106

Figure 31: LCU per US$, 2015-2024 107

Figure 32: Market Capitalization of Listed Companies (US$ Billion), 2005-2012 108

Figure 33: Market Capitalization of Listed Companies as a % of GDP, 2005-2012 109

Figure 34: Goods Exports as a % of GDP, 2005-2013 110

Figure 35: Goods Imports as a % of GDP, 2005-2013 111

Figure 36: Services Imports as a % of GDP, 2005-2013 112

Figure 37: Services Exports as a % of GDP, 2005-2013 113

Figure 38: Net Foreign Direct Investment (BoP, current US$ Billion), 2005-2013 114

Figure 39: Net FDI as a % of GDP, 2005-2013 115

Figure 40: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014 116

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