Sunday, October 20, 2013

China's arms industry makes global inroads

Beijing: From the moment Turkey announced plans two years ago to acquire a long-range missile defense system, the multibillion-dollar contract from a key NATO member appeared to be a U.S. company's to lose.  For years, Turkey's military had relied on NATO-supplied Patriot missiles, built by the U.S. companies Raytheon and Lockheed Martin, to defend its skies, and the system was fully compatible with the air-defense platforms operated by other members of the alliance. 

There were other contenders for the deal, of course. Rival manufacturers in Russia and Europe made bids. Turkey rejected those - but not in favor of the U.S. companies. Its selection last month of a little-known Chinese defense company, China Precision Machinery Export-Import Corp., stunned the military-industrial establishment in Washington and Brussels.  
The sale was especially unusual because the Chinese missile defense system, known as the HQ-9, would be difficult to integrate with existing NATO equipment. 

China Precision is also subject to sanctions from the U.S. for selling technologies that the U.S. says could help Iran, Syria and North Korea develop unconventional weapons. A State Department spokeswoman said this month that U.S. officials had expressed to the Turkish government "serious concerns" about the deal, which has not yet been signed. 

Industry executives and arms-sales analysts say the Chinese probably beat out their more established rivals by significantly undercutting them on price, offering their system at $3 billion. Nonetheless, Turkey's selection of a Chinese state-owned manufacturer is a breakthrough for China, a nation that has set its sights on moving up the value chain in arms technology and establishing itself as a credible competitor in the global weapons market. 

"This is a remarkable win for the Chinese arms industry," said Pieter Wezeman, a senior researcher at the Stockholm International Peace Research Institute, which tracks arms sales and transfers. In the past, Chinese companies have been known mainly as suppliers of small arms, but that is changing quickly. From drones to frigates to fighter jets, the companies are aggressively pushing foreign sales of high-tech hardware to other nations, mostly in the developing world. Russian companies are feeling the greatest pressure, but U.S. and other Western companies are also increasingly running into the Chinese. 

"China will be competing with us in many, many domains, and in the high end," said Marwan Lahoud, the head of strategy and marketing at European Aeronautic Defence & Space, Europe's largest aerospace company. "Out of 100 campaigns, that is, the commercial prospects we have, we may have the Chinese in front of us among the competitors in about three or four. They have the full range of capabilities and they are offering them." 
The Stockholm institute released a report this year on global weapons transfers that found the volume of Chinese conventional weapons exports - which included high-end aircraft, missiles, ships and artillery - jumped by 162 percent from 2008 to 2012, compared with the previous five years. Pakistan is the leading customer. .. read more:

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