China’s Arms Sales Rise While Those of Russia Fall

May 30, 2009

Martin McCauley writes: Despite the world economic downturn one industry keeps on expanding: the arms industry. The world leader is, of course, the United States followed by Great Britain, France and other developed economies. But now a new competitor has entered the race: China. Its expanding economy has a voracious appetite for raw materials and hydrocarbons and its state owned companies have been planting themselves round the globe.When it comes to arms sales, China has a great advantage over its rivals. It can accept payment in kind. For instance, Zambia can exchange copper for weapons. Kenya is even negotiating with China over fishing rights to pay for more guns and bullets.

One would not, of course, expect China to publish accurate statistics about its arms sales. Information has to be gleaned from company accounts. Manufacturing plants were originally mixed enterprises: civil and military. This tradition was inherited from the Soviet Union which originally built many of them. There was a fundamental reform of these enterprises in 1998 which separated civil from military plants. One of the largest of these reformed companies is the China South Industries Group Corporation (CSIGC). It consists of 64 large and medium sized industrial enterprises, 13 research institutes and various other companies. CSIGC also has shareholdings in various other enterprises. The company is well known for its research and development of equipment for the armed forces.

First quarter sales were up by 8.4 per cent year on year and reached $5.7 billion. The company reported pre-tax profits of over $100 million during the period from January to March. Car and vehicle sales grew by 13 per cent. Products for the power industry were up 60 per cent. These figures are remarkable given the slowdown of the Chinese economy.

One reason for the expansion of the company, one can surmise, is increased sales of military equipment. The military budget has been growing by over 10 per cent annually for the last two decades. The People’s Liberation Army has also been given a new task: helping to maintain law and order.

There are those who worry that Chinese arms sales are increasing tension in conflict zones. Beijing would reply that it is responding to demand and that every sovereign state has the right to defend itself domestically and against foreign foes.

Russian arms sales, in sharp contrast, are in decline. The greatest drop has been in sales to China. Moscow claims sales worth $16 billion since 2001. Last year, however, China only accounted for 18 per cent of Russian arms exports. This will drop further this year. The Russian arms industry is desperate for a Sino-Russian military alliance which would boost sales. The bad news for Moscow is that China no longer needs a military alliance. The key military relationship is with the United States. Russia is viewed as producing few high tech weapons which are attractive to China.

Russia did supply some arms to Sri Lanka to help it crush the Tamil Tigers. However the lion’s share was provided by China including F7 jet fighters. In return China is building a port at Hambantota, in the south. It will be used by commercial and naval vessels.

China has prevented the UN Security Council from passing resolutions critical of the Sri Lankan government’s onslaught on the Tamil Tigers. This week the UN Human Rights Council passed a resolution praising the defeat of the Tamil Tigers and condemning the insurgents for using civilians as human shields. The motion was supported by China, India, Egypt and Cuba which are among the 29 developing countries who are members. This was a shock for the United States, Britain and other European countries who had wanted a motion passed which condemned the actions of the Sri Lankan military and government. This marked a sea change in attitudes to human rights. The developing world sees human rights through the eyes of the governing elites in those countries. Maintaining stability takes precedence. This is the attitude of China towards separatists in Tibet and Xinjiang.

Hence arming the Sri Lankan government is changing the balance of power in South Asia and also in the UN. China is on a roll in international affairs.

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Tags: arms, China, Russia