China’s New Export: Military in a Box

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from Bloomberg Businessweek,

China arms maker Norinco’s $62 billion in 2013 revenue make it bigger than Lockheed Martin or General Dynamics.

At the Africa Aerospace and Defence expo in September, weapons buyers from across the continent descended on Air Force Base Waterkloof in the South African capital of Pretoria for a bit of shopping. There they were wooed by Chinese defense gear giant Norinco, which has honed its pitch to an art.

Namibia Deputy Defense Minister Petrus Iilonga, wearing Prada sunglasses and a Lenin pin, studied models of battle tanks before representatives from Norinco, a state-controlled conglomerate also known as China North Industries Group, ushered him into a room marked VIP for some personal salesmanship. Nearby, the Tanzanian military chief, General Davis Mwamunyange, furrowed his brow while a company official in a charcoal suit and orange tie described a truck with a radar device mounted on the back. “Just about a month ago, we did a live test on this one,” the Chinese official confided.

Norinco has even devised a novel way to make buying weapons easier: It bundles together starter kits of basic defense gear—everything from rifles to howitzers, laser-guided bombs, armored personnel carriers, tanks, and drones—for governments that want to quickly outfit their armed forces. Chinese state media has dubbed the package a “military set meal.”

More than three decades after Chinese leader Deng Xiaoping and the Communist Party founded Norinco, in the wake of a humiliating border war with Vietnam that ended in a stalemate, the company sits atop a military-industrial complex that increasingly rivals the U.S. war machine in firepower and influence.

The party has poured hundreds of billions of dollars into the military, molding Mao-era weapons makers into growth-driven conglomerates eager to court buyers of bargain-priced weaponry.

“The Chinese systems are simply cheaper, they are reliable, and they are tailored to the conditions of developing countries,” says Anthony Cordesman, a national security analyst at the Washington-based Center for Strategic and International Studies. “As the systems get more sophisticated, they will undercut Europe and the U.S. and compete with Russia.”

With foreign sales of $7.4 billion over the past five years, China overtook France in 2013 to become the world’s fourth-largest arms exporter, according to the Stockholm International Peace Research Institute.

A growing number of Chinese-made weapons are also stockpiled in the arsenals of small or developing nations that want to upgrade equipment without the diplomatic strings usually attached to deals with American and European manufacturers. China signed about $10 billion in agreements to sell conventional weapons worldwide from 2008 to 2012, with many going to sub-Saharan Africa and Latin America, the U.S. Defense Department said in its annual report to Congress in June.

One prominent customer has been South Sudan, a source of oil bound for China. Clashes between the government and the Nuer ethnic minority have caused widespread famine since December and forced more than 1.8 million people from their homes, according to a recent United Nations report.

Gear produced by Norinco and other Chinese weapons makers holds particular appeal to developing nations, which have sometimes relied on secondhand weapons to equip their militaries. “In terms of actual capability, they’re comparable to what makes up the bulk of the U.S. forces today,” Roger Cliff, a senior fellow at the Washington-based Atlantic Council, says of China’s arms.

In places such as South Sudan, myriad pieces of its operations come together: Norinco’s arms sales help the government protect China’s oil interests in the country, where China National Petroleum is one of three companies with oil-pumping operations. That leaves Norinco free to explore civilian projects in the country. Its engineering and construction unit, Norinco International Cooperation, opened an office in South Sudan in March.

“Norinco has been able to integrate arms trading into new business areas,” UCSD’s Cheung says. “In many ways, Norinco’s transformation tells the story of the transformation of the Chinese defense industry.”

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