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China knows limits of copying foreign weapons, investing in R&D and JVs: US report

The report noted Russia may remain China's sole source of dual-use technology

j20 moon A Chinese J-20 stealth fighter | China's Ministry of National Defense

For years, China's arms industry has been ridiculed for engaging in theft of intellectual property of foreign suppliers to develop indigenous weapons.

For instance, China has built hundreds of aircraft based on the design of the Russian Su-27 fighter, which was first exported to Beijing in 1992. Experts have opined the design of China's new Z-20 utility helicopter is based on a variant of the US Blackhawk helicopter exported to Beijing in the 1980s.

A new report by a US think tank has argued that reliance on theft of foreign designs has hampered advances of China's arms industry, but Beijing is working to address this shortcoming using joint ventures and boosting spending on research and development.

The report Defense Acquisition in Russia and China was released by the RAND Corporation on Wednesday. The RAND report focussed on "research, development, and acquisition (RDA) processes of Russia and China—both doctrinally and in practice—and identifies areas in which each country excels and where each country has challenges."

RAND noted, "China has relied heavily on theft of intellectual property for weapon development, which has helped it remain competitive but has pegged it several years behind the cutting edge." The report argued these 'copied' products "vary in quality and do not necessarily perform the same as their counterparts". It highlighted the problems China has faced in developing aircraft engines. "..., China is still 15 to 20 years behind the United States and Russia in military aviation. Although intellectual property theft has surely accelerated China’s development process, it does not provide the full solution," the report stated.

R&D focus

In an attempt to overcome these limitations, RAND noted China has "turned to joint ventures and other investments to grow its organic R&D capacity". It cited data to show China increased spending in research and development "at a compound annual growth rate of almost 15 per cent since 2010" until 2016, approaching nearly $250 billion. In March 2021, China's National Bureau of Statistics revealed the country had spent approximately $378 billion in R&D in 2020.

The spending on R&D comes as President Xi Jinping has pushed the goal of military-civil fusion (MCF) since 2015. "MCF consists of a broad range of strategic initiatives, all with the goal of helping the PLA leverage the full potential of its civilian populace for defense, especially in technological innovation. MCF is motivated by the fact that, in recent years, the private sector—not the military—has been responsible for creating society’s most transformative technologies," the RAND report stated.

The US government had previously noted China was adopting a holistic approach to pursue advances in cutting-edge fields such as artificial intelligence. This included collaboration between the military, private and state companies and academia. The 2020 Pentagon report on China's military noted, "The PRC is pursuing a whole-of-society effort to become a global leader in AI, which includes designating select private AI companies in China as 'AI champions' to emphasize R&D in specific dual-use technologies."

Joint ventures

Despite the increased spending on R&D, Chinese companies have been hampered by inadequate project management skills and inefficient bureaucracy. The RAND report noted China is attempting to address this problem by "investing in acquisitions of foreign technology and joint-venture partnerships".

"These business relationships have the twofold benefit of developing the technical and managerial skills of junior talent and also increasing their access and exposure to foreign technologies. Although foreign companies are aware of China’s reputation for intellectual property theft, they are willing to enter these partnerships because of the access it gives them to Chinese buyers and sellers. Joint ventures can act as marketing tools to establish good will in the Chinese market, allowing foreign companies to trade their technology and expertise for the opportunity to reach out to new customers and source low-cost components," RAND noted.

The report noted Russia may remain China's sole source of dual-use technology given Western suspicions.

Highlighting the massive advances in defence investments made by China, RAND noted that of the 22 companies with highest defence revenues worldwide in 2016, "Nine are from the United States and eight are from China". All of these Chinese companies are state-owned. However, RAND noted that these companies are still not profitable and productive compared with their US competitors.

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