Conceptual Theory

Hierarchy of Arms Production

The global arms industry is hierarchical system which determined a nation’s position as
an arms producer. This hierarchy is dictated by the relative level of its indigenous capabilities for
independent defense-related R&D and manufacturing. According to Bitzinger, arms-producing
nations is customary to divide the global defense industry into three tiers.
1. ​First tier as comprising those states with the capacity for across-the-board

development and manufacture of advanced conventional weaponry. This tier

consists of just a handful of countries: the ​United States and the four largest
European Arms producers (Britain, France, Germany and Italy). Increasingly,
these four european weapons states have achieved tier 1 status mainly through
the ​amalgamation of their defense industrial capabilities​, via collaborative
programs or the creation of pan-European defense enterprises and joint ventures.
2. ​Second tier consists of 3 groupings. The first grouping (2a), within this tier

consists of those industrialized countries possessing the capabilities for

advanced but quantitatively limited (i.e., niche) defense production, such as
Australia, Canada, Israel, Norway, Japan, and Sweden. The second subgrouping
(2b) consists of developing or newly industrialized countries containing modest
(but in some cases expanding) military-industrial complexes, such as Argentina,
Brazil, Indonesia, Iran, South Africa, South Korea, Taiwan, and Turkey. Finally,
the third subgrouping of second tier (2c), such as India and ​China​; these are
developing industrial states with large, broad-based defense industries but
nevertheless still lacking a sufficiently capable R&D and industrial capacities to
develop and produce highly sophisticated conventional arms​.
3. ​At the bottom, in Tier 3 of the hierarchy we are using, are various states that

possess very limited and generally low-tech arms production capabilities, such
as the maufacture of small arms or the licensed assembly of foreign designed
system. Countries in this group include Egypt, Mexico, and Nigeria.
China has traditionally been placed into the category of Tier 2c arms producer. In
particular, china is one of the few countries in the developing world to produce nearly a full
range of military equipment, from small arms to armored vehicles to fighters aircraft to
warship and submarine (with plans to contruct aircraft carriers).

Ladder of Production
According to Ladder of Production of Keuth Krause Model, to determine the dependency of
defence industry, there are 11 trait measurements.
1. Capability of performing simple maintenance
2. Overhaul, refurbishment and rudimentary modification capabilities.
3. Assembly of imported components, simple licensed production.
4. Local production of component of raw materials.
5. Final assembly of less sophisticated weapons; some local component production.
6. Co-production or complete licensed production of less sophisticated weapons.
7. Limited R&D improvements to local licensed-produced arms.
8. Limited independent production of less sophisticated weapons; limited production of more
advanced weapons.
9. Independent R&D and production of less sophisticated weapons.
10.​ ​Independent R&D and production of advanced arms with foreign components.
11.​ ​Completely independent R&D and production.

China’s defense industry is comprised of 11 state-owned enterprises, which cover the general
industrial areas of nuclear affairs, aerospace, aviation, shipbuilding, ordnance, and electronics
(Medeiros, 2004). In this framework paper, the writer aims to examine the possibility for China
to catch-up with Russia and the US to become ​a first tier country in arms production, with
special attention to the ​aviation sector during ​2005-2015​. The focus of the research is ​to answer
the following question​.
Is it possible for China to catch up Russia and US becoming first tier country in arms
production?
What kind of limitation China has to overcome in order to become the first tier in aerospace
production hierarchy?

Embargo to China

The limitation of arms trading is one of many obstacles for any country’ path to step up higher
tier or contrary it perhaps become security driven imperative for self-sufficieny in arms
procurement. Speaking of embargo, EU addressed arms embargo to China on 27 June 19889 for
escalating terror in Tiananmen. To record, it has not been lifted until present.

(​https://fas.org/sgp/crs/row/RL32870.pdf​)

In opposite of embargo, China has made partnership with foreign country for R&D purpose.
Government Support

The subsidy beneficiaries are willing to produce and sell more products at a given sales price, are
able to sell their products at a lower price than would be the case absent the subsidies, or have
lower fixed costs. China’s government subsidies to industries known as “absolute control” and
“heavy weight” industries. The strategic industries identified by many fields, related to special
attention of paper, one including is ​armaments​. The firms which been subsidizied are ​China
Aerospace International Holdings Ltd ​and ​AviChina Industry & Technology Co Ltd.

(​http://origin.www.uscc.gov/sites/default/files/Research/AnAssessmentofChina'sSubsidiestoStrat
egicandHeavyweightIndustries.pdf​)

China Aerospace

the ​J-20 stealth fighter, FC-1, and FC-8 fighters​, the 5th-generation ​FC-31 stealth
fighter, and aerial reconnaissance and attack ​drones​. In 2007, Chinese hackers
stole secrets about the U.S. F-35 that were incorporated by AVIC into the Chinese
FC-31.
Source: Global Economic Prospects,
http://databank.worldbank.org/data/reports.aspx?source=global-economic-prospects&Type=TA
BLE&preview=on

Source: World Development Indicators,

http://databank.worldbank.org/data/reports.aspx?source=2&series=NY.GDP.MKTP.CD&countr
y=#
(A1) R&D spending as % of GDP and (A2) How much R&D spending for defence industry, and
as % of national R&D spending?

Source: Source: Military expenditure by country as a share of GDP, 2002–2015 (SIPRI, 2016)

Detailed Numbers

Years America (US) China Russia

2005 6827 286 5210

2006 7481 670 5154

2007 7800 505 5568

2008 6799 636 6265

 2009 6806 1178 5070

2010 8098 1496 6172

2011 9104 1338 8695

2012 9163 1728 8480

2013 7678 2055 8107

2014 10470 1360 5468

2015 10484 1966 5483

Analysis
The chart above shown about weapons exports comparisons between People's Republic
China, United States of America, and Russian Federation accompanied by a table showing
detailed numbers being used as the charts’ data.
From a glimpse look on the chart above, America and Russia seems to tightly competing
with each other in terms of worldwide arms exports value. Both compared to China, there is still
a long way for the one of three Asian’s Tiger in order to catch up. This, however, doesn’t mean
that China is out of the game.
We can see from detailed view of both the chart and the table that the trend of China weapons
export value always rises from time to time, tough not very considerably. The most increases of
the trend was occurred from 2008 to 2013 span, valued from US$636.000.000,00 to
US$2.055.000.000,00 respectively. The 2013 exports value is the highest from all China exports
in 11 years span. Still, China suffers decrease in such matter in 2014 but keep trying to maintain
profit in 2015.
On the Russian side, Russian weapons exporters are experiencing fluctuation from time to time
as shown on both the chart and the table. Major increases in value happen from 2009 to 2011
with grand total from US$5.070.000.000,00 to US$8.695.000.000,00 respectively. 2011 proofed
to be the most profitable year for Russian weapons exporter because they finally experiencing
minor decreases in the matters spanning for the next two years and major decreases on the
remaining year, plummet to just US$5.483.000.000,00 in 2015.
And finally, from American weapons exporters’ point of view, the trend is generally in line with
that of the Russian. Big differences are that not only the lowest in value still beat other two
exports value in the same years, which happen in 2008 and 2009 trades’ value, but also the profit
always increases from time to time. Majors increases in profit happen from 2014 to 2015 span,
amounting both US$10.470.000.000,00 and US$10.484.000.000,00 respectively. The only well
obvious decrease only happen in 2013 with amount of US$7.678.000.000,00 exports value that
at the same time make Russia appear temporarily on the first place from the three ranks shown in
the charts. Still, a large boost of income that American weapons exporter experiencing from
2013 to 2014 meant that America will stay in the game, at least in the 2005-2015 span.
All-in-all, Chinese weapons exporter need to do something very drastic and very fast if their aim
is to successfully become the number one weapons exporting countries in the world that valued
more than Russian or American weapons exporters in terms of profit.

TIV of arms exports to

China, 2005-2015

http://www.sipri.org/databases/armstransfers/background

http://www.tradingeconomics.com/united-states/gdp

http://www.tradingeconomics.com/Russia/gdp

http://www.tradingeconomics.com/China/gdp

SIPRI 2016, ​Military expenditure by country as a share of GDP, 2002–2015,​ viewed on 16

January 2017, retrieved from <​https://www.sipri.org/sites/default/files/Milex-GDP-share.pdf​>

Comparisons of GDP from 3 Countries ( Russia, China, USA ) 2005-2015

List of China’s weapon Imports from Russia

Source: ​SIPRI Arms Transfers Database