China Poised to Take More Defence Market Share

By Arslan Khan

Author Profile: Arslan Khan is an aerospace engineering student and an analyst/observer of Pakistani defence issues.

As the war in Ukraine continues to play out, both Russia and Ukraine – who were major defence exporters – will likely have to cut back on their exports to rebuild their industries and attrition losses. 

Aside from this, another major issue is sanctions on the Russian state. These now add an extra area of complexity for Russian arms exports as their industries can no longer access Western componentry for their weapons and systems. 

According to a claim by the Ukrainian Armed Forces, the Russians are already feeling the effect of the sanctions, being unable to replace tanks lost in the war due to access to Western components being restricted. However, this is a claim Quwa has been unable to verify. 

This, paired with chronic underfunding within the Russian defence industries has meant that slowly, China is laying the groundwork to overtake the Russians with regard to defence exports.

In some areas, China has held the title of being the largest exporter of certain types of hardware, drones being a key one. From 2014 to 2018, China was the largest exporter of unmanned aerial vehicles (UAVs), with most of their orders being attributed to the Middle East and Africa. 

While on the other hand, the Russians have been struggling to induct their own drones, let alone export them.

Granted, China’s ability to export drones was helped, in part, by the tight control the US has on the export of the type. This was due to alleged human rights concerns, however, these export controls were loosened by the Trump administration to allow US companies to compete with China for these large contracts all over the world.

Fallout with Ukraine

Looking back at Ukraine, in 2014, the Ukrainians had halted exports to Russia. This was a serious decision as about 70% of Ukrainian arms exports were to the Russians. 

Ukraine was a key supplier of engines, motors, fuel and electronics, all of which were vital for Russian weapons programs. This had a significant impact on the Russian defence industries and their ability to fulfil their contractual obligations.

For example, this had meant that gas turbines for Project 22350 were halted, leading to a delay in their deliveries. Russia also did not have the necessary components to produce the An 140. This led them to find a domestic replacement in the form of the Ilyushin IL-112, an aircraft yet to be introduced. 

This situation also posed an issue for Russia’s defence exports. 

Ukraine had withheld the transfer of the gas turbines to Russia for the Indian Navy’s (IN) Project 11356 Frigates being built at Russia’s Yantar Shipyard. However, in the end, Indian lobbying influenced Ukraine to transfer the turbines for the IN ships. 

Tensions with Ukraine have been a long-standing sore point for the Russian industries. Russia did not lay the groundwork when it had the chance to become fully self-sufficient. Instead, out of complacency (and likely a lack of money), Russia decided to rely on Ukraine for key componentry. 

This has meant that now the Russians will need to source an alternative supplier to meet their defence needs. It is not unlikely that either China or India will try to fill the gap left by Ukraine.

The Chinese have already attempted to get in on key Russian contracts, particularly for the supply of naval propulsion as a result of various embargoes. 

The one saving grace for Russia, however, is that through the war, its forces have managed to capture systems donated by the West. This means that it is not unlikely that they will make their way back to a lab to be studied, even potentially reverse engineered. 

This will provide Russian industries with a significant boost, allowing them to improve and create new systems based on the knowledge gained from the analysis of western systems such as the Brimstone or Javelin missiles. 

However, the impact of this growth on Russian defence exports is likely to be very minimal for the foreseeable future. In all likelihood, Russia will focus on rebuilding its forces, replacing their losses and revising tactics and training.

Thus, however, as mentioned before, the economic sanctions could mean that this is a process that could potentially take decades. Replacing vast amounts of equipment with modern equipment is no easy feat for forces with access to free markets. However, this is something Russia does not enjoy.  

The US had also deterred shoppers from turning to Russia.

CAATSA threatened severe economic sanctions on states that engaged in large arms procurements from Russia (among others). These sanctions were a hot topic, both in NATO and around the rest of the world. 

CAATSA lost the Russians a contract to provide Sukhoi Su-35s to Egypt. It deterred many smaller states from engaging in procurement from Russia, resulting in them turning to the West and China. 

Aside from this, the CAATSA sanctions have created animosity between Turkey and the US over the Turkish procurement of the Russian S400 system. India is also in limbo for similar reasons, though it may receive a waiver for specifically the S400. But further purchases may not be on the horizon.

China’s Rise

On the other hand, this is a prime opportunity for China to take Russia’s place as the leading Eastern supplier of arms.

Russia’s defence exports will likely be at a minimum for the foreseeable future. However, it is not always possible for nations to procure directly from the West or even countries such as Israel or Turkey due to ITAR restrictions. 

China, however, is more relaxed with its arms export policy. It does not discriminate between its customers. Alongside this, China also can offer significant amounts of financing. Granted, the details of its financing terms are scarce. But in any case, financing is not something Russia may not be able to sustain if continues experiencing sanctions and restrictions.

China also has one of the most diverse defence portfolios of any country, with the ability to provide microcontrollers, all the way up to some of the most advanced radars and missiles on the market.

It is akin to a ‘one-stop shop’ for all defence items. 

China has experienced significant growth in its defence exports, fuelled by a global arms race and a willingness to sell. Exports from China had slumped slightly in recent years. However, this can be attributed to the general economic state of countries after COVID-19. 

China has had considerable success exporting its aircraft and also missile systems. However, their export of high-end naval vessels is not something that has been as successful.

With the Pakistan Navy (PN) inducting Type 054A/P frigates and, eventually, S26-based Hangor submarines, other navies could follow suit.

Chinese naval platforms offer a very good value proposition that brings modern capabilities at comparatively low prices. China is also able to deliver its arms faster than any other exporter. It is practically renowned for its ability to launch naval ships at a very high pace. Another example is the delivery of J-10CEs to Pakistan. From contract signing to batch 1 delivery, it had taken less than one year. This is not something Russia or, for that matter, even the U.S. could provide.

In the coming years, we are likely to see a shake-up in the major defence exporters, with small players like Pakistan on the rise, Turkey breaking through and Russia and Ukraine busy rebuilding their economies and armed forces.

China will not have a particularly hard time settling into the spot left by Russia. After all, China can provide practically everything Russia was already selling on the market up to this point, and much more.