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Seven Chinese defence firms in world's top 20, international think tank says

Chinese weapons makers are among the world's biggest defence companies, accounting for seven of the top 20 by revenue, according to a report by a London-based think tank.

In its first such survey, the International Institute for Strategic Studies said the seven state-owned Chinese defence firms each had more than US$5 billion in revenue in 2016, thanks largely to China's massive and ever-rising military spending.

But they still have to make a lot of improvements before they can compete with their counterparts in the West, an institute researcher said.

The leader of the Chinese pack is China South Industries Group (CSGC), which came in at fifth with an estimated revenue of about US$22 billion in arms sales in 2016 " about half the revenue of the world's biggest manufacturer, Lockheed Martin.

A poster showing a unmanned vehicle by China South Industries Group Corporation is displayed in Beijing in 2015. Photo: Simon Song

CSGC, which makes light weapons, advanced ammunition, optoelectronic devices and counterterrorism equipment, said it earned 301 billion yuan (US$44 billion) in revenue and made 21 billion yuan (US$3 billion) in profit last year from sales of both weapons and civilian products such as cars and motorbikes.

Military and civilian aircraft maker Aviation Industry Corporation of China was seventh overall, and China North Industries Group Corporation, which makes tanks, guns and rockets, was ninth.

Also in the top 20 were China Aerospace Science and Industry Corporation, China Shipbuilding Industry Corporation, China Electronics Technology Group Corporation and China Aerospace Science and Technology Corporation.

China State Shipbuilding Corporation, which earned just under US$5 billion in 2016, was 22nd.

Meia Nouwens, a co-author of the report, said that while the Chinese companies' exports were growing, a significant part of their sales was from equipping the People's Liberation Army.

China's state-owned Aviation Industry Corporation of China flies its strike drone, Yaoying-2, in August. Photo: handout

China's military expenses have surged in the last two decades with years of double-digit growth. It is the second-biggest spender on defence after the United States, earmarking more than 1.1 trillion yuan (US$160 billion) for the military in this year's budget.

Many observers maintain that the real figure could be much higher because of a lack of government transparency. It was also difficult to estimate the revenues of the defence firms.

Nouwens said the Chinese companies probably only had an edge in drones, because of competitive pricing and more relaxed export restrictions.

"Chinese defence companies are large entities, but that doesn't necessarily mean they are able to directly compete with Western defence giants just yet on all fronts," she said.

"The Chinese defence industry still has to improve on areas such as innovation, and government-led policies have in recent years been implemented to make the sector more efficient and competitive, and remove duplication of effort."

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2018. South China Morning Post Publishers Ltd. All rights reserved.

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