China is the second largest defense spender globally after the US. The country’s large military budget is primarily driven by its robust economic growth and its desire to match-up with the US in terms of military capabilities. Additionally, China shares its borders with 14 countries, and is involved in several border disputes which increase the need to invest in the recruitment and maintenance of a large number of troops to prevent infiltration or other hostile acts. The Chinese defense budget grew at a CAGR of about 7.3% during 2013–2017, from around US$115 Billion in 2013 to about US$153.9 Billion in 2017.
Over the forecast period, the country’s defense expenditure is expected to increase from over US$167 Billion in 2018 to around US$226.5 Billion in 2022, reflecting a CAGR of more than 7.8%. The country’s focus on military modernization, building technical capabilities, and dealing with territorial conflicts, while at the same time contributing to various peacekeeping operations worldwide, will drive the defense budget over the forecast period.
China is the second largest military spender globally, with a cumulative spending of over US$687 Billion between 2013 and 2017. Disputes over borders and territories, participation in peacekeeping missions, and military modernization are expected to drive the country’s future military expenditure, which is expected to grow at a CAGR of around 7.8% during 2018-2022. Meanwhile, the country’s defense budget is projected to remain stable at an average of 1.3% of GDP over the forecast period, and per capita defense expenditure will increase from around US$110 in 2017 to more than US$158 by 2022.
The report “Future of the Chinese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the Chinese defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.
In particular, this report provides the following -
- The Chinese defense industry market size and drivers: detailed analysis of the Chinese defense industry during 2018–2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of the Chinese defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: analysis of the competitive landscape of the Chinese defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
Companies mentioned in this report: China North Industries Corporation (NORINCO), China Electronics Technology Group Corporation (CETC), Aviation Industry Corporation of China (AVIC), China National Nuclear Corporation (CNNC), China Nuclear Engineering and Construction Corporation (CNEC), China Aerospace Science and Industry Corporation (CASIC), China State Shipbuilding Corporation (CSSC), and China National Electronics Import and Export Corporation (CEIEC)
Scope
- China is the second largest defense spender globally after the US. The country’s large military budget is primarily driven by its robust economic growth and its desire to match-up with the US in terms of military capabilities. Additionally, China shares its borders with 14 countries, and is involved in several border disputes which increase the need to invest in the recruitment and maintenance of a large number of troops to prevent infiltration or other hostile acts. The Chinese defense budget grew at a CAGR of 7.33% during 2013-2017, from US$115.9 billion in 2013 to US$153.9 billion in 2017.
- China’s military modernization plans require a huge capital inflow and the government is expected to meet the requirements of these programs over the forecast period. The country’s defense capital expenditure increased from US$37.9 billion in 2013 to US$50.4 billion in 2017, growing at a CAGR of 7.37%.
- Initiatives to combat organized crime and increase border security expenditure, and investments in infrastructure development, have driven the homeland security budget between 2013 and 2017. Over the forecast period, these factors are expected to continue to drive the country’s defense expenditure.
Reasons to buy
- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Chinese defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the Chinese defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts
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1. Introduction 1.1. What is this Report About? 1.2. Definitions 1.3. Summary Methodology 1.4. About Strategic Defence Intelligence 2. Executive Summary 3. Market Attractiveness and Emerging Opportunities 3.1. Current Market Scenario 3.1.1. Primary Threat Perception 3.1.2. Military Doctrine & Strategy 3.1.3. Military Fleet Size 3.1.4. Procurement Programs 3.1.5. Social, Political and Economic Environment and Support for Defense Projects 3.1.6. Political and Strategic Alliances 3.2. Defense Market Size Historical and Forecast 3.2.1. Chinese defense expenditure is expected to increase at a CAGR of 7.81% over the forecast period 3.2.2. Race over military supremacy, territorial disputes, peacekeeping missions, increasing tension with the US, and research and development are the main factors driving Chinese defense expenditure 3.2.3. Chinese defense budget as a percentage of GDP is expected to remain stable 3.3. Analysis of Defense Budget Allocation 3.3.1. China to allocate a high percentage share towards revenue expenditure over the forecast period 3.3.2. Defense capital expenditure is expected to increase at a CAGR of 7.82% over the forecast period 3.3.3. Per capita defense expenditure is expected to increase substantially during the forecast period 3.4. Homeland Security Market Size and Forecast 3.4.1. Chinese homeland security is expected to reach US$38.4 billion by 2022 3.4.2. Organized crime, terrorism threats, and cyber protection are expected to drive Chinese homeland security expenditure 3.4.3. China falls under the “highly affected” terrorism category 3.4.4. China is “highly affected” by terrorism as per the Terrorism Index 3.4.5. China has a terrorism index score of 6.1 3.5. Benchmarking with Key Global Markets 3.5.1. China is anticipated to be the largest defense spender in Asia over the forecast period 3.5.2. China has the second largest defense budget in the world 3.5.3. China allocates a lower share of GDP to defense compared to the US and other Asian countries 3.6. Market Opportunities: Key Trends and Growth Stimulators 3.6.1. Missile defense systems 3.6.2. Surface-to-air missiles 3.6.3. Multirole aircraft 3.6.4. Infrastructure construction 3.6.5. Transport Aircraft 4. Defense Procurement Market Dynamics 4.1. Import Market Dynamics 4.1.1. China is expected to import fewer weapons over the forecast period 4.1.2. Russia accounts for the majority of Chinese defense imports 4.1.3. Aircraft, engines, and naval vessels are the most imported military hardware 4.2. Export Market Dynamics 4.2.1. Defense exports are expected to grow over the forecast period 4.2.2. Pakistan emerged as the biggest importer of Chinese low-cost defense equipment exports 4.2.3. Chinese aircraft and naval vessel exports expected to increase 5. Industry Dynamics 5.1. Five Forces Analysis 5.1.1. Bargaining Power of Supplier: High 5.1.2. Bargaining Power of Buyer: Medium 5.1.3. Barriers to Entry: High 5.1.4. Intensity of Rivalry: Low 5.1.5. Threat of Substitution: Low 6. Market Entry Strategy 6.1. Market Regulation 6.1.1. The Chinese military-industrial complex opens up to private sector participation 6.1.2. Defense industry remains closed to foreign direct investment 6.2. Market Entry Route 6.2.1. Budget Process 6.2.2. Procurement Policy and Process 6.2.3. Foreign technology finds its way into the Chinese defense industry through civil-military integration 6.3. Key Challenges 6.3.1. Lack of competition and long production cycles continue to hamper the performance of the Chinese defense industry 6.3.2. Arms embargo imposed by the US and EU 7. Competitive Landscape and Strategic Insights 7.1. Competitive Landscape Overview 7.1.1. State-owned enterprises are the only major players in China’s defense industry 7.1.2. Foreign technology enters the Chinese defense market by supplying civil use products 7.2. Key Domestic Companies 7.2.1. China North Industries Corporation: Overview 7.2.2. China North Industries Corporation: Products 7.2.3. China North Industries Corporation: Recent Announcements and Strategic Initiatives 7.2.4. China North Industries Corporation: Alliances 7.2.5. China North Industries Corporation: Recent Contract Wins 7.2.6. China Electronics Technology Group Corporation: Overview 7.2.7. China Electronics Technology Group Corporation: Products 7.2.8. China Electronics Technology Group Corporation: Recent Announcements and Strategic Initiatives 7.2.9. China Electronics Technology Group Corporation: Alliances 7.2.10. China Electronics Technology Group Corporation: Recent Contract Wins 7.2.11. Aviation Industry Corporation of China: Overview 7.2.12. Aviation Industry Corporation of China: Products 7.2.13. Aviation Industry Corporation of China: Recent Announcements and Strategic Initiatives 7.2.14. Aviation Industry Corporation of China: Alliances 7.2.15. Aviation Industry Corporation of China: Recent Contract Wins 7.2.16. China National Nuclear Corporation: Overview 7.2.17. China National Nuclear Corporation: Services 7.2.18. China National Nuclear Corporation: Recent Announcements and Strategic Initiatives 7.2.19. China National Nuclear Corporation: Alliances 7.2.20. China National Nuclear Corporation: Recent Contract Wins 7.2.21. China Nuclear Engineering and Construction Corporation: Overview 7.2.22. China Nuclear Engineering and Construction Corporation: Services 7.2.23. China Nuclear Engineering and Construction Corporation: Recent Announcements and Strategic Initiatives 7.2.24. China Nuclear Engineering and Construction Corporation: Alliances 7.2.25. China Aerospace Science and Industry Corporation: Overview 7.2.26. China Aerospace Science and Industry Corporation: Products 7.2.27. China Aerospace Science and Industry Corporation: Recent Announcements and Strategic Initiatives 7.2.28. China Aerospace Science and Industry Corporation: Alliances 7.2.29. China Aerospace Science and Technology Corporation: Overview 7.2.30. China Aerospace Science and Technology Corporation: Products 7.2.31. China Aerospace Science and Technology Corporation: Recent Announcements and Strategic Initiatives 7.2.32. China Aerospace Science and Technology Corporation: Alliances 7.2.33. China State Shipbuilding Corporation: Overview 7.2.34. China State Shipbuilding Corporation: Products 7.2.35. China State Shipbuilding Corporation: Recent Announcements and Strategic Initiatives 7.2.36. China State Shipbuilding Corporation: Alliances 7.2.37. China State Shipbuilding Corporation: Recent Contract Wins 7.2.38. China National Electronics Import and Export Corporation: Overview 7.2.39. China National Electronics Import and Export Corporation: Products 7.2.40. China National Aero-Technology Import and Export Corporation: Overview 7.2.41. China National Aero-Technology Import and Export Corporation: Products 7.2.42. China National Aero-Technology Import and Export Corporation: Recent Announcements and Strategic Initiatives 8. Business Environment and Country Risk 8.1. Economic Performance 8.1.1. Gross Domestic Product per Capita 8.1.2. Gross Domestic Product (Current US$ Billion) 8.1.3. Exports of Goods and Services in LCU 8.1.4. Imports of Goods and Services in LCU 8.1.5. LCU per US$ 8.1.6. Market Capitalization of Listed Companies (US$ Billion) 8.1.7. Market Capitalization of Listed Companies (Percentage of GDP) 8.1.8. Goods Exports as a Percentage of GDP 8.1.9. Goods Imports as a Percentage of GDP 8.1.10. Services Imports as a Percentage of GDP 8.1.11. Services Exports as a Percentage of GDP 8.1.12. Net Foreign Direct Investment (BoP, current US$ Billion) 8.1.13. Net FDI as a Percentage of GDP 8.1.14. Mining, Manufacturing, Utilities Output 9. Appendix 9.1. About SDI 9.2. DisclaimerList of TablesTable 1: China - Defense Modernization Table 2: Chinese Army Strength Table 3: Chinese Air Force Strength Table 4: Chinese Navy Strength Table 5: China - Ongoing Development and Procurement Programs Table 6: China - Future Procurement Programs Table 7: China Defense Expenditure (CYN Billion & US$ Billion), 2013-2022 Table 8: China GDP Growth and Defense Expenditure as a % of GDP Growth, 2013-2022 Table 9: China Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022 Table 10: China Defense Capital Expenditure (CYN Billion & US$ Billion), 2013-2022 Table 11: China Per Capita Defense Expenditure (US$), 2013-2022 Table 12: China Homeland Security Expenditure (CYN Billion & US$ Billion), 2013-2022 Table 13: Terrorism Index Table 14: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022 Table 15: Chinese Budget Formation Timetable Table 16: Competitive Landscape of the Chinese Defense Industry Table 17: Chinese Military-Industrial Complex - Competitive Landscape Table 18: China North Industries Corporation - Product Focus Table 19: China North Industries Corporation - Alliances Table 20: China North Industries Corporation - Recent Contract Wins Table 21: China Electronics Technology Group Corporation - Product Focus Table 22: China Electronics Technology Group Corporation - Alliances Table 23: China Electronics Technology Group Corporation - Recent Contract Wins Table 24: Aviation Industry Corporation of China - Product Focus Table 25: Aviation Industry Corporation of China - Alliances Table 26: Aviation Industry Corporation of China: Recent Contract Wins Table 27: China National Nuclear Corporation - Services Focus Table 28: China National Nuclear Corporation - Alliances Table 29: China National Nuclear Corporation - Recent Contract Wins Table 30: China Nuclear Engineering and Construction Corporation - Services Focus Table 31: China Nuclear Engineering and Construction Corporation- Alliances Table 32: China Aerospace Science and Industry Corporation - Product Focus Table 33: China Aerospace Science and Industry Corporation - Alliances Table 34: China Aerospace Science and Technology Corporation - Product Focus Table 35: China Aerospace Science and Technology Corporation- Alliances Table 36: China State Shipbuilding Corporation - Product Focus Table 37: China State Shipbuilding Corporation - Alliances Table 38: China State Shipbuilding Corporation: Recent Contract Wins Table 39: China National Electronics Import and Export Corporation - Product Focus Table 40: China National Aero-Technology Import and Export Corporation - Product Focus List of FiguresFigure 1: China Defense Expenditure (CYN Billion), 2013-2022 Figure 2: China Defense Expenditure (US$ Billion), 2013-2022 Figure 3: Chinese GDP Growth and Defense Expenditure as a % of GDP Growth, 2013-2022 Figure 4: Chinese Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022 Figure 5: China Defense Capital Expenditure (CYN Billion), 2013-2022 Figure 6: China Defense Capital Expenditure (US$ Billion), 2013-2022 Figure 7: China Per Capita Defense Expenditure (US$), 2013-2022 Figure 8: China Homeland Security Expenditure (CYN Billion), 2013-2022 Figure 9: China Homeland Security Expenditure (US$ Billion), 2013-2022 Figure 10: Terrorism Heat Map, 2017 Figure 11: Terrorism Index, 2017 Figure 12: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022 Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 Figure 15: Chinese Missile Defense Systems Market Size (US$ Billion), 2017-2027 Figure 16: Chinese Surface-to-Air Missiles Market Size (US$ Billion), 2017-2027 Figure 17: Chinese Multirole Aircraft Market Size (US$ Billion), 2017-2027 Figure 18: Chinese Infrastructure Construction Market Size (US$ Billion), 2017-2027 Figure 19: Chinese Transport Aircraft Market Size (US$ Billion), 2017-2027 Figure 20: Chinese Defense Import Trend, 2012-2016 (TIV values) Figure 21: Chinese Defense Imports by Country (%), 2012-2016 Figure 22: Chinese Defense Imports by Category (%), 2012-2016 Figure 23: Chinese Defense Exports Trend, 2012-2016 (TIV values) Figure 24: Chinese Defense Exports by Country (%),2012-2016 Figure 25: Chinese Defense Exports by Category (%), 2012-2016 Figure 26: Industry Dynamics Porter’s Five Forces Analysis Figure 27: GDP per Capita, 2015-2025 Figure 28: GDP Current US$ (US$ Billion), 2015-2025 Figure 29: Exports of Goods and Services (LCU Billion), 2005-2014 Figure 30: Chinese Imports of Goods and Services (LCU Billion), 2005-2014 Figure 31: LCU per US$, 2015-2024 Figure 32: Market Capitalization of Listed Companies (US$ Billion), 2005-2012 Figure 33: Market Capitalization of Listed Companies as a % of GDP, 2005-2012 Figure 34: Goods Exports as a % of GDP, 2005-2013 Figure 35: Goods Imports as a % of GDP, 2005-2013 Figure 36: Services Imports as a % of GDP, 2005-2013 Figure 37: Services Exports as a % of GDP, 2005-2013 Figure 38: Net Foreign Direct Investment (BoP, current US$ Billion), 2005-2013 Figure 39: Net FDI as a % of GDP, 2005-2013 Figure 40: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014
List of Tables
Table 1: China - Defense Modernization
Table 2: Chinese Army Strength
Table 3: Chinese Air Force Strength
Table 4: Chinese Navy Strength
Table 5: China - Ongoing Development and Procurement Programs
Table 6: China - Future Procurement Programs
Table 7: China Defense Expenditure (CYN Billion & US$ Billion), 2013-2022
Table 8: China GDP Growth and Defense Expenditure as a % of GDP Growth, 2013-2022
Table 9: China Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 10: China Defense Capital Expenditure (CYN Billion & US$ Billion), 2013-2022
Table 11: China Per Capita Defense Expenditure (US$), 2013-2022
Table 12: China Homeland Security Expenditure (CYN Billion & US$ Billion), 2013-2022
Table 13: Terrorism Index
Table 14: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 15: Chinese Budget Formation Timetable
Table 16: Competitive Landscape of the Chinese Defense Industry
Table 17: Chinese Military-Industrial Complex - Competitive Landscape
Table 18: China North Industries Corporation - Product Focus
Table 19: China North Industries Corporation - Alliances
Table 20: China North Industries Corporation - Recent Contract Wins
Table 21: China Electronics Technology Group Corporation - Product Focus
Table 22: China Electronics Technology Group Corporation - Alliances
Table 23: China Electronics Technology Group Corporation - Recent Contract Wins
Table 24: Aviation Industry Corporation of China - Product Focus
Table 25: Aviation Industry Corporation of China - Alliances
Table 26: Aviation Industry Corporation of China: Recent Contract Wins
Table 27: China National Nuclear Corporation - Services Focus
Table 28: China National Nuclear Corporation - Alliances
Table 29: China National Nuclear Corporation - Recent Contract Wins
Table 30: China Nuclear Engineering and Construction Corporation - Services Focus
Table 31: China Nuclear Engineering and Construction Corporation- Alliances
Table 32: China Aerospace Science and Industry Corporation - Product Focus
Table 33: China Aerospace Science and Industry Corporation - Alliances
Table 34: China Aerospace Science and Technology Corporation - Product Focus
Table 35: China Aerospace Science and Technology Corporation- Alliances
Table 36: China State Shipbuilding Corporation - Product Focus
Table 37: China State Shipbuilding Corporation - Alliances
Table 38: China State Shipbuilding Corporation: Recent Contract Wins
Table 39: China National Electronics Import and Export Corporation - Product Focus
Table 40: China National Aero-Technology Import and Export Corporation - Product Focus
List of Figures
Figure 1: China Defense Expenditure (CYN Billion), 2013-2022
Figure 2: China Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Chinese GDP Growth and Defense Expenditure as a % of GDP Growth, 2013-2022
Figure 4: Chinese Defense Expenditure Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: China Defense Capital Expenditure (CYN Billion), 2013-2022
Figure 6: China Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: China Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: China Homeland Security Expenditure (CYN Billion), 2013-2022
Figure 9: China Homeland Security Expenditure (US$ Billion), 2013-2022
Figure 10: Terrorism Heat Map, 2017
Figure 11: Terrorism Index, 2017
Figure 12: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion),
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 15: Chinese Missile Defense Systems Market Size (US$ Billion), 2017-2027
Figure 16: Chinese Surface-to-Air Missiles Market Size (US$ Billion), 2017-2027
Figure 17: Chinese Multirole Aircraft Market Size (US$ Billion), 2017-2027
Figure 18: Chinese Infrastructure Construction Market Size (US$ Billion), 2017-2027
Figure 19: Chinese Transport Aircraft Market Size (US$ Billion), 2017-2027
Figure 20: Chinese Defense Import Trend, 2012-2016 (TIV values)
Figure 21: Chinese Defense Imports by Country (%), 2012-2016
Figure 22: Chinese Defense Imports by Category (%), 2012-2016
Figure 23: Chinese Defense Exports Trend, 2012-2016 (TIV values)
Figure 24: Chinese Defense Exports by Country (%),2012-2016
Figure 25: Chinese Defense Exports by Category (%), 2012-2016
Figure 26: Industry Dynamics Porter’s Five Forces Analysis
Figure 27: GDP per Capita, 2015-2025
Figure 28: GDP Current US$ (US$ Billion), 2015-2025
Figure 29: Exports of Goods and Services (LCU Billion), 2005-2014
Figure 30: Chinese Imports of Goods and Services (LCU Billion), 2005-2014
Figure 31: LCU per US$, 2015-2024
Figure 32: Market Capitalization of Listed Companies (US$ Billion), 2005-2012
Figure 33: Market Capitalization of Listed Companies as a % of GDP, 2005-2012
Figure 34: Goods Exports as a % of GDP, 2005-2013
Figure 35: Goods Imports as a % of GDP, 2005-2013
Figure 36: Services Imports as a % of GDP, 2005-2013
Figure 37: Services Exports as a % of GDP, 2005-2013
Figure 38: Net Foreign Direct Investment (BoP, current US$ Billion), 2005-2013
Figure 39: Net FDI as a % of GDP, 2005-2013
Figure 40: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014
