China to Outrun U.S. Militarily Before Economically
On November 12, 2024, the biennial Zhuhai Airshow opened with grandeur. At the invitation of relevant units of the Air Force, our delegation from the Institute of Regional and Country Studies at Renmin University attended this year’s airshow and its accompanying international exchange forum. I also invited a group of senior experts and former leaders from the fields of diplomacy and the military to join us. Since we were in the Greater Bay Area, we organized a series of research visits, touring more than ten representative companies to understand the foundations of new productive forces, emerging combat capabilities, and the microeconomic basis of current macroeconomic changes. Based on these investigations, we also held a closed-door seminar, where ideas clashed, and the discussions were highly fruitful. I will focus on my reflections and observations from this trip.
1. The Rise of China’s Military-Industrial System
First, as many commentators have noted, the scale and sophistication of the weapons on display at this year’s airshow are truly astonishing. This highlights the combined power of China’s engineering talent pool and its manufacturing industry clusters, signaling the emergence of a formidable defense industry. Nearly 40% of the world’s science and engineering graduates are in China, and the state-owned military-industrial system, coupled with a vast domestic manufacturing base, provides opportunities for practical application and research. Many young engineers are making their mark, creating a flourishing environment for both military and dual-use technologies. The world’s largest and most efficient industrial clusters are showcasing their economies of scale, driving down the costs of production and R&D for various components to the extreme.
In several speeches over the past two years, I’ve posited that among the various dimensions of national power comparisons between China and the United States, military strength might be the first area where China surpasses the U.S., even before economic scale. After seeing this year’s airshow, I believe more people will agree with this prediction.
2. Challenges in Civil-Military Integration
Although China has been pursuing civil-military integration for over a decade and has made some progress, the actual results still fall short of expectations. The relative insularity of the military-industrial system has created a sense of detachment between private enterprises and the Chinese military’s procurement system. The military procurement process imposes many qualification and procedural barriers, which, in practice, hinder the participation of numerous private companies. Moreover, under the threat of sanctions from the U.S. and Western countries, capable private enterprises are often reluctant to engage in military-related business.
An incident during our Greater Bay Area research visit left a lasting impression on me. Our delegation included both retired local officials and some active-duty Air Force officers. One well-known company, which derives a significant portion of its revenue and an even larger share of its profits from Western markets, has faced U.S. federal sanctions in recent years, leading to a noticeable contraction in its market space. During preliminary communications, the company candidly informed us that while they could host the retired local officials, they could not receive active-duty military personnel. The reason was that the company was in the midst of a lawsuit against relevant U.S. government agencies, seeking to lift military-related allegations and associated sanctions. At this critical juncture, it was highly likely that U.S. agents had already infiltrated the company to gather evidence and fabricate charges.
This incident serves as a wake-up call: under certain circumstances, some Chinese companies may cooperate with Western sanctions against the Chinese government, the Communist Party, and the military in order to protect their market interests in the West. Why? Because companies are market- and profit-driven; without profits, they cannot survive. When a company’s primary profits come from Western markets, even a purely Chinese-owned enterprise may find itself “in the enemy camp.” To address this potential risk, I believe a dual approach is necessary:
Soft measures: Fully open up the military procurement market to key private enterprises, actively lower entry barriers, and make efforts to attract them.
Hard measures: Establish corresponding laws and regulations to appropriately warn and penalize companies that exhibit particularly passive behavior in critical areas with serious consequences.
We cannot simply blame companies for lacking patriotism. Encouraging patriotic actions requires a combination of regulations and incentive mechanisms. Civil-military integration is a critical strategic issue tied to the nation’s destiny. We must find ways to integrate leading private enterprises into the military-industrial system as soon as possible. Only in this way can we secure greater opportunities for survival and development in an increasingly competitive global environment.
3. Rethinking China’s Military Exports
The further development of China’s military exports requires a shift in the longstanding ideas and traditions at the level of foreign strategy. I consulted relevant experts, and they highlighted that, to date, China has maintained strict controls on military exports for two main reasons:
1) To prevent advanced weapons from falling into the hands of potential adversaries or enemies.
2) To avoid damaging China’s diplomatic relations and international image.
However, I believe these considerations are insufficient to justify limiting Chinese enterprises, especially private companies, from exporting military products. Does not selling weapons mean others cannot figure out the capabilities of your equipment? Does reducing arms exports improve our international image? The world’s largest and most advanced military-industrial system, if controlled by a peace-loving and non-extremist country like China, would be a blessing for humanity.
From a logical perspective, previous export control policies were designed during an era when peace and development were the dominant themes, aligning with the need for a low-profile diplomatic strategy. These policies were also established when China’s military-industrial capabilities were far behind those of the U.S., Russia, Europe, and Japan. Today, however, the times have changed. The 20th Party Congress report described this era as one of “turbulence and transformation” and “unprecedented changes in a century.” Given the overall industrial landscape—where we are strong and our adversaries are weak, and where private enterprises outperform state-owned ones in manufacturing scale—our policies on military and dual-use technology exports must evolve accordingly.
We need to aggressively compete in the global arms market, treating military and dual-use technology as strategic industries. This requires not only R&D subsidies but also export tax rebates and seller financing, along with diplomatic support to pave the way. Economic common sense tells us that for an industry to thrive, demand-side pull is far more powerful than supply-side push. For an industry to grow and technology to advance, it cannot rely solely on government support and subsidies. Ultimately, it must capture the largest possible and continuously growing market, ensuring reasonable returns on initial investments. Furthermore, multiple rounds of feedback from consumers and users are essential for continuous improvement.
For politicians, military products are akin to drugs for addicts or cosmetic surgery for middle-aged women—they can be addictive and create dependency. The procurement of advanced military equipment often triggers anxiety and arms races among neighboring countries, especially adversaries, leading to an escalating cycle of competition that is difficult to stop. The U.S., Europe, and the former Soviet Union all used their military-industrial advantages to control numerous smaller nations. Decisions on whether to sell advanced weaponry, how much to sell, and when to sell became key diplomatic bargaining tools.
In my view, the strategic significance of vigorously developing military-industrial exports lies in at least three aspects:
1) Boosting domestic military strength and dual-use technology development: Greater sales revenue directly supports the continuous improvement of national military capabilities and the advancement of dual-use technologies.
2) Capturing as much of the international market as possible: This helps slow the growth of the military and technological capabilities of adversaries and potential rivals by limiting their access to markets and resources.
3) Creating dependency among military and political elites in middle-ground countries: By fostering reliance on our advanced military systems, we can secure as much global market share as possible for our high-end civilian products in an increasingly fragmented global economic system.
Imagine this: if Europe’s national security were primarily dependent on advanced military systems provided by us, would they still use “national security” as an excuse to exclude Huawei from their markets?
4. Advocating for an International “Arms Competition”
To capture external markets, we should proactively invite military-industrial powers like the U.S., Russia, and Europe to participate in a global “arms competition.” Some argue that for Chinese military exports to truly take off, they need a real-world conflict to prove their capabilities. However, given China’s diplomatic principles, we obviously cannot start a war just to sell products. Since we cannot engage in “armed competition,” why not organize “peaceful competition”? Let’s see who’s better: Are the performance metrics reliable? Are the advertised specifications truthful? Global military-industrial players can showcase their products in a live, competitive environment rather than static displays. Aside from political factors, the outbreak of war is also related to differences in the perception of each side’s relative strength and willingness to engage in war. Arms races and public demonstrations of military capabilities can help reduce misjudgments, thereby lowering the risk of war.
For a declining hegemon like the U.S., its military exports still benefit from the halo and prestige accumulated during its imperial peak. Participating in such open competitions would likely pose greater risks than rewards for them, so the U.S. military and its arms manufacturers would probably refuse. However, this would not prevent us from repeatedly inviting and publicly challenging them, nor would it stop us from inviting third-party countries that have purchased U.S. weapons to bring their American-made equipment to the competition. Such “buyer showcases” are often the nightmare of sellers of substandard products.
Historically, arms races have been viewed negatively, often associated with strategic imbalances and escalating conflicts. However, in today’s context, we should rethink this concept pragmatically. Confucian idealism, such as “cultivating virtue to win over distant peoples,” is a noble aspiration, but in the anarchic international order, Han Feizi’s realism—“train for three years and dance with weapons to compel submission”—may be more practical.
5. The Evolution of China’s Military Industry
China’s military-industrial development has gone through three distinct phases in the history of the People’s Republic.
1) The first 30 years were characterized by imitation of Soviet military technology. In the early 1950s, the Soviet Union provided extensive assistance to China, primarily in military and heavy industry projects. The Type 56 semi-automatic rifle, for example, was based on the Soviet AK-47. These weapons proved highly effective, such as during the 1962 Sino-Indian border conflict.
2) The second 30 years began with the reform and opening-up period, during which China studied and emulated American military equipment, while also drawing lessons from European and Israeli designs. The Soviet approach emphasized system-level efficiency, while American designs often prioritized achieving overwhelming superiority in specific metrics, such as range or stealth. China’s military industry excelled at reverse engineering, creating simplified versions to ensure that “we have what others have.”
3) In the post-financial crisis era, as China’s industrial capacity and overall technological level have significantly advanced, the development of China’s military-industrial complex has entered its third phase. This phase is characterized by continuous independent innovation, building upon the foundations of prior learning and integration, and achieving breakthroughs that surpass the original “teachers.” I’ve heard multiple anecdotes from friends illustrating this phenomenon: U.S. arms manufacturers publicly advertise that their products achieve a certain key performance metric, let’s call it “Level A.” Chinese military experts take these claims at face value, using “Level A” as a benchmark and working tirelessly to exceed it, eventually reaching “Level B.” However, when the two sides finally compare their work, it turns out that the U.S. manufacturers’ “Level A” was a marketing exaggeration—an idealized claim presented as reality, which they had yet to fully achieve. Meanwhile, Chinese military technology had already surpassed it. According to media reports, such cases have occurred in areas like electromagnetic catapults, hypersonic missiles, railguns, radars, and drones.
While I don’t specialize in military technology or consider myself a military enthusiast, I do know of a classic example involving the father of a long-time friend of mine. During the first 30 years after the founding of the People’s Republic of China, in support of global revolutions and the liberation of the Third World, China provided military aid to other nations. A senior general once vividly recounted to me how he navigated a single ship across thousands of miles to deliver military supplies to Africa, competing with the Soviets for the revolutionary friendship of newly independent African nations.
During the second 30-year phase, under Deng Xiaoping’s leadership, China maintained its role as an arms supplier. Deng famously remarked that “we still need to be arms dealers.” However, during this period, China’s arms exports were relatively limited in scale. The growth potential for arms exports was far smaller than that of civilian goods, with arms deals being not only unstable in volume but also constrained by diplomatic considerations. Consequently, many Chinese military-industrial enterprises had to pivot to producing civilian goods to survive, manufacturing items such as televisions and surveillance cameras.
Now, in the new 30-year phase, systemic changes are taking place in China’s relationship with the world. It seems we may have no choice but to strive to become the world’s largest arms exporter. This is not primarily for profit but to squeeze strategic rivals’ military-industrial enterprises out of the global market.
Conclusion
The ancient Europeans said, “If you want peace, prepare for war.” Today, we might say, “If you want lasting and dignified peace, ensure the sustained superiority of your military-industrial system.” May the world become more peaceful.
