In 2021, Chinese defense revenues increased for each of the seven state-owned companies involved in Chinese defense production. Growth has been variable among the seven companies, but all have benefited from relative economic growth in 2021, as well as the People’s Liberation Army’s continued modernization and acquisition of naval, aerospace and land capabilities. .
Companies in the shipbuilding and electronics sectors have seen particularly high growth between 2020 and 2021. China’s state-owned enterprises, or SOEs, have also reportedly made significant progress in fully implementing the three-year plan to reform SOE of the State Council, which is to be completed before the 20th Party Congress in the fall of this year.
In 2021, the Aviation Industry Corporation of China – also known as AVIC – remained China’s top defence-related state-owned enterprise for the fourth consecutive year, according to an analysis by the International Institute of Defense. strategic studies.
Speak Top 100 Defense News lists, AVIC’s total revenue grew from $67.9 billion in 2020 to $80.4 billion in 2021, while its defense-related revenue grew 18% from $25.5 billion. dollars in 2020 to $30.2 billion.
In line with the requirements of the 14th Five-Year Plan as well as the requirements of the PLA Air Force and Navy, Chinese securities companies expect continued growth in defense-related and civilian businesses from AVIC. Thanks to this strong growth rate, AVIC has maintained its position as the world’s sixth largest defense company in the Top 100.
However, it was not the fastest growth rate among Chinese state-owned enterprises. Between 2020 and 2021, the defense-related revenues of China Electronics Technology Group (CETC) and China South Industries Group Corporation (CSGC) are estimated to have increased by 40% and 28%, respectively.
The increase in CETC revenue is due to the acquisition in June 2021 of telecommunications rival China Putian Information Industry Group, also known as Potevio, whose revenue in 2019 amounted to 116 billion yuan (17 billion of dollars). The acquisition means CETC’s total revenue in 2021 has reached $58 billion, of which IISS estimates $14.7 billion is for defence-related activities, moving the company from 15th to 11th place in this year’s Top 100.
Potevio’s activities focus mainly on the commercial sector, although a major subsidiary, Eastern Communications, supplies telecommunications systems to the Chinese military. The acquisition is in line with the “independent innovation” goal of China’s 14th Five-Year Plan, which also includes a requirement for national defense entities to expand their collaborative efforts – both among themselves and with the commercial sector. – in order to strengthen national defence. industrial capacity and innovation.
CSGC’s estimated defense-related revenue increased by approximately 28%, from $10.7 billion in 2020 to $13.7 billion in 2021; from 2019 to 2020, it increased by 21%. Despite internal restructuring and streamlining reforms appearing to bolster performance over the past two years, CSGC revenues are still well below peak 2016 levels due to annual declines of 25% per year between 2017 and 2019. The company’s overall revenue growth in 2021 can be attributed to the growth of the automotive sector (including electric vehicle), the optics industry, and the electronics and energy industries.
For the second year, shipbuilding giant China State Shipbuilding Corporation Limited, or CSSC Group, released official figures following the merger of China Shipbuilding Industry Corporation and China State Shipbuilding Corporation in 2019. Following the global economic recovery in 2021, China’s shipbuilding industry maintained a global lead in 2021 in terms of volume of ships built, new shipbuilding orders and pending order volumes.
Also in defense, Chinese shipbuilders have had an active year supplying the PLA Navy. In 2021, the PLAN commissioned eight guided-missile destroyers, two amphibious assault ships and one nuclear-powered ballistic missile submarine. Construction was underway on PLAN ships which were commissioned in July 2022, including two more Type 052D destroyers, three Type 055 destroyers, a Type 075 amphibious assault ship and the third aircraft carrier of the ‘APL – Fujian. The IISS estimates that the defense-related revenues of the CSSC group increased by 16% between 2020 and 2021.
Defense-related revenue for NORINCO – or China North Industries Group Corporation Limited – grew 16% from 2020, reaching $18 billion in 2021, nearly doubling the company’s annual growth over the previous three years . According to NORINCO’s annual work report, this reflects a “good start for the 14th Five-Year Plan”, with the company signaling the successful completion of delivery tasks for the PLA’s participation in international military competition and for civilian use. in the Beijing Science and Technology. Winter Olympics.
The company also continues to play a leading role in application development research and construction of the BeiDou satellite navigation system. Internationally, the activity report highlights the company’s activity “against the tide”, with the construction of major projects along the “Belt and Road” initiative, an economic and development program. Chinese investment.
The China Aerospace Science and Technology Corporation recorded defense-related revenue growth of 12% from 2020 to 2021, helping the company hold on to 18th place in the Top 100. During its annual work conference 2022the company highlighted the success of “building models of national defense weapons” as well as progress in space development with 48 launch missions and the first Mars exploration mission completed.
However, the company noted that the challenges of “the economic environment have increased significantly” while the task of corporate reform is “still arduous”.
For the China Aerospace Science and Industry Corporation, revenue growth was relatively subdued for the third consecutive year, at just 9% from 2020 to 2021, which dropped the company from 11th to 14th place in the Top 100. Nonetheless, the company has managed to maintain overall business revenue in recent years, despite supply chain challenges and significant exposure to commercial aviation, where performance is constrained by ongoing lockdowns related to the COVID-19.
In May 2022, Hao Peng, director of the state-owned enterprise reform leading group of the State Council Office and the council’s Public Assets Supervision and Administration Commission, announced that more than 90 percent of enterprises had completed almost all the necessary reforms according to the three-year public enterprise reform plan – 2020 to 2022.
Last year was apparently important for achieving this level of progress, as 70% of reform tasks were completed in 2021 at the central and local levels of state-owned enterprises. These reforms focus on improving governance structures and party leadership; improve efficiency and encourage market-based measures; create incentives for scientific and technological innovation; achieve technological advancements; lose weight and reduce risk; and improving capital oversight, among other objectives.
Although Chinese reports suggest that the full realization of these reforms is on track for the deadline of the 20th Party Congress, it is unclear to what extent they may have played a role in the revenue growth seen in all companies. defence-related public works in 2021.
Factors such as China’s broader economic backdrop after the COVID-19 outbreak, the country’s civilian industry and the PLA’s procurement in line with the 14th Five-Year Plan targets are likely explanations.
However, following the Chinese government’s adherence to its so-called dynamic zero COVID policy, a crisis in the real estate sector, a rural banking scandal and concerns over overseas debt repayments, the economic malaise of China so far in 2022 could paint a different picture for next year’s results.
Fenella McGerty is a research fellow in defense economics at the International Institute for Strategic Studies, where Meia Nouwens is a research fellow on Chinese defense policy and military modernization.