Revenues at major Chinese military companies fell last year as anti-corruption campaigns delayed contracts and arms purchases, according to a study released on Monday (1) by a leading conflict research institute.
The decline in China contrasts with strong growth in global revenues for major arms manufacturers and military services companies, driven by the wars in Ukraine and Gaza, as well as global and regional tensions, according to research by the Stockholm International Peace Research Institute (SIPRI).
“A series of corruption allegations in Chinese arms procurement have led to the postponement or cancellation of major contracts in 2024,” said Nan Tian, director of the Military Expenditure and Arms Production Program at the SIPRI Institute. “This deepens the uncertainty surrounding the modernization of the Chinese military and the timeline for integrating new capabilities.”
The People’s Liberation Army (PLA, short for People’s Liberation Army) was one of the main targets of a wide-ranging anti-corruption campaign launched by President Xi Jinping in 2012, which reached high military rank in 2023, when its missile force came under investigation.
In October, eight generals were expelled from the Communist Party on corruption charges, including the country’s second-highest official, He Weidong. He had served with Xi on the Central Military Commission, China’s highest military command body.
Asian and Western diplomats say they are still trying to assess the impact of this attack on China’s military trajectory and the extent to which it reaches different levels of the chain of command.
Revenues at China’s major military companies fell 10% last year, while Japan’s revenues jumped 40%, Germany’s revenues grew 36%, and U.S. revenues rose 3.8%, according to data from the SIPRI Institute.
Revenues of the world’s 100 largest arms manufacturers rose 5.9% to a record $679 billion, according to the report, while the recession in China made Asia and Oceania the only region where major defense companies contracted.
Chinese revenues have declined despite three decades of defense budget increases in a context that combines conflict with the United States and friction over claims to sovereignty over Taiwan and the South China Sea.
Investments and modernization
The military buildup is showing clear results, with China deploying the world’s largest naval and coast guard fleets – including a potentially advanced new aircraft carrier – as well as new hypersonic missiles, nuclear weapons, and air and sea drones.
According to Sipri, revenues declined at Avic, China’s largest arms maker, at Norinco – a producer of ground systems – and at Casc, an aircraft and missile maker; They are all state owned. Norinco recorded the largest decline of 31% to US$14 billion.
The research found that changes related to corruption investigations in the leadership of Norinco and CASC led to government reviews and project delays, while military aircraft deliveries from AVIC slowed.
The Chinese Ministry of Defense and the three companies did not immediately respond to Reuters’ fax requests for comment.
The advanced systems schedule of the People’s Liberation Army’s Missile Force — responsible for the growing arsenal of ballistic missiles, hypersonic missiles and cruise missiles — could be affected, as could its aerospace and cyber programs, said Xiao Liang, a researcher at the SIPRI Institute.
This raises uncertainty about the PLA’s goal of achieving basic capabilities and combat readiness by its 100th anniversary, Liang said. The predecessor of the People’s Liberation Army, the Red Army led by Mao Zedong, was founded in 1927.
“However, in the medium and long term, continued investment in defense budgets and political commitment to modernization should continue, albeit with some program delays, higher costs and increased stringency in acquisitions,” Liang said.