China’s Arms Industry Makes Global Inroads

Sim Chi Yin for The New York Times

Members of Aviation Industry Corporation of China displayed a model of the JF-17 jet at an exposition in Beijing last month.

BEIJING — From the moment Turkey announced plans two years ago to acquire a long-range missile defense system, the multibillion-dollar contract from a key NATO member appeared to be an American company's to lose.

For years, Turkey's military had relied on NATO-supplied Patriot missiles, built by the American companies Raytheon and Lockheed Martin, to defend its skies, and the system was fully compatible with the air-defense platforms operated by other members of the alliance.

There were other contenders for the deal, of course. Rival manufacturers in Russia and Europe made bids. Turkey rejected those — but not in favor of the American companies. Its selection last month of a little-known Chinese defense company, China Precision Machinery Export-Import Corp oration, stunned the military-industrial establishment in Washington and Brussels.

The sale was especially unusual because the Chinese missile defense system, known as the HQ-9, would be difficult to integrate with existing NATO equipment. China Precision is also subject to sanctions from the United States for selling technologies that the United States says could help Iran, Syria and North Korea develop unconventional weapons. A State Department spokeswoman said this month that American officials had expressed to the Turkish government "serious concerns" about the deal, which has not yet been signed.

Industry executives and arms-sales analysts say the Chinese probably beat out their more established rivals by significantly undercutting them on price, offering their system at $3 billion. Nonetheless, Turkey's selection of a Chinese state-owned manufacturer is a breakthrough for China, a nation that has set its sights on moving up the value chain in arms technology and establishing itself as a credible competitor in the global weapons market.

"This is a remarkable win for the Chinese arms industry," said Pieter Wezeman, a senior researcher at the Stockholm International Peace Research Institute, which tracks arms sales and transfers.

In the past, Chinese companies have been known mainly as suppliers of small arms, but that is changing quickly. From drones to frigates to fighter jets, the companies are aggressively pushing foreign sales of high-tech hardware, mostly in the developing world. Russian companies are feeling the greatest pressure, but American and other Western companies are also increasingly running into the Chinese.

"China will be competing with us in many, many domains, and in the high end," said Marwan Lahoud, the head of strategy and marketing at European Aeronautic Defense and Space, Europe's largest aerospace company. "Out of 100 campaigns, that is, the commercial prospects we have, we may have the Chinese in front of us among the competitors in about three or four. They have the full range of capabilities, and they are offering them."

The Stockholm institute released a report this year on global weapons transfers that found the volume of Chinese conventional weapons exports — which included high-end aircraft, missiles, ships and artillery — jumped by 162 percent from 2008 to 2012, compared with the previous five years. Pakistan is the leading customer. The institute now estimates that China is the fifth-largest arms exporter in the world, ahead of Britain. From 2003 to 2007, China ranked eighth.

China's foreign arms sales are also rising fast in dollar terms. According to IHS Jane's, an industry consulting and analysis company, Chinese exports have nearly doubled over the past five years to $2.2 billion, surpassing Canada and Sweden, and making China the world's eighth-largest exporter by value.

The total global arms trade revenue in 2012 was estimated to be $73.5 billion, and the United States had a 39 percent share, according to IHS Jane's.

Xu Guangyu, a retired major general in the People's Liberation Army and director of the China Arms Control and Disarmament Association, said in an interview that the push by Chinese companies to develop and sell higher-tech arms was "a very normal phenomenon."

"In arms manufacturing, China is trying to increase the quality and reduce price," he said. "We're driven by competition."

Mr. Xu said that besides pricing, Chinese companies had another advantage: they do not "make demands over other governments' status and internal policies." He added: "Our policy of noninterference applies here. Whoever is in the government, whoever has diplomatic status with us, we can talk about arms sales with them."

Chinese officials know that China's encroachment on Western-dominated military markets raises concerns. When asked about the missile-defense sale to Turkey, a Chinese Foreign Ministry spokeswoman said, "China's military exports do no harm to peace, security and stability," and do not "interfere with the internal affairs of recipient countries."

Edward Wong reported from Beijing and Tokyo, and Nicola Clark from Paris. Gerry Doyle contributed reporting from Hong Kong. Patrick Zuo and Bree Feng contributed research from Beijing.

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