Earnings for major Chinese military conglomerates saw a dip last year, stemming from anti-graft campaigns that caused the postponement of arms deals and procurement activities, as revealed in a study published Monday by a prominent research institute focused on conflict.
These downturns in China stand in stark contrast to robust revenue increases experienced globally by prominent defense and military service corporations, which have benefited from the conflicts raging in Ukraine and Gaza, alongside broader geopolitical and regional instability, according to the findings from the Stockholm International Peace Research Institute (SIPRI).
“A wave of corruption accusations within China’s arms purchasing process resulted in significant defense contracts being put on hold or scrapped throughout 2024,” stated Nan Tian, who directs SIPRI’s program tracking military expenditure and arms production.
“This situation exacerbates the existing doubt regarding the trajectory of China’s military modernization goals and precisely when novel capacities will become operational.”
China’s Sales Drop While Japan’s Increase
The military apparatus of the People’s Liberation Army (PLA) has been a major focus of a widespread anti-corruption sweep initiated by President Xi Jinping back in 2012, which escalated to implicate senior leadership within the armed forces in 2023, notably targeting the Rocket Force.
In October, eight high-ranking generals were removed from the ruling Communist Party based on corruption charges, among them He Weidong, considered the nation’s second most senior general. He had previously served under Xi on the Central Military Commission, the PLA’s ultimate command structure.
Diplomatic sources from both Asian nations and Western countries are reportedly still trying to assess the full ramifications of this crackdown on China’s ongoing military advancement and how deeply it has penetrated the chain of command.
Data from SIPRI indicates that revenues for China’s leading defense companies decreased by 10% last year, whereas firms in Japan recorded a substantial 40% surge, Germany saw a 36% rise, and US defense revenues climbed by 3.8%.
The report further highlighted that revenues for the world’s top 100 defense contractors reached an unprecedented $679 billion, marking a 5.9% overall growth. Nevertheless, the decline in China was significant enough to render the Asia-Oceania region the sole geographical area where top arms firms experienced a collective revenue contraction.
This revenue drop in China occurred despite Beijing maintaining rising defense budgets for three decades amidst its escalating strategic competition with the United States, the established military power in Asia, and persistent tensions related to Taiwan and the heavily disputed South China Sea.
Modernization Efforts Will Persist
Despite the revenue dips, the overall military build-up is yielding visible results, with China now fielding the world’s largest navies and coast guard fleets—including a potentially sophisticated new aircraft carrier—alongside a growing arsenal of hypersonic missiles, nuclear capabilities, and various aerial and maritime drones.
According to the SIPRI research, state-owned entities such as AVIC (China’s largest defense manufacturer), land systems developer Norinco, and aerospace/missile corporation CASC all saw revenue reductions. Norinco suffered the most severe earnings contraction, with a 31% drop, bringing its revenue to $14 billion.
The research determined that personnel shake-ups due to corruption at the senior levels of Norinco and CASC prompted government scrutiny and caused project timelines to shift, while AVIC experienced a slowdown in the delivery of its military aircraft.
China’s Ministry of National Defense and the three companies mentioned did not offer immediate responses to requests for comment faxed by Reuters.
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The schedule for deploying advanced systems for the PLA’s Rocket Force, responsible for its expanding inventory of ballistic, hypersonic, and cruise missiles, could face exposure, as might programs related to aerospace and cyberspace, suggested SIPRI researcher Xiao Liang.
This uncertainty compounds the challenges facing the PLA in meeting its objective of having key combat capabilities and full readiness in place by its centenary, Liang noted. The forerunner to the PLA, Mao Zedong’s Red Army, was established in 1927.
“Nevertheless, looking toward the medium and long term, consistent financial backing through defense budgets and strong political will supporting modernization will endure, even if it incorporates some delays in specific programs, increased costs, and stricter oversight of the procurement process,” Liang concluded.
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