China Spurs Domestic Military Sector with Stolen Tech, R&D Investment: Report

China is racing to catch up to the military superiority of the United States. It’s doing so by beefing up domestic innovation efforts in tandem with ongoing intellectual property theft efforts, according to a recent think tank report.

At the same time, the military arm of the Chinese Communist Party (CCP) is hindered by both the trappings of a socialist command economy and the inability to develop cutting-edge technology on its own, the RAND Corporation report (pdf) titled “Defense Acquisition in Russia and China,” said.

According to the June report, “China’s reliance on intellectual property theft means its weapons are years behind, but the Chinese recognize that shortcoming and are investing in and growing organic capabilities through joint ventures and acquisition of foreign technology.”

The report, drafted for the United States Army, outlines how China is moving away from its standard model of copying other countries. “Overall, the PLA has overcome many technological barriers and is the clear pacing threat to the United States in defense acquisitions.”

Theft and Acquisition

The Chinese innovation model for years has been to steal and replicate, which the RAND authors refer to as the “copy-replace model.” Many divisions of the People’s Liberation Army (PLA) are armed with replicates of other nations’ weaponry.

RAND cites that Chinese aircraft bear striking similarities to U.S. and Russian counterparts. Among the list of call signs are the American F-35 Lightning II and the similar-looking Chinese J-31 Gyrfalcon.

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Composite image of an American F-35 Lightning II (top) and a Chinese J-31 Gyrfalcon (bottom). (Leon Neal/Getty Images, Johannes Eisele/AFP via Getty Images)

Another jet, known as the J-20 Mighty Dragon, is similar to the American F-22 Raptor. But according to the report, despite the J-20 going through relatively quick development, RAND estimates that China is as far as 20 years behind the United States in military aviation.

On the ground, the PLA’s domestically produced standard service rifle of roughly the last 25 years, the QBZ-95, may soon be replaced by a copied model. The replacement, which is unofficially known as the QBZ-191, is a near copy of the Heckler and Koch 416, according to analysis from The Firearm Blog. This rifle is also strikingly similar to an AR-15.

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Composite image of soldiers holding the QBZ-95 (L) and an H&K 416 (R). (Kevin Frayer/Getty Images, Boris Horvat/AFP via Getty Images)

The CCP’s “reliance on theft of intellectual property for its weapon development has helped keep it competitive but has pegged it several years behind the cutting edge,” according to RAND. This has led China to increase efforts in its own R&D.

Innovation

China’s domestic military spending has been on the rise for recent decades, and its approach to innovation has met with a paradigm shift in recent years.

The report writes, “Chinese military expenditures grew tenfold in constant dollars over the past 25 years, with spending reaching an all-time high of $250 billion in 2018.” By comparison, the United States had a defense budget of $700 billion the same year.

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Defense revenues by firms, worldwide, 2016. (Defense Acquisition in Russia and China/RAND Corporation)

Chinese leader Xi Jinping’s takeover of the CCP led to several systemic changes in the PLA’s weapon development strategy. Since 2016, the military and commercial sectors have become more closely integrated. Military designs are often contracted out to civilian companies, albeit state-owned.

Rand reports, “for a sense of scale, of the top 22 highest-grossing defense firms worldwide, nine are from the United States and eight are from China.” Chinese salaries for project managers and engineers are also becoming competitive with the United States. This further serves to lure Chinese nationals attending universities abroad back home.

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Average pay rate by job in China’s largest cities. (Defense Acquisition in Russia and China/RAND Corporation)

Almost all Chinese students began living abroad after graduating in 2000. By 2016, nearly 65 percent of Chinese students returned to China.

Barriers to Battle

Money and theft are not able to solve all of China’s development problems. “The PLA is still struggling to spur domestic innovation and close the gap on a few glaring technical deficiencies, such as high-end chips, silent submarines, and aircraft engines,” according to the report.

RAND highlights internal impediments stemming from the political structure of communism. The report states, “even as it strives to clear these technical hurdles, the PLA must address the institutional inefficiencies and barriers related to management and quality assurance that continue to frustrate its efforts at reform.”

Many Chinese businesses’ internal hierarchies are based duration of employment and personal relationships rather than meritocracy. Despite large numbers of students returning to the country, many existing Chinese companies fail to effectively integrate returning talent, reported RAND, citing ineffective management practices.

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Number of Chinese students returning to China by year. (Defense Acquisition in Russia and China/RAND Corporation)

Further, “The design of Chinese defense contracts also does little to encourage transparency and accountability.” The language in contracts is vague, contract winners are guaranteed a share of profits on top of costs, and low bidders for contracts are given consolation projects. These vestiges of the command economy result in little to no incentive to innovate, according to RAND.

July 24, 2021 6:55 pm

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