China Is Eating Russia’s Lunch in the Defense Market

In the new Sino-Russian defense relationship, China does what it wants, and there isn’t a whole lot Russia can do about it. 

Xi Jingping’s recent visit to Moscow—his first since Vladimir Putin invaded Ukraine last year—was summed up by historian Sergey Radchenko in this way: “The summit can be summarised by the Chinese saying 雷声大雨点小 (Loud thunder but few raindrops). Scratch that, even the thunder wasn’t all that loud.” 

The meeting, which apparently produced no major policy shifts nor even notable statements of support, did further illustrate a tectonic shift in the supposed "no limits" relationship: China is taking the lead in nearly every aspect, including in the defense-industrial sphere once dominated by Russia.

Russia’s modern defense ties to China go back to the 1920s. when the new Communist regime in Moscow initially supported the Kuomintang, rather than Mao’s forces, during the Chinese civil war and in the battle against imperial Japan. But Stalin eventually came to back the Chinese Communist Party, handing over Manchuria and its heavy industry in 1945, then supplying economic aid and helping to establish the nascent People’s Republic of China’s civilian and defense manufacturing sector. During this period, the USSR willingly transferred various military technologies to the PRC, including systems that China eventually recast into the J-5 and the J-6 fighter aircraft, as well as the H-6 bomber. This was not merely an expression of goodwill; by allowing an ally to copy their designs, the USSR was able to not only arm a close partner without stressing its own manufacturing, but also rely on them for a supply of materiel to other client states, such as during the Korean War.

Their strategic partnership frayed as the Cold War continued, yet swathes of China’s defense industry, from missiles and radar to warships, have been heavily influenced by equivalent Soviet and then Russian models. Some of these models were licensed directly from Russian defense conglomerates; others were either stolen or legitimately purchased and then reverse-engineered.

In the post-Soviet era, even as Russian firms showed more concern about corporate espionage and technological theft, cooperation between the two countries’ defense industries surged again. This is not just a reflection of their increasingly close ties, but also because defense technology is a rare area where Russian products remained globally competitive and better than their Chinese counterparts. But Moscow increasingly grew caught in a dilemma of immediate sales versus long term loss. It has consistently taken the short view, continuing its arms sales to China, even if it knows that its eastern partner is likely to copy these products and erode its advantage. This policy dilemma has been compounded by the post-Ukraine effect on Russia’s economy, which has left the Russian economy increasingly reliant on China, further decreasing any remaining leverage in the relationship.

Aviation and air defense show this in action.

The J-11, debuted in 1996, was the first Chinese aircraft made after the fall of the Soviet Union to feature significant Russian input. It began as an officially licensed, Chinese-made copy of the Russian Su-27 multirole fighter, a sale welcomed by the cash-strapped Kremlin. However, before long, China canceled the agreement and began producing the aircraft independently, going on to build over 400 of them—a loss to Russia of roughly $30 million or more in sales per plane. 

This appears to have become standard operating procedure for China. For example, when Beijing was looking to upgrade the J-11D, it decided the best method was to purchase Russia’s advanced Su-35 multirole fighter. The deal was completed in 2018 and conspicuously included numerous spare turbofan engines. China then reverse-engineered the engine, shoring up a broader area of continued weakness in its indigenous arms industry. An even more accelerated version of this process played out with Russia’s Su-33 carrier-based fighter. China obtained an early version and began producing an unlicensed indigenous version, the J-15. 

Similarly, China’s defense industry has bought, copied, and adapted Russian-made air and missile defense systems, apparently with Russian acquiescence. Six years after acquiring Russia’s S-300, China produced its own copy, the HQ-9, which still serves as one of the PLA’s primary surface-to-air missile systems. Likewise, the Chinese HQ-16 missile system was copied from the Russia Buk-M1-2 but appears to have been made in full collaboration with the Russian Almaz-Antey Corporation. This trend continues with even the most advanced systems, as China purchased the state-of-the-art S-400 in 2014, began testing in 2018, and appears to be currently using the system to improve its own designs.

If Russian officials are unhappy with China slowly absorbing more and more of its defense market, they have remained low-key about it. Aware of its limited options, Russia has tried to make the best of the situation, promoting official licensing and tech-transfer deals. While many of these licensing and technology-sharing agreements respond to China’s earlier technology thefts, they are also reflect Russia’s increasing international isolation. As far back as 2019, a representative from Rostec implied that U.S. pressure was harming its arms business with Turkey. In October 2021, just four months before Russia’s invasion of Ukraine, Rostec announced it would pull away from conducting dollar transactions and maintain strong business ties with East Asia. Last year, Rostec announced a full decoupling from Western countries in the aerospace field. Chinese firms have been more than happy to try to step into this void. 

This dependency has now turned from markets to military hardware itself. The perfect storm of Western sanctions and severed business and political ties have severely curtailed Russia’s options in supplying its own forces, especially as the war consumes far more parts than expected. China’s practice of purchasing Russian modeled weapons, largely for acquiring the technology to make itself, though, means China now has a large reserve of military hardware it can supply to Russia’s flagging war effort.

In February, the Chinese firm AVIC International delivered $1.2 million in parts for Russia’s Su-35 fighter, which China began operating in 2018 and has been studying for its own fighter development. The PLA Air Force has also used a subsidiary to deliver critical components for Russia’s S-400 missile defense system. The deliveries also included navigation equipment for the Russian Mi1-71 helicopters, for which China now runs a maintenance center. In new technology areas, China has provided at least $12 million in drones and drone parts since the war began. 

As the war goes on, Russia will likely need even more of China’s military industrial capacity to keep elements of the Russian war machine on its feet. Russia faces massive sanctions from the international community, and its defense industry is being forced to source critical components through elaborate third-party arrangements, and even electronics cannibalized from washing machines and refrigerators. Their changing ambitions were recently summed up by Russia's Kommersant newspaper: "Technological sovereignty for the Russian Federation and China means two different things. China has set itself the task of producing the entire range of key products and possessing all key technologies as the global leader. For Russia...it is about the possession of a minimum set of technologies that would allow it to compete with the West and not lag behind in development."

Under these conditions, China has even more leverage in a relationship that was already tilting its way. The accelerated loss of one of Russia’s few competitive edges against China and in the global market is among the many costs of Putin’s war. As Russia’s defense industry collapses, Chinese firms are moving to the fore in supplying not just the PLA, but also foreign markets that Russia once sold arms to, and even now to the Russian military itself. 

The new China-Russia defense industrial relationship can best be summed as beneficial to both parties, but one in which China ultimately benefits far more.  

Thomas Corbett is a research analyst with BluePath Labs. His areas of focus include Chinese foreign relations, emerging technology, and Indo-Pacific security studies.