Category The Chinese Air Force

The weaponry—air-to-air, air-to-surface, and surface-to-air—avail­able to the PLAAF has obviously advanced dramatically since the mid-1990s. As discussed above, new AAMs and precision-guided munitions (PGMs) are entering the force, providing China with much improved capabilities across the board. Whereas in 1995 the PLAAF would have gone to war with out­moded AAMs and “dumb” bombs, its inventory today includes weapons—of both Russian and Chinese manufacture—that are in the same class as those carried by USAF and U. S. Navy combat aircraft, including laser – and satellite- guided bombs and guided missiles of various sorts. Tables 8-8 and 8-9 com­pare similar weapons from each side’s arsenal.

Education and training are clearly at the forefront of the PLA drive toward comprehensive force modernization that has been underway for nearly 30 years. Since the early 1980s, Chinese leaders have recognized a need to build “regular­ized” (ШШЕ) military forces better able to respond in China’s evolving security environment.49 To that end, the leaders of China’s air force have undertaken a series of steps to build a more professional, competent, and capable air force.

The PLAAF regards officer professional development a cornerstone of its force modernization program, a viewpoint consistent with the goals of three generations of CMC chairmen. Beginning with Deng Xiaoping in the 1980s, the chairmen of the CMC have stressed the strategic requirement to build “a young and knowledgeable, revolutionized and professionalized officer con – tingent.”50 In the 1990s, then-CMC Chairman Jiang Zemin expressly pointed out that unless the PLA emphasized professional development as a strategic mission, it would be “impossible to build a modernized army and defeat ene­mies having high-tech advantages.”51 Under Hu Jintao, the PLA is continuing to pursue professional development “centered on enhancing competence and integrating training and employment” through a pattern of “connected aca­demic education and military training, parallel development of military educa­tion and national education, and the combination of domestic cultivation and overseas training, so as to effectively develop and make a full use of the human resources of the military.”52

The PLAAF’s transition toward improved education and training is being driven by overarching guidance from the CMC and shaped by a rec­ognized need for a new generation of operators and support personnel with vastly greater knowledge and skills to employ and manage weapons systems of increasing technical complexity. Although the PLAAF has made substan­tial progress in recent years, it has not yet achieved the development goals it seeks for officers and NCOs. In particular, increased academic education for air force officers remains a priority, and it appears that PLAAF academies will move from military specialty training programs to course work focus on for­mal academics. As the air force continues on this development path, it can be expected that future officers will be universally educated at the university level, adept in the employment of modern technologies, and competent in multiser­vice joint operations.

As the PLAAF evolves to address the demands of integrated joint opera­tions, greater demands will be placed on the officer corps, further raising the requirements for professional military education and training. These changes are also certain to create pressure to expand the authorities and responsibili­ties of air force NCOs, who will be required to take on greater responsibilities in the more demanding joint environment. Going forward, it can be expected that along with the reform and development of PLAAF colleges and schools, the development of mid – and senior-level NCO curriculum and training pro­grams will be a primary focus, with education and training for junior ranks remaining a goal for the future.

After Gorbachev’s 1989 visit to Beijing, Sino-Soviet rapprochement was solidified by various arms sales agreements including the 1991 deal for China to purchase a dozen Sukhoi Su-27 fighters. 108At the time, the Soviet Union had just collapsed and the new Russian economy was in a shambles. Strapped for cash, Moscow was ready to leverage the defense industry—one of the few performing sectors of the economy—in order to profit. China was quick to take advantage of the deteriorating situation in the early 1990s, getting Mos­cow to accept poor quality “barter goods” in exchange for weaponry.109 Russia had little choice but to put longer-term strategic security concerns on the back burner and do what it could to keep its arms industry operational. To provide some idea of how important Chinese arms sales became to the Russian defense industry, a U. S. Department of Defense report estimated the value of weaponry delivered to China (not simply agreed upon) from 1990 to 2002 at between $7 and $10 billion.110

China took delivery of its initial order of 12 Su-27s in 1992, and an addi­tional batch of18 Su-27SKs and 6 Su-27UBKs in 1995-1996. Altogether China purchased 48 Su-27 Flankers before deciding to build the aircraft domestically as the Shenyang J-11.

The J-11 story began in 1996, when Russian arms export organization Rosoboronexport signed a $2.7 billion licensing agreement with Shenyang Aircraft Corporation allowing coproduction of 200 Su-27s.111 The agreement came with two provisos: that China would not export the J-11 and that the fighters would be fitted with Russian engines, radar, and avionics which would not be licensed for coproduction.112 This important agreement, which moved China’s military aviation industry from third-generation to fourth-generation production capacity, came about through the actions of the General Direc­tor of the Sukhoi Design Bureau, Michael Simonov, who negotiated the deal without Moscow’s approval and later presented it to the Yeltsin government as a fait accompli.113 Simonov (acting more in the interests of Sukhoi than the new Russian state) knew that forming a strategic partnership with China was the cornerstone of Yeltsin’s Asia policy and that a reversal of the Flanker deal on Moscow’s part might sabotage these efforts. The terms of the arrangement were finalized and SAC received manufacturing documents for the Su-27 in 1997 along with complete knock-down kits from which it assembled its first two J-11s. Although both fighters were test flown, they proved to be of such poor workmanship that Russian technicians were called in to rebuild them.114

During the first 3 years of production, SAC assembled just five J-11s. Over the next 3 years it quadrupled this number, turning out 20 aircraft by 2003. As SAC began to successfully produce its own replacement parts, the Russian supplier (KnAPPO) began to reduce the contents of the knock-down kits it pro­vided. By 2002 China was not just coproducing the J—11, but doing it at a high level of quality—a remarkable development given that just 4 years earlier SAC could not even put the fighter together correctly without Russian technical assis­tance.115 By late 2004, SAC had taken possession of all 105 CKD kits delivered from Russia and had managed to assemble and deliver 95 of those to the PLAAF. After mastering coproduction China quickly moved on to developing its own version of the J—11. Russia cancelled plans to fulfill the remainder of the order after discovering that China had an indigenous J—11 in the pipeline.116 The 1996 agreement stipulated that China would equip its J-11s solely with Russian-made engines, radar, and avionics, which left China dependent on KnAPPO. Russia had no objection to China producing replacement parts not related to engine, radar, or avionics; the violation occurred when it began to develop these three systems indigenously. By doing so, China ensured that it would not be reliant on Moscow for any component part of its J-11s. This presented the Russian avia­tion industry with a loss of future revenue and also presented the possibility that China would attempt to sell its J—11 on the international arms market. To date China has made no effort to export any J—11 variant, nor has it expressed any interest in doing so. Chinese officials justified the decision to violate the con­tract by claiming that the 95 Su-27s on order were no longer adequate to serve the needs of the PLAAF—an interesting claim given the large number of third – generation J-8s still in service. China’s decision to abrogate the terms of the Su – 27/J-11 contract has had lasting consequences. Since 2006, Russia has refused to enter into any substantive military aviation transfer agreement. We discuss some of the repercussions for China in the next section.

It took 4 years to produce three prototypes of the J-11B multirole fighter, and another 2 years to build the twin-seat J-11BS variant. Sources in the Chi­nese defense industry report that the J-11B is based on roughly 90 percent Chi­nese-designed parts and subsystems, including the Type 1474 serial radar system, 3-axis data system, power supply system, emergency power unit, brake system, hydraulic system, fuel system, environment control system, and molecular sieve oxygen generation systems.117 The J-11B/BS is also fitted with indigenous PL-12 air-to-air missiles. There have been several cases since 2008 of Russian authori­ties in the Transbaikal region arresting Chinese citizens for attempting to smug­gle spare Su-27 parts into China.118 This might suggest that China is not able to design 90 percent of the original fighter’s parts and subsystems (the 10 percent gap in design capability alluded to presumably refers to engines, avionics, and radar which were not among the smuggled items). The engine is the only major subsys­tem China has openly acknowledged it has yet to master, relying on the imported Russian AL – 31F turbofan for both the J—11 and J—10 fighters.119 Shenyang Lim­ing Motor Corporation has produced a turbofan engine in the WS—10A Taihang (likely the product of substantial reverse engineering) that approaches the per­formance of the AL—31F, but takes twice as long to “spool up,” or obtain the same thrust output, as its Russian counterpart.120 This lag time could have life or death consequences for a pilot needing to restart his engine.

Chinese military aviation worked hard to incorporate indigenous systems into the J—11B. The upgraded systems were developed as improvements to the original Su—27SK, which was dated technology by the mid 1990s (the Soviet Air force began operating the Flanker in 1985). China’s subsequent decision to lobby Sukhoi to sell it an upgraded version of the Flanker was precipitated by a handful of factors. China was looking for a faster way to obtain increased fighter capabil­ity than was presented by developing indigenous upgrades. The 1995—1996 Tai­wan Strait crisis highlighted the real possibility of an armed conflict, which in turn reinforced previous conclusions about the centrality of Chinese airpower in prevailing in a Taiwan scenario. Displays of overwhelming U. S. airpower in the 1991 Gulf War were undoubtedly still fresh in the minds of Chinese military planners during the Strait crisis. In addition, the Russian government’s inabil­ity to regulate military transfers and the tenuous state of the national economy ensured that China could gain access to fighter technology that was closer to state of the art than Russia might have been willing to sell in better circumstances.121

The Su—30MK (modernizeerovannyy kommercheskiy—upgraded export variant) was already available on the international arms market at the time China was seeking an upgraded Flanker. Russia agreed to sell China a version of this aircraft, appending “K” to the name to denote the customer (kitayskiy— Chinese), in 1998. While the two-seat Su—30MKK was not the best fighter Russia was able to produce, it represented a significant jump forward for the PLAAF, particularly in terms of subsystems. The avionics suite incorporated cutting-edge digital processors that linked the primary avionics subsystems together via multiplex databuses.122 This made it possible for China to inte­grate new avionics components, either indigenously produced or purchased from a third party, as they became available. The first batch of 10 Su—30MKK aircraft entered service at Wuhu airbase in December 2000.123 Another 70 were delivered to China in 2001. China and Russia signed a contract in 2003 for the sale of a Su—30 variant with maritime strike capability (MK2), with the PLA – NAF taking possession of 24 of the aircraft in early 2004. The Su—30MKK is the most sophisticated fighter the PLAAF operates to this day—a mantle it is likely to wear until China’s fifth-generation fighter comes into service.

The Game of Influence is largely political in nature, with the major pow­ers vying for greater influence in a variety of arenas. As a result, the game’s scope may be confined to a region or along a much broader scale. For instance, a major power may seek to wield influence on a global scale, as the United States does, or the goal may be more limited in nature, such as China attempt­ing to assert dominance in the South China Sea. The major powers seek to dictate the “rules of the road” and to be accepted as the legitimate authority in their desired spheres. And while the game’s scope ranges across political and military arenas, the Game of Influence will not necessarily be played in every, or even the majority, of possible spheres. Instead, each power will only engage the other major power in the areas most relevant to its national interests.

Military power is often utilized in an important supporting role, but the focus of the two sides is not military victory or conquest. The major powers will largely seek to advance their goals through political posturing, economic power, and diplomatic dealings, but “soft” power is not sufficient when engaging another major military power. The political narrative of a state must be backed up by military power, by the credible threat of force. Force is one of the keys to deter violent actions by others and also serves as a tool for compellence. Military power is thus necessary to “enforce” and make credible political moves.

Despite this essential military aspect, the game remains largely non­zero-sum. Both powers will attempt to achieve their own interests, but one side’s “gain” is not necessarily the other side’s “loss” because both powers do not value all aspects of the game equally. The stakes in the game vary from incident to incident; one power may view an aspect of the game as more important than the other power does or both sides may hold similar views of the stakes. Nev­ertheless, the overall stakes are relatively symmetric in that both sides see the totality of maintaining and gaining influence in the game as important to their national interests. Responses to moves by the other side are determined by the nations’ levels of interest. Because the stakes vary, a response to an opposing move may not always be seen as necessary, and each side can escalate or dees – calate within the same game as interests dictate. Finally, the Battle over a Third Party may be played at the same time as the Game of Influence. But if a Game of Influence is played after a Great Power Game begins, the Game of Influence will take on a significantly different character due to the Great Power Game’s encompassing nature.

Rationale/explanation for the game. Military power in the Game of Influ­ence is utilized much differently than in the models of war familiar to Western militaries before the Cold War. Force is not used directly to prepare for or to engage in large-scale battle, but is utilized as a means of influencing the actions of the adversary.2 Now one of the primary goals of utilizing military power is shaping the national populations’ opinions of the ongoing competition, and both powers must be aware that there are internal and external audiences to be addressed. The primary objective for using force is not destroying an adver­sary’s military, though that may play a role in limited situations. The central objective for military power is to serve as a tool in convincing a power to accept the other side’s objectives.

What would it look like if the United States and China were engaged in this game? The ongoing South China Sea dispute over maritime boundaries and acceptable behavior in international waters is illustrative of this type of game. This is not primarily a military conflict, although military power is a neces­sary tool for both sides. China’s goal is apparently to have its interpretation of maritime laws and conduct accepted as the international norm. The United States, on the other hand, seeks to maintain the current norm. For both par­ties, this involves crafting different political narratives for regional and inter­national audiences. But it is also likely that both the United States and China may seek to gain influence and/or demonstrate influence by shows of military presence. This is not necessarily a demonstration of force, but, in the case of the United States, it is demonstrating that its navy maintains its right to oper­ate in international waters. In this game, it is possible that a military incident will occur, but military conquest or victory in a conflict is not the end game. The end game is the ability to define and, if necessary, legitimately enforce the norms in the region.

The Game of Influence is also taking place in the broader maritime arena. China is seeking greater control of exclusive economic zones (EEZs) as well as waters it defines as core interests outside EEZs or territorial waters. For China, regional and international acceptance of its control in the region and of its right as a naval power to engage in limited policing is crucial to its inter­ests. China maintains intermittent patrols and limited interdiction in these rel­evant sea areas with the goal of limiting resource extraction or transit by other nations. And even if not acknowledged fully in the international arena, a lim­ited acceptance of Chinese control by fishermen or resource extraction compa­nies in the region would be a win in this game for the Chinese because it would show that Chinese norms were accepted over those promulgated by the United States. Military power thus serves to bolster political control, but the use of military force is not the focus of this competition.

For decades, the United States has fielded dozens of noncombat aircraft that increase the effectiveness of its fighters and bombers. These “force multi­pliers”—the E-3 AWACS, the E-8 JSTARS (Joint Surveillance Target Attack Radar System), the KC-135, the RC-135, and others—help manage air combat, track moving targets on the ground, refuel aircraft to extend their range and endurance, and provide a variety of intelligence and electronic warfare (EW) capabilities. They are linchpins of not just U. S. air operations but also of the Pentagon’s overall concept for joint operations.

Until recently, the PLAAF has only aspired to such capabilities, and in the realm of in-flight refueling its capabilities remain minimal. With the deployment of the KJ-2000 AEW&C platform and multiple EW aircraft based on the Y-8, however, it has begun to make progress in a number of these areas. These specialized aircraft exist in small numbers and it is not at all clear how adept the PLAAF is in operating and exploiting these emerging capabilities, nor do we know how well they are integrated into Chinese operational con­cepts. But the steps we have seen them taking are significant and bear very close attention going forward.

Shen Pin-Luen

China’s aviation industry has been plagued by problems of inefficiency, redundant leadership, and overlapping organizational and bureaucratic struc­tures. In a closed system that had a planned economy and prioritized military development, such problems would not create much of an impact. But along with the inception of reform and opening-up and People’s Liberation Army (PLA) modernization, problems in China’s outdated aviation industry began to surface, prompting the People’s Republic of China (PRC) leadership to ini­tiate a series of reforms. In January 2006, the PRC State Council released the National Guideline on Medium and Long-term Program for Science and Tech­nology Development (2006-2020), which listed the development of large air­craft as a key national science and technology project.1 In May 2008, China established the Commercial Aircraft Corporation of China, Ltd. (COMAC), and in November 2008, China merged China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II) to found China Aviation Industry Corporation (AVIC). This overhaul of the aviation sector is an indication that the pace of development and reform in China’s avi­ation industry is picking up. Therefore, China’s determination and injection of resources into the industry should not be underestimated by the outside world.

Due to the complexity of the development of China’s aviation industry and China’s tight control, most of the public information about the sector is general in nature and gives only an overview and the objectives of the industry. Truly useful analysis and documentation are rare. Therefore, this article seeks to provide a relatively objective and comprehensive analysis of the issue based on available information and personal observations.

In addition to acquisition and coproduction of the Su-27, China also con­tinued to pursue indigenous development efforts in parallel through the J—10 fighter program, which drew significantly on Israeli-rooted technology and design assistance.124 Defense collaboration between the two countries was in full swing as early as 1984 with arms sales reaching an estimated $3.5 billion in that year alone.125 A great deal of speculation remains regarding the amount and type of technical assistance Israel provided in the development of the J—10, but open source materials clearly indicate that Israel used some expertise gained from developing the U. S.-financed Lavi fourth-generation fighter to assist in the devel­opment of the J—10.126 It is difficult to determine whether the design assistance provided by the Israelis on the J—10 rises to the level of codevelopment as articu­lated in the model. It is likewise difficult to determine from open source materi­als what, aside from money, China offered Israel in exchange for design assistance on the J—10. One logical possibility is that Beijing shared technical information on the missiles it sold to countries hostile to Israel—Iran being a prime example. Arguments have also circulated that China had access to a Pakistani F-16, parts of which it may have reverse engineered and integrated into the J—10. The J—10 is clearly not a Lavi clone, however. It has significant design differences from the Lavi including its larger size, canard positioning, wing platform, and two-dimensional air intake.127 It was originally designed to use the Israeli Elta EL/M-2035 radar, which can simultaneously track six air targets and lock onto the four most-threat­ening, but is also able to incorporate Russian and Chinese avionics. Both the origi­nal J—10 and the J-10B/AS/AB upgrade variants that came into PLAAF service in 2006 sport specially designed Russian Lyul’ka Saturn AL-31N turbofan engines.128

Israel was China’s second largest source of military aviation technology transfer in the 1990s.129 While this data point is undeniable, some clarification should be added. Russian arms sales to China during the 1990s topped those of all other countries combined; Israel’s stake in the market was trivial by compari­son. Nevertheless, it assisted Chinese military aviation in several other areas. In the mid-1990s Israel agreed to sell China its Phalcon Airborne Early Warning and Control (AEW&C) platform and the Harpy unmanned aerial vehicle. At the time, some defense experts rated the Phalcon as the most advanced AEW&C sys­tem in the world. This might explain why China approached Israel rather than Russia for access to the technology. With Western arms embargoes still in full force, there was a very short list of states willing and able to sell China advanced military aviation hardware. Israeli Aircraft Industries (IAI) received an initial $319 million deposit from China to secure the Phalcon. News of the deal pro­voked a strong reaction in Washington, where there was growing concern over Chinese military modernization, particularly as it applied to a potential Taiwan scenario. Chinese military planners understood that in order to prevail in a Tai­wan scenario (with U. S. military intervention likely), it was essential to control the airspace over the strait. The first Gulf War confirmed to Beijing the extent of the gap between the PLAAF and its potential U. S. rival. AEW&C was one of a set of capabilities that China needed to develop in order to stand a chance of contest­ing the U. S. Air Force over the Taiwan Strait. From Israel’s perspective, a supplier – client relationship with a rising power like China was a golden opportunity for its small yet capable indigenous defense industries.

Israel ultimately decided that its relationship with the United States was too important to jeopardize, and in July 2000 it canceled the Phalcon sale and refunded China’s deposit. Beijing was furious when Israel announced it was backing out of the deal. Prime Minister Ehud Barak had promised that China would receive Phalcon technology, leading President Jiang Zemin to make pub­lic statements to that effect.130 Jiang lost face over what turned out to be empty promises and a substantial diplomatic rift between the two sides ensued.131

Since the Phalcon deal fell through in 2000, China has pursued its own domestic AEW&C development program, encountering numerous difficulties along the way. In 2006 a prototype aircraft undergoing flight testing crashed in Anhui province, killing 40 people, among them 35 technicians who were inti­mately involved with the project.132 China has since succeeded in producing several types of AEW&C aircraft: the KJ-200, based on the Soviet Yak-8 trans­port, and the KJ-2000, based on the Russian A-50 MAINSTAY airframe.133 The PLAAF has taken possession of, and is presumably operating, at least four KJ-2000s.134 Little is known about the exact capabilities of these aircraft, though there is speculation that they are similar in design, though technically inferior, to the Phalcon.135 The degree to which China’s AEW&C aircraft were developed domestically remains an open question. Despite the fact that Israel cancelled its sale of the Phalcon, it is not implausible that it might have pro­vided China design and technical assistance after the fact.

Israel’s reversal on the Phalcon damaged its military aviation technology transfer relationship with China (and also affected overall bilateral relations), but the Harpy fiasco in 2004 was the knock-out punch. Designed to “detect, attack, and destroy radar emitters with a very high hit accuracy"’ the Harpy is an unmanned aerial vehicle (UAV) with all-weather capability.136 Its range, the fact that it is launched from a ground vehicle outside the immediate battlespace, and its ability to neutralize SAM and radar sites for long periods of time made the Harpy a sought – after item for Chinese military planners looking out over the Taiwan Strait. The Harpy deal was negotiated in the mid-1990s, with China having taken possession of around one hundred of the UAVs by 1999.137 The deal was reported to the United States at the time it was negotiated and although there were objections, Washington did not pressure Israel to cancel it. Because the Harpy was a system wholly designed and produced by Israel there was no basis to block the sale on the grounds of illicit technology transfer. It was only when China sent its Harpy inventory back to Israel for service and repair in 2004 that the United States objected. The Bush adminis­tration claimed that the true purpose was to upgrade the systems with new sensors that could detect radar emitters even when they are not actively transmitting a sig­nal.138 Taiwan was reportedly already in possession of the new, upgraded Harpy.139

Concerned about the threat the Harpy posed in the case of a Taiwan sce­nario, the United States demanded that Israel not return the drones that China had already purchased and thus legally owned. What finally happened to Chi­na’s Harpy aircraft remains unclear (at least in open source material).140 Israel did refund China a considerable sum of money related to the UAV upgrade indicating that some part of the work was not completed, though whether this included technical upgrades (as Washington claimed) or routine maintenance is still unknown.141 There is also the possibility that Israel confiscated Harpy components and paid China off in order to mitigate political fall-out over the incident. Whatever the case, the Harpy episode marked the last significant military aviation transfer between Beijing and Jerusalem. It also had negative repercussions for U. S.-Israeli relations: Amos Yaron, Director General of Isra­el’s Ministry of Defense, resigned after the incident.

Ukraine also emerged as a source of advanced military aviation tech­nology during this period. It has not played as prominent a role in equipping the PLAAF as has Russia, but Ukraine has served as an important conduit for Russian military hardware that China has been unable to procure directly. In 2000-2001, the Ukrainian firm Progress reportedly supplied both Iran and China with Soviet Kh-55 cruise missiles, which have an active range of 3,000 kilometers and can be armed with both nuclear and conventional war – heads.142 The highly accurate guidance system used in the Kh-55 was more advanced than anything China was producing indigenously at the time, and expanded the capability of its aged bomber fleet (the Kh-55 is an air-to-sur – face missile fired solely from bomber platforms). Around this time China also gained access to a single Su-33 (air frame T-10K-7) prototype from Ukraine.143 China has used this aircraft as a template for its J-15 naval fighter, which is reported to have made a successful test flight in August 2009.144

From 1989 to 2004, China actively pursued acquisition of advanced aircraft and aviation technology from Russia, Ukraine, and Israel; used a combination of coproduction and reverse engineering to make advances in subsystem design and manufacturing; and came up with innovations in its own capacity to build fighter aircraft at least partially based on indigenous design. China also appears to have greatly expanded its efforts to steal restricted technologies by way of industrial espionage using both traditional and computer network intrusion techniques. While there are few documented examples citing fighter aircraft technology, there are a number of cases where China obtained, or attempted to obtain, restricted dual-use technologies from the United States using surreptitious means. By 1993 approximately 50 percent of the 900 technology transfer cases handled by U. S. federal law enforcement agencies involved the Chinese.145 Cases of cyber espio­nage that track back to China provide more detail about the types of military avia­tion-related technical data attackers are after. It should be noted that the relative anonymity afforded cyber attackers often leads to problems of attribution. Foren­sic investigators can trace the origin of a certain exploit back to a computer server in China, for example, but the attacker might be using Chinese commercial net­works, which are notoriously porous, as an intermediary point. We therefore only cite examples where evidence exists linking the source of espionage attempts to China, and suggests the involvement of the military or intelligence organizations.

Although the intrusions did not target fighter technology, the 2004 attacks on a number of computer networks belonging to the U. S. military and defense contractors that came to be known as Titan Rain were definitively traced back to a location in Guangdong Province by a computer specialist working at Sandia National Laboratories in New Mexico. The specialist, a former U. S. military intel­ligence officer, surreptitiously monitored the activities of the attackers after the Sandia networks he was responsible for safeguarding were attacked. He discov­ered an operation that involved 20 or more individuals connecting through three separate end nodes in Guangdong. While this is not hard proof of a Chinese mili­tary or intelligence operation, the sort of data being targeted suggests a military end user. The attackers reportedly breached the systems of the Redstone Arsenal, home of Army Aviation and Missile command, and stole technical data for the mission planning system used by U. S. Army helicopters, as well the Falconview 3.2 flight planning software used by both the U. S. Army and Air Force.146

Chinese cyber espionage operations aimed at extracting sensitive technical data began in the period under consideration (1989-2004), and expanded rap­idly in terms of both volume and sophistication since. In a 2009 case, computer networks belonging to at least one defense contractor working on the F-35 Joint Strike Fighter program were reportedly compromised, giving intruders access to Pentagon computer systems that contained sensitive, though not classified, data on the J-35’s design, performance, and electronics systems. There is not as much evidence linking this exploit to Chinese attackers, but U. S. officials interviewed about the breach reported that it had been traced to China and bore the hallmark of a state-sponsored operation.147 In this particular case, the stolen information could not be used to reverse engineer F-35 systems, but could have been helpful in learning how to better defend against them.

This chapter has examined the evolution of China’s military aviation industry over the decades and discussed the various procurement strategies it has used at different points in time. The approach has been based on four main vari­ables: (1) the state of China’s domestic economy, in particular the state of its tech­nological and industrial base; (2) the technological capacity of China’s military aviation sector; (3) the willingness of foreign countries to sell China advanced military aircraft, key components, armaments, and related production technol­ogy; and (4) China’s bargaining power vis-a-vis potential sellers of military air­craft and aviation technology. Between 1989 and 2004 China was able to diver­sify avenues of aviation technology procurement. Expansion occurred as a result of favorable developments across each of the four main variables. China’s civil­ian technology base grew as a result of trade and foreign investment, generat­ing access to dual-use technologies which the military aviation sector lever­aged to improve design and production capacity. Rapprochement with Russia once again gave China access to advanced military hardware that was blocked by Western embargoes post-Tiananmen. Moreover, China’s newfound economic clout afforded it a much stronger negotiating position with a Russian state that faced myriad economic difficulties after the Soviet collapse. Defense cooperation with Israel, though ultimately problematic, provided China a window of access to technical knowledge and design expertise which moved its aviation industry for­ward. Engagement with the outside world resulted in an increased Chinese pres­ence abroad, providing avenues to restricted military technologies via espionage. Finally, cyber espionage emerged in the later part of this time period as a new vec­tor for the extraction of data related to restricted military aviation technologies.

Looking Forward: Chinese Military Aviation Technology Procurement (2004-Present)

Building

China’s overall economic development continues to progress rapidly, both in terms of growth and technological sophistication. Investment by devel­oped countries, imports of sophisticated production technology, and indige­nous production have created an advanced-Chinese economy that approaches world-class standards in many areas. Chinese companies do not necessarily have full knowledge of all the advanced technologies embodied in equipment operated on Chinese territory, but the situation has changed fundamentally. The government’s focus on developing indigenous innovation with Chinese characteristics (zizhu chuangxin, emphasizes the importance of for­

eign technology and knowledge in moving China’s overall level of industrial and scientific development forward. The most recent iteration of the Medium – and Long-Term Science and Technology Development Plan (MLP), released in 2006, outlines a path to “promote original innovations by reassembling exist­ing technologies in different ways to produce new breakthroughs and absorb and upgrade foreign technologies.”148 The idea at the core of this approach is to assimilate and absorb preexisting foreign technologies and in the process of merging them with domestic technologies, realize new breakthroughs and improvements.149 The decision of many advanced Western companies to locate technology R&D labs in China has led to an improvement of China’s technol­ogy knowledge base which has in turn enabled overall economic progress.

This economic progress has benefited the Chinese defense industry in general and the military aviation industry in particular. Globalization has increased China’s access to technologies originally developed by the West for military applications, and then applied widely for civilian purposes. This allows China to benefit from a “spin-off, spin-on” dynamic to apply these technolo­gies to its defense industries. Advances in information technology (IT) and communications technology are providing new design tools and the basis for improved avionics systems that can be applied to Chinese fighters. Key compa­nies in this sector such as Huawei and Julong were founded by ex-PLA officers and are closely tied to the Chinese defense industry.150 China has been involved in commercial j oint ventures with Western aviation companies since the 1980s, producing subassemblies and parts for civilian aircraft and has continued to expand its role in the global aviation supply and production chain. However, unlike the IT sector, there have been relatively few opportunities for Chinese civil/military aviation integration and technology sharing.151 This is partly due to the limited applicability of civilian aviation technologies for military use. Compartmentalization also prevents useful transfers of personnel, knowledge of production practices, and materials. Commercial and military aviation proj­ects are conducted by different enterprises on different production lines with apparently little or no interaction on areas that might be of common interest.152 There are a few isolated cases where technologies and process improvements derived from civilian production may spill over to the military side, but this is not an institutional feature of the Chinese aviation industry.153 Despite these inefficiencies and continuing problems, the Chinese military aviation indus­try’s ability to “build” a more sophisticated PLAAF has advanced significantly.

China’s potential to continue to “build” its way to a more sophisticated air force in the future depends on the degree to which it will be able to meet its indigenous innovation objectives, which continue to depend on access to advanced foreign technologies. Examples of true indigenous innovation are still few and far between. Even with the benefit of “follower’s advantage” Chi­nese military aviation is still unable to copy some subsystems at a level equiva­lent to those of the original. Continuing limitations are most apparent in the industry’s inability to design a turbofan engine that meets the requirements of its fleet of indigenously produced advanced fighters. In April 2009, the head of Aviation Industries of China (AVIC), Mr. Lin Zuoming, admitted that the WS – 10A (China’s most advanced turbofan at the time) was still “unsatisfactory in its quality” and that engine production for military aircraft has been a “chronic illness” in China’s defense industry.154 AVIC is investing $1.5 billion into jet engine research and development to try to overcome persistent problems with quality control and reliability.155

Flight tests of the new J-20 stealth fighter may reveal whether China has overcome this hurdle. Chinese news sources reported after the initial test flight that two J-20 prototypes had been produced, one with a Russian engine and the other with an indigenously produced engine. It is not clear which engine is coupled with which prototype. Photographic analysis reveals that the exhaust nozzles of one prototype are “jointed in a way that implies thrust vectoring capability”156 China has been using the thrust-vectored Russian AL-31FN-M1 in its two-seat J-10 AS/BS fighters since 2006.157 This is most likely the engine in one of the J-20 prototypes, although there is speculation that the production model will be powered by thrust-vectored WS – 10G turbofans, manufactured by the Shenyang Liming Aircraft Engine Company.158 If Chinese media reports are accurate and one prototype sports a non-thrust vector capable indigenous engine (probably, based on past instances where Russian and Chinese engines were simultaneously tested in the same model aircraft), this engine is likely some version of the WS-10.159

The unveiling of the J-20 is the most significant recent event for Chi­nese military aviation. The J-20 prototype’s maiden flight coincided with U. S. Defense Secretary Robert Gates’ January 2011 visit to China. Learning of the successful test flight, Gates commented, “They may be somewhat further ahead in the development of that aircraft than our intelligence had earlier predicted.” The J-20 reportedly made a second round of successful test flights on April 17, 2011, to commemorate the sixtieth anniversary of the PLAAF.160 Most recently, Chinese military bloggers posted photos of the J-20 making what appears to be a third and fourth set of test flights.161 The fighter is expected to enter into service with the PLAAF between 2018 and 2020. While the development of J-20 prototypes is a significant achievement for Chinese military aviation, the flight tests provide no insight into whether the industry is any closer to over­coming its engine impediment or whether it has mastered critical challenges in avionics and radar. J-20 test pilot Xu Yongling made statements to the Chinese media touting technological breakthroughs embodied in the fighter, including supersonic cruise capability.162 Publicly available data on the test flights does not provide enough evidence to support Xu’s assertion. About the only thing that can be determined from them is that China can produce a few prototypes of an aircraft that appears to incorporate some stealth technology and that one of these prototypes can be flown for a short period of time without crashing. Interpreting the appearance of the J-20 as proof that China is right on the heels of U. S. military aviation capability is a misinterpretation of the known facts. Russian and Western military aviation experts maintain that the PLAAF is still 15 to 20 years behind the most advanced air forces in terms of equipment.163

The Battle over a Third Party focuses on the role of military power in a possible conflict over a third party, and this game’s scope is the most limited of the three described because it is confined to a third party territory or region. In this game, there is a threat of one major power using force either in an active defense of a third party or in an attack against the other major power to maintain the third party’s independence. Military forces have a direct impact here, and both pow­ers have a fairly well defined role in the ongoing military competitions. There are many possible stratagems available to both sides, but the most severe threat is seizing physical control of the third party. Lesser threats include large-scale stra­tegic attacks, blockades, and other higher-end compellence mechanisms.

The stakes are the most interesting aspect of this competition. The game can have highly asymmetric stakes, with one power viewing control of the third party as much more central to its national interests than does the other power. This asymmetry creates interesting conflict dynamics but, fortunately, little chance of escalation because the degree of importance both sides place on the conflict is below the threshold required for either to escalate into a much more costly general war.3 By choosing this game, both sides implicitly declare they have limited interests that do not extend to general war. And while military power in the confines of the third party game is the main focus, the third party situation is not the driving force for both sides’ overall military strategy and choices—though it may be the central focus for the side with the higher stakes.

Because of its non-zero-sum nature, military improvements or political posturing by either side may not require a countermove, though changes that improve the capabilities of one side in the third party battle may cause the other side to respond directly if interest levels are high enough. In other words, each power will escalate or deescalate within the game as interests demand. Addi­tionally, this game may be played alone or as part of the Game of Influence. Importantly, if a Battle over a Third Party is played within the Great Power Game, the nature of the game is fundamentally altered as the third party com­petition now plays a role in a broader, higher-stakes game.

Rationale/explanation for the game. Military power is used here in a more traditional sense than in the Game of Influence, though the use of that power is limited in scope. Both sides, for any number of reasons, have decided that they have interests in a third party nation that are important enough to engage mili­tary force to achieve. Neither side views the Battle over a Third Party as part of a larger, more comprehensive game. Military capabilities are generally highly tailored to the contours of a particular conflict, and the evaluation of forces is viewed through this conflict’s lens. Other interactions and games between the two powers will undoubtedly occur, but those interactions are largely divorced from this military context and are reflective of interests that exist outside this limited contest.

This asymmetry is particularly important to the game’s outcome as the military capabilities of the two parties begin to approach parity in the area of interest. The differences in stakes will alter the relative attractiveness of vari­ous defense strategies.4 Essentially, the gains associated with some strategies will no longer be worth the risks for the side with lesser stakes in the game. And, of course, the changes in the two sides’ relative military capabilities impact the potential game outcome by altering how well either side can accomplish particu­lar missions or thwart the other power’s ability to accomplish its own missions.

What would it look like if the United States and China engaged in this game? The Battle over a Third Party has been the main competition between the United States and China during the last 60 years. This competition has manifested itself both in Taiwan and Korea, where control was seen as by both parties as important but was not seen as a means of defining regional influence or a greater direct competition between the United States and China. Instead, for the United States, these were elements of the broader Cold War competi­tion with the Soviet Union and were seen as part of a perceived Communist threat that existed throughout the world. Both of these conflicts seem to have been about narrow interests and not about serving as a stepping-stone to a larger competition.5

In this game, the biggest unknown when the forces begin to approach local parity in capabilities is how each side defines operational success or fail­ure. Taiwan is an illuminating example because of the asymmetric levels of interests and the very different potential standards for success or failure on each side. China regards Taiwan as one of its core interests, but the United States does not elevate its interests in Taiwan to a comparable level.6 In the mil­itary dimension, these differing levels of interests might manifest themselves through planners on the two sides defining success or failure in different ways. For instance, a Chinese planner might want to possess a military option to land a significant ground force on Taiwan that could be used in extreme cases and that would use Chinese air and missile forces as tools for accomplishing the mission. On the other side, an American planner might be satisfied with pre­venting the Chinese from effectively exploiting a landing and would therefore be more willing to accept higher levels of damage from Chinese air and mis­sile forces. Because the bars of success or failure are different for both sides, improvements in one dimension such as airpower might not increase military capabilities enough to deny a fairly modest military objective and therefore might not be enough to alter the “balance.”

The forces necessary for each side to succeed in these competitions may be far from symmetrical, and the ways in which the forces are trained could likewise be very different. For instance, a U. S. force optimized for conflicts near China might look very different from typical U. S. force configurations, unless the infrastructure (bases, country access, level of competence of military part­ners) for U. S. forces proved to be far more robust and extensive than in any other part of the world. Much of the U. S. force structure was inherited from the Cold

War, and even the modest changes from Cold War threat assumptions have tended to adapt the force to operate under more benign instead of more hostile conditions.7 These changes included reliance on unfettered access to large bases and entry areas for effective employment of air and ground forces, judging that the threat to those bases that existed during the Cold War was gone.8

In almost any plausible near – to mid-term Sino-U. S. confrontation, China would have home-field advantage, at least relative to the United States. Whether across the Taiwan Strait, over the Senkaku/Diaoyu Islands, or in the South China Sea, Beijing would be able to bring more of its military power to bear than could the United States. This is especially true in the early hours, days, and weeks of a conflict. For the PLAAF, that means that it will at least initially likely enjoy a numerical advantage over U. S. forces, and—depending on the circumstances— perhaps even over the combined forces of the United States and its partners.32

Operating close to China’s shores could also bring the PLAAF’s modern SAMs into the picture. Figure 8-3 shows the ranges of today’s S-300PMU2 (200 kilometers) and tomorrow’s S-400 (400 kilometers) in the context of the Taiwan Strait and South China Sea areas.33

At maximum range these missiles can engage only high-flying targets, but many important U. S. aircraft—the “force multipliers” described above along with high-endurance UASs like Global Hawk—typically operate at pre­cisely those altitudes. Especially after the S-400 enters Chinese service, those U. S. platforms will either have to operate in the face of a much-increased SAM threat or fly farther away from the action and so compromise their perfor – mance.34 U. S. bombers carrying cruise missiles might be compelled to launch farther from the Chinese coast, which would limit the depth into the mainland that the missiles could reach. Closer in, these advanced SAMs could constrain the operation of even high-performance fighter aircraft; nonstealthy, so-called legacy jets—the F-15, F-16, and F/A-18—would be greatly at risk if called upon to fly within the S-300/400’s envelope.

Figure 8-3. Range Rings for S-300PMU2 and S-400 Surface-to-Air Missiles

S-300PMU-2 range

The Big Picture: The PLAAF Today and Tomorrow

If the PLAAF is not capable of challenging U. S. airpower in a nearby scenario like a Taiwan Strait contingency, its major items of equipment are no longer the main culprits. Its radical downsizing and steady modernization have, since 1995, brought the Chinese air force up to advanced world stan­dards in many regards. Its growing fleet of fourth-generation fighters, stock­piles of advanced air-to-air and air-to-surface weaponry, emerging AEW&C and EW capabilities, and up-to-date surface-to-air defenses represent remark­able advances in technology and capacity since 1995.

In the event of a confrontation farther afield—for example, in the Malacca Strait, or closer to home, in the Spratly Islands—the PLAAF’s capabil­ities remain limited. Conducting high-tempo combat operations is much more challenging 1,500 or 2,500 kilometers from home versus 200 or 300 kilome­ters. Under these conditions, the PLAAF would require a much more robust in-flight refueling capability and enough AEW&C assets to compensate for the
absence of ground-based control. Recent years have seen the PLAAF begin to step up to the latter challenge; its intentions regarding tanker aircraft, on the other hand, appear modest. With only a dozen or so H-6Us operational and no known plans to acquire more than the four MIDAS tankers it ordered in 2005, aerial refueling does not appear to be a current priority for the Chinese; this will have to change if the PLAAF is to project significant power more than a few hundred kilometers from Chinese territory.

Looking toward 2020, it seems likely that the PLAAF will continue on the path it has been following since the mid-1990s. This will mean the retire­ment of many J-7s and early model J-8s accompanying the acquisition of addi­tional advanced fighters. It seems unlikely that China will choose to replace its own “legacy” fighters on a one-for-one basis, so the PLAAF will probably con­tinue to shrink, though not at the pace we have witnessed over the last 15 years.

The PLAAF’s decision to “indigenize” the Su-27 as the J-11B rather than build licensed Su-30s suggests a growing confidence in the ability of China’s defense industry to produce complex modern weapons. We might therefore expect to see a larger and larger proportion of Chinese-built hardware filling out the PLAAF’s inventory. We can also expect China to progressively upgrade its fourth-generation inventory to accommodate new weapons, radars, and avi­onics, as it already appears to have done with its Su-27s—to fire R-77/AA-12 MRAAMs—and the J—10, by developing the J-10B.

By 2020, the PLAAF may be operating at least small numbers of J—20 stealth fighters; we should also expect to see the introduction or enhancement of other PLAAF platforms and weapons. These include the following: more, and more advanced, AEW&C capabilities, and improved EW capacities overall; improved air-to-air weapons, including a very long-range AAM to threaten an adversary’s high-value assets like the E-3; the proliferation of “smart” weapons throughout the force; increased use of drones and UASs, likely including ana­logues to the U. S. Predator and Global Hawk aircraft; and continued deploy­ment of the indigenous HQ-9 long-range SAM and acquisition of the S-400.

Although it seems less likely given available evidence, by 2020 China could also be well on the way to equipping the PLAAF with a new long-range strike aircraft to replace its antediluvian H-6s as bombers and cruise missile carriers. The PLAAF might also seek to increase its modest long-range airlift capabilities. Receiving the 34 Il—76 Candids it bought in 2005 would appre­ciably expand its transport fleet, but, as with tankers, the development and/or acquisition of more airlifters beyond those already booked would be needed if the PLAAF sought to support power projection over long distances.

The progress made in recent years by the PLAAF is impressive. Not too long ago, it was an unsophisticated congeries of ancient aircraft and weapons, its pilots poorly trained and poorly supported. As late as the early 1990s, it was likely too weak to have even defended China’s home airspace against a serious, modern adversary. In the early – to mid-1990s, as Chinese doctrine changed from focusing exclusively on territorial defense to contemplating lim­ited power projection campaigns, the PLAAF found itself confronting a num­ber of daunting learning curves that led from where it was to where it needed to be to fulfill its new missions. In terms of major items of equipment, it has successfully climbed many of these curves and appears at least to understand the ones that are left, even if it is not yet poised to climb them.

The revolution in the PLAAF’s order of battle is over. It has made up the four decades separating the MiG-17/MiG-19 generations from the Su – 27SK /Su-30MKK generation in just 15 remarkable years. Whether or not the PLAAF can close the remaining gaps between its capabilities and those of the most advanced air forces remains to be seen. But given how it has transformed itself over the last 15 years, one would be foolish to bet heavily against it.

The origin of China’s aviation industry can be traced back to April 18, 1951, when China established the Bureau of Aviation Industry under the Min­istry of Heavy Industry for the purpose of maintaining military aircraft. In other words, China’s aviation industry started from military applications. At the end of December 1953, the former Soviet Union transferred manufac­turing technology for the Yak-18 trainer (including engine) to China, along with complete technical information and prototypes. In July 1954, the Yak-18 trainer was assembled successfully at China Nanchang Aircraft Manufacturing Corporation (CNAMC) under the designation CJ-5. In October of the same year, the former Soviet Union transferred manufacturing technology for the production of MiG-17 fighters to China. In September 1956, Shenyang Air­craft Corporation assembled the MiG-17 fighter successfully, which the PRC named the J-5. These two types of aircraft are milestones in the development of China’s aviation industry. On June 4, 1965, the Q-5 attack aircraft, a vari­ant of the later J-6 that CNAMC produced from copying the MiG-19, made its maiden flight. Mass production of the Q-5 began in 1969. The Q-5 can be regarded as the first military jet developed and manufactured by China.

China’s Bureau of Aviation Industry was reorganized successively into the Third Ministry of Mechanical Industry (1960-1982), the Aviation Ministry of Industry (1982-1988), and the Aviation and Astronautic Ministry of Indus­try (1988-1993). Starting in 1993, China ushered in three waves of organiza­tional transformation in its aviation industry.

The first wave began in 1993, when the PRC restructured the defense indus­tries under its direct administration into large, state-owned enterprise groups including China National Nuclear Corporation, China Aerospace Corporation (CASC), China Aviation Industry Corporation (CAIC), China Shipbuilding Cor­poration, and China Ordnance Industry Corporation. CASC and CAIC were incorporated by splitting the Ministry of Aerospace Industry. It was hoped that through an enterprise-oriented structure, the industry’s manufacture, research and development (R&D), maintenance, and sales could be integrated and better managed so as to enhance its operation and productivity, and the industry could be run and developed from the perspective of enterprise management.

The second wave began in 1998 when China abolished the Commission of Science, Technology, and Industry for National Defense (COSTIND), which was set up by the PLA in 1982, and created in its place an institution of the same name directly under the State Council. The new COSTIND’s main duties were to supervise production of military products and development of defense industry; study and formulate policies, regulations, and laws on the conver­sion of military technologies and products to civilian use; and administer bid­dings from defense firms. In the same year, the PLA formed the General Arma­ment Department (GAD) to assume the procurement function of the former COSTIND, and integrate equipment-related offices within the General Staff and General Logistics systems and some procurement units under the General Logistics Department. The GAD is responsible for defense procurement, life­cycle management of weapons, and maintenance of the weapons research and testing base of the PLA.

In 1999, China divided each of the big five military conglomerates into two independent companies, forming 10 major defense science and technol­ogy groups. In 2002, China created China Electronics Technology Group Cor­poration (CETC) as the 11th large military enterprise group.2 One of the recon­struction efforts is to split CASC into AVIC I and AVIC II.

It was out of this climate that China embarked on its third wave of defense industrial organizational reform. China’s 2006 defense white paper outlines the development direction of its defense industry and the focuses on “consolidating its foundation, making independent innovation, and speeding up the implemen­tation of the strategy of transition and upgrading, so as to ensure the produc­tion and supply of military equipment and promote the development of national economy"’3 In September 2007, COSTIND, the State Development and Reform Commission (NDRC), and State-owned Assets Supervision and Administration Commission (SASAC) jointly issued the “Guiding Opinions on Promoting the Transformation of Defense Industries into Joint-Stock Enterprises.”

This document encourages military enterprises to implement share­holding system reform and structural transformation, while making full use of civilian strengths in national defense building.4 In October of the same year, Hu Jintao revealed in his report to the 17th National Congress of the Com­munist Party of China (CPC) that the country should “adjust and reform the systems of defense-related science, technology and industry and of weapons and equipment procurement,” and “establish a sound system of weapons and equipment research and manufacture that integrate[s] military with civilian purposes and combine[s] military efforts with civilian support.”5 These devel­opments indicated that to facilitate military modernization, China was paving the way for the third wave of reform of the defense industry.

On April 1, 2008, China established a new state agency, the Ministry of Industry and Information Technology (MIIT), and reorganized COSTIND into the State Administration of Science, Technology, and Industry for National Defense (SASTIND), which is subordinate to the MIIT. The MIIT assumed authority to oversee the 11 major military-industrial enterprise groups origi­nally under COSTIND, basically achieving unified management over the mili­tary and civilian industries.

With regard to the aviation industry, AVIC I and AVIC II were set up with the goal of fostering internal competition and undertaking international outsourcing business as original equipment manufacturers (OEMs). The two conglomerates produce different lines of products to reduce overlapping busi­nesses. Nonetheless, the split caused resource diversion, redundancy, and low efficiency, and went against the growth-through-merger trend of the leading aviation giants in the world.

Once China decided to undertake the development of large aircraft, COMAC was founded in 2008, and AVIC I and AVIC II were merged to form AVIC. On the surface, the newly established groups look similar to their pre­decessors. However, they have completely new structures and market posi­tioning. The primary duties of COMAC include the design, assembly, sale, maintenance, and after-sale service of large passenger aircraft. AVIC is mainly responsible for the development and production of military aircraft, small to medium civil aircraft, helicopters, and engines, and for carrying out aviation research and flight testing. For its secondary tasks, AVIC also functions as a supplier to COMAC, manufactures airframes, engines, and airborne equip­ment for large passenger aircraft, and undertakes outsourcing business for for­eign civil aircraft companies. In addition, AVIC Commercial Aircraft Engine Co., Ltd. (ACAE) was set up in 2009 to be the main contractor producing the engine to be used in the large aircraft project.

Aviation Industry Corporation of China. AVIC has a registered capi­tal of RMB 64 billion, nearly 200 subsidiaries, and about 400,000 employees. The company has total assets reaching RMB 290 billion. The reorganization of AVIC was an endeavor to regroup and adjust each subsidiary according to its specialties, and realign and optimize company resources. After the reor­ganization, AVIC headquarters has 14 divisions directly under it in charge of 10 key business segments.6 At present, the restructuring of AVIC headquar­ters and subsidiaries has been completed, and consolidation of the 10 busi­ness segments is in full swing. After its birth in the wake of the reorganization, AVIC launched a development strategy of “market-oriented reform, center – of-excellence-based integration, capital operation, globalization-based devel­opment, and industrial-scale-based growth,” and “integration into the world aviation industry chain, integration into the regional economic development circles.” According to AVIC, the company is aiming to grow more than 20 per­cent annually and achieve 1 trillion yuan in sales by 2007.

Commercial Aircraft Corporation of China (COMAC) and AVIC Com­mercial Aircraft Engine Corporation (ACAE). COMAC has a registered capital of RMB 19 billion and six primary shareholders—SASAC, AVIC, the Shanghai Guosheng Group (representing the Shanghai Municipal People’s Government), Aluminum Corporation of China (CHINALCO), Shanghai Baosteel Group Corporation, and China Sinochem Group Corporation (Sinochem). COMAC can be regarded as a fully state-owned company of the PRC.7 COMAC leader­ship came from senior government officials; COMAC Chairman Zhang Qing – wei and General Manager Jin Zhuanglong are the former COSTIND Minister and Vice-Minister, respectively. COMAC is the executive body of China’s spe­cial science and technology project for the R&D of large passenger aircraft. It has three centers—the R&D Center, the Final Assembly Center, and the Cus­tomer Service Center, and a consortium of subsidiaries such as AVIC I Com­mercial Aircraft Co., Ltd. (ACAC), Shanghai Aircraft Design and Research Institute, and Shanghai Aircraft Manufacturing Co., Ltd. COMAC is respon­sible for the overall design, system integration, marketing, airworthiness certi­fication, and service of large passenger aircraft.

Short-term goals proposed by COMAC include the following: through the introduction and absorption of foreign technology and independent inno­vation, making breakthroughs in key technologies concerning the C919, and obtaining airworthiness certification; completing research and development of the ARJ21 regional aircraft, obtaining airworthiness certification, making delivery to customers, establishing mass-production capacities, and expand­ing market shares; and setting up a system of R&D, production, marketing, and customer service for civil aircraft. Long-term goals include achieving the industrialization and series production of civil aircraft; carrying out mainte­nance and repair of civil aircraft, developing financial leasing and other related businesses, and expanding the industry chain of the civil aviation sector; and becoming a civil aircraft manufacturer that owns independent intellectual property rights and enjoys international competitiveness.

With a registered capital of RMB 6 billion, ACAE is invested by its con­trolling shareholder AVIC and shareholders such as Shanghai Electric Group and Shanghai Guosheng Co., Ltd.8 The remaining 30 percent of ACAE shares is planned to be bought by private enterprises. The main function of ACAE is to carry out R&D, production, sales, and maintenance of civil aircraft engines, and to provide technical consultation. Its key tasks include constructing an engine R&D center and a basic technology center, recruiting engine experts at home and from abroad, establishing technical cooperation with foreign engine manufacturers, seeking to build up an international R&D team and hiring pro­fessional organizations for technical advice and marketing consultation.