Opportunities and pitfalls abound

ASIA-PACIFIC DEFENCE

China

THE Chinese arms market has many opportunities but just as many pitfalls, a China specialist said yesterday.

Dr John Frankenstein, a senior lecturer of Hongkong University’s department of management studies, said that Beijing sought modern military technology which it could not produce locally.

He was speaking on the latest trends and developments in China’s defence industry.

China had to develop its military capability because of the need to defend its borders, project its armed forces and ensure internal security.

“How would it be possible for any intelligent king or sacred emperor to exist without military power? Bows and arrows are traditionally used for controlling the country,” he quoted a Ming dynasty scholar.

He said that there were opportunities for defence industries to sell their products and transfer technology to China.

Beijing’s drive to reform the economy was also reflected in the defence sector.

Describing it as “bureaucratic entrepreneuralism”, he said it was reported that 27,000 enterprises had been set-up in the defence sector over the last few years. About 70 per cent of the defence industry output went into civilian use.

China’s defence industries had also diversified their operations and were adopting a corporate status, he said.

He added that Beijing had expanded research into advanced military areas including radar, telecommunications, software, long-range mission technologies, and air and naval capabilities.

“It is a question of defence conversion,” he pointed out.

Dr Frankenstein said the China’s military industrial organisation was now talking of profits and being efficient.

These changes presented opportunities for businessman to sell defence products to Beijing.

But on the flip side, it was necessary to point out difficulties which could hinder a business partnership.

“They have been talking about it for years,” he said, adding that there could be “foot dragging, if not outright resistance and refusals” to reform the defence industry.

Other problems included an incomplete legal system, the presence of a massive bureaucracy, capital shortages and lack of understanding of the market economy.

There were operational risks as well. These included inadequate infrastructure and labour management problems.

There was also the prospect of political and social instability with the change in Beijing’s leadership.

While old problems still remained, it was important to note the changes in the Chinese defence industry.

He had this advice for those thinking of selling defence equipment to China.

“You can’t push your Chinese partner,” he said. “You have to lead him, give him hints and talk business in personal terms.”

* Frankenstein’s law
Everything you hear about China is true, but none of it is reliable.

* Frankenstein’s principle
No matter how much we study, China will always surprise us.

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