The Chinese defense industrial complex (CDIC) can be looked at as a remarkable accomplishment, a worst-case example of Chinese state-owned enterprises and a strategic failure. When the People’s Republic of China was established in 1949, its economy and industrial base was an ash heap, yet within 20 years the CDIC was producing a full range of relatively modern military equipment, including strategic weapons. But the sector did not keep pace with modernization, and today is regarded as an industrial dinosaur, unable to achieve that most meaningful metric in this era of economic reform: profitability. More importantly, the CDIC has not been able to design and produce the systems the Chinese military deems necessary for its future—with the result that China has become dependent on foreign sources for key technologies and weapons system.
The Chinese are not unaware of the CDIC’s shortcomings, but the various attempts to resolve the sector’s problems —reorganization and “conversion” — have only been marginally successful. While some “converted” plants, mostly in aviation, have entered into the kinds of international chains of production that mark true globalization, Chinese observers deem benefits to have been minor. In short, the Chinese have a wary attitude toward globalization, and it is premature to think of the CDIC as a player in a global defense industry context.