The Dragon Flying High? Examining China's Aerospace Industry: The Deng Era

Deba R. Mohanty, Associate Fellow, IDSA


Since the death of Mao Tse-tung in September 1976, China's defence industry, like so many other aspects of its economy, society, culture, politics and international relations, has undergone a series of comprehensive reforms.1 This was the time when the reformist leaders of China, headed by Deng Xiaoping, slowly consolidated their power. Based on their twenty-odd year old belief that economic and technological backwardness of the Maoist era were not only seen as the most serious obstacle in China's prosperity but also a major block on its path to socialism. Having realised this, they tried to revive the mid-1960s and mid-1970s modernisation agenda which could not be implemented due to radical obstruction during the preceding years. This resulted in what is called Deng's "Four Modernisation" agenda, where he accorded highest priority to the reform of agriculture, industry, science and technology, and national defence.2 Though his last priority was national defence, he was conscious of the fact that reforms in the defence industrial sector were not to be neglected as this sector was characterised by technological backwardness, waste or mismanagement of resources, over capacities developed over the years, and most importantly, lack of a comprehensive long-term policy for modernisation.3 This concern was later translated into a series of reforms that the Chinese defence industry has so far experienced. In this research paper, the extent and impacts of reforms that have taken place in the aerospace industry have been examined, which undeniably constitutes a major component of the huge military-industrial complex of China that we witness today.

Maoist Era: A Brief Assessment

Both organisation and infrastructure development of the Chinese aerospace industry during the Maoist era witnessed several common as well as distinct features. Among those that stand out prominently are political upheavals caused by the Great Leap Forward and the Cultural Revolution; strategic miscalculations like the Third Front; technological and strategic factors like strong Sino-Soviet defence cooperation as well as uneven pattern of bilateral relationship between the two undergoing strong had lean patches; and more importantly, economic difficulties. The frequent changes witnessed in organisational structure in the aerospace industry is attributable to all the above factors. Slowdown of infrastructure development was primarily due to reasons that are economic—both deficient allocation and sometimes unequal emphasis given to particular projects; changes caused by both at strategic and policy-making level; and mismanagement especially during the late 1950s and the mid-1960s. At the same time, the Great Leap Forward forced the unprepared industry to quickly produce new kinds of aircraft. Indeed, the adverse impacts of Sino-Soviet relationship that was already on the horizon had forced the Chinese to contemplate on indigenous production and self-reliance. The strategic decision to build a huge military-industrial structure in the remote and inaccessible hinterland (Third Front or Third Line) added, among others, more difficulties. Though this programme received the biggest chunk of financial assistance and consequently strived to link the remote with the urban regions of China, it was a failure simply because of the fact that it neither catered to domestic military needs nor did it provide a viable long term solution to China's future military needs. The Cultural Revolution severely interfered with and destroyed the smooth development of indigenous military aircraft. In ten years, more than thirty projects were launched and cancelled as a result of mismanagement. Large amount of development investment paid for nothing, valuable time was wasted, resulting in heavy losses. Technical problems led to many accidents, and hundreds of aircraft had to be returned to the factories for repair. These constraints confused and complicated R&D programmes, created unnecessary competition, stretched technical and production capacities to their limits, caused delays in other development and production programmes, seriously compromised quality, and most importantly, led to a waste of huge state resources.

On the brighter side, achievements had been made in the aerospace activities though undermined by serious shortcomings like excessive dependence on the Soviets, backward technology, difficulties in adapting theories and designs to production, isolation from the international community, and radical politics complemented by short-sighted policies. China's aerospace industry, by the time of Mao's death in September 1976, had achieved great progress especially in the fields of copy-production, modification, and even independent development of various military aircraft. The decision in the early 1960s to adopt several aerospace policy keywords like adjustment, consolidation, replenishment, and improvement indeed paid off in the subsequent years. The Third Front aerospace industries, despite their shortcomings, have contributed enormously to both military as well as civilian needs. It is the early 1960s, the time when the Chinese realised their short-sighted programmes and tried to rectify their past mistakes, by the time which China had already lagged behind in all spheres. The desire to compensate for the shortcomings and effort to accomplish it in a short span were both difficult and dangerous. If one looks into the progress made during this two and half a decades, one will probably reach the conclusion that the Chinese have had a mixed result: the production was excessive, the financial assistance was huge, the quality was inferior, and the desire to adapt the superior technology from the West was not successful. It was only after the death of Mao and consequent years in which China witnessed its most important transition from a closed to an open economy that the aerospace industry got a new lease of life.

The Deng Era: Military and Civilian Production and Development

The formative years of the Deng era witnessed far reaching reforms that have taken place in the aerospace sector. Notably the developments are characterised by strengthening research and development (R&D), active transfer and accumulation of technologies both indigenous and foreign, readjustment in several key management areas, effort toward increasing efficiency, expansion of export trade activities, and most importantly, conversion of some military industrial activities for alternative civilian uses.

Research and development in key aspects of aerospace were contemplated soon after Deng assumed power. In 1978, the Ministry of Aviation Industry developed a plan of future development for the aerospace industry that highlighted high-performance propulsion, active controls, CAD/CAM design systems, advanced fire control systems, fatigue and fracture control, electronics and digital systems, titanium alloys, advanced composite materials, and advanced hot-forming manufacturing technologies.4 It is possible that versions of this plan have been carried on in a modified form till the present. The comprehensive plan of future technology development for the aerospace industry was soon followed by a policy of profit contracting between the aerospace industry and central government. Reforms were undertaken in several aspects of management of defence industrial enterprises. They were given increased authority for making decisions. The industry was given a clear objective of transforming its almost purely military production structure to a joint military and civil production system, developing more indigenous designs, and seeking foreign export markets. More business oriented management system for enterprises thus was visible for the first time in the history of the Chinese defence industrial field.

The aerospace industry during the Maoist era was almost exclusively producing aircraft and allied products that were meant for military use. It is evident from the fact that the share of military production in the aerospace industry output value accounted for about 95 per cent.5 The total inventory ratio of military versus civil aircraft was thus 19:1. A primary policy from 1979 onwards was to address this imbalance through increased civil aircraft production and military spin-offs to the civil sector. This conscious policy saw an increase in civilian production in the aerospace industry. The share of civilian production went upto 13 per cent in 1980, 40 per cent in 1985, 61 per cent in 1986, 64 per cent in 1990, and about 75 per cent by the mid-1990s.6 Similarly, in terms of monetary value, China's aerospace industry's civilian output during the Seventh Five-Year Plan (1986-90) was 3.76 times higher than that of the Sixth Five-Year Plan (1981-85).7 However these data do not take into account much of the dual-use technological nature of the industry and its products. The most widely used indigenous aircraft for civil applications were the Y-7-100, Y-8 and Y-12II transports, and Z-8 and Z-9 multi-purpose helicopters. The 150 seat MD-80/82 civil passenger aircraft, jointly manufactured by the Shanghai Aviation Company and the McDonnell Douglas Company of the US, was first produced in Shanghai in April 1986, with initial flights in July 1987. MD-82 production typified the end of China's twenty years of isolation from the outside world, and the corresponding increased emphasis on foreign cooperation and exchange activities such as education and technology transfer. The China National Aero-Technology Import and Export Corporation (CATIC) was established by the Ministry of Aviation in 1979 to specifically undertake such technical and economic exchanges with foreign nations. CATIC was authorised to organise foreign trade, absorb foreign investment, and to export many of China's aerospace products. In brief, China's aerospace industry began to transform the purely military production structure into a combined military and civilian production structure and gradually switched to civilian production guided by the laws of market economy.

In the field of military production, the first all weather J-8 fighter was flown in June 1980. This was unsuccessful due to quality problems in its hydraulic systems. On the other hand, improved quality efforts were stressed for new aircraft types such as the J-7III, J-8II, and JJ-7 fighters, Y-11 and Y-12 transports, Z-8 helicopter, and Z-9 multi-purpose helicopter. Product support for aircraft was strengthened, including increased maintenance personnel and spare parts systems. The J-8II fighter was developed for PLAAF operations to begin in the late 1980s and early 1990s, and first flew in June 1984, following a three year design and development period. The other new aircraft types developed during this period included the RPV-5 unmanned reconnaissance aircraft and other small RPVs and target drones, H-6 electronic counter-measure aircraft and Y-8 sea-patrol aircraft.

This era, unlike the previous one, witnessed a new cycle of military and civil export activity that was strictly profit-oriented. An organisational step in this direction was the establishment of the CATIC as the principal trading arm of China's aerospace industry. Enterprises were allowed to select their own export channels. At the time, the Chinese government also decided to start selling aircraft after several thousand aircraft had been provided free of charge to seventeen countries from the 1950s to the 1970s.8 Contracts were now signed between CATIC and foreign countries and between CATIC and the enterprises. Products sold abroad have invariably included large numbers of J-6, J-7M and Q-5 military aircraft, the Y-12II passenger aircraft and associated spares, aero-engines, ground equipment, tools, and after sales services such as training and maintenance. China's export aircraft, while not as technologically sophisticated as those of the West, enjoy advantages in competitive pricing, and can be readily retrofitted with new systems such as advanced electronics to fulfill customer specifications. China also exported major machined components for aircraft and aero-engines under sub contract to firms in the US, Canada, France, in UK and Italy. China's aerospace industry participated at the Farnborough International Air Show for the first time in 1986, with photo and model displays of 11 aircraft and missile types, including the first public release of information on the J-8II. The early 1980s saw a jump for the first time in export earnings. In 1980, the earnings from aerospace product exports were 2.46 times more than in 1979, and the value of exports in 1986 was 5.5 times more than in 1979.9 The exporting enterprises were able to retain some of the foreign exchange; the total amount, the size of profits, and the performance rate of the contracts in turn determined their bonuses. Moreover, as an incentive they could keep a higher share of foreign exchange earned from the export of civilian goods.

Increased importance of the aerospace industry in China's overall economy was visible from the early 1980s. To further facilitate the functioning of the aerospace industry vis-à-vis the new economic scenario, the Ministry of Aviation Industry was put under direct control of the State Council in 1986. An increased emphasis was placed on the production of a wide variety of non-aerospace products in aerospace facilities, a profit making practice that still persists under the rubric "defence conversion".10 Popular products for civilian use include automobiles, motorcycles, bicycles, precision machine tools, textiles and light industry machinery, medical equipment, electrical and electronic products, and an array of consumer products like refrigerators, washing machines, etc.

China's military aerospace capabilities did improve during this period, with the PLAAF conducting a milestone exercise during September 1981, with activities in air superiority, air reconnaissance, ground support, air supply, rescue, airborne troop landings, aerial mining and electronic countermeasures. Some 838 reportedly successful sorties were conducted by Chinese-manufactured fighters, attack aircraft, bombers, transports and helicopters, although overall operational coordination between the three services remained at a low level. However, China's aerospace technology generally lagged behind that of the West which had seen considerable military and spin-off civilian advances stimulated by the Cold War during the same period as the Cultural Revolution. For example, by 1976, the J-6 had already been manufactured for 16 years and not yet been replaced by the J-7 for the PLAAF service.11 The industry realised it would be crucial to domestically develop and obtain from abroad the technologies for advanced aircraft of the 1990s: advanced aerodynamic distribution designs, high thrust/weight ratio aero-engines, active control systems, inertial navigation systems, electronic flight instrument systems, environmental systems, computer systems, etc.

Indeed, the 1990s saw a renaissance of China's aerospace R&D facilities, with the introduction of a large amount of foreign equipment at major institutes, design offices, and universities and colleges. There was considerable increase of the levels of skilled personnel. From 1979 to 1986, there were 22,252 university and college aerospace graduates, 1,254 post-graduates, 600 students returned from abroad, 4,555 professional college graduates, 31,000 skilled worker graduates, and 2,523 technician graduates.12

This period also witnessed the emergence of many key aerospace specialists, among whom were Cai Yunjin (aero-engine compressor specialist), Cao Chuanjun (rocket engine specialist), Gu Songfen (chief designer of the J-8II fighter aircraft), Huang Qingsen (robotics specialist), Li Wei (large scale integrated circuit CAD specialist), Long Lehao (chief designer of the CZ-3B space launcher), Ma Yuanliang (specialist in solid rocket propellants), Ren Xinmin (senior space advisor), Wang Nanshou (chief designer of the J-8 fighter aircraft), Xue Mingg Xian (RPV chief designer), and several others.

Increased joint R&D activities were undertaken by the Chinese Aeronautical Establishment with several foreign organisations from France, Germany, Italy and others. By the end of 1986, some 140 Chinese aeronautical experts had been sent abroad for specialised study tours, while 87 foreign experts visited China for reciprocal activities in areas such as aerodynamics, aircraft structural strength, aero-engine research, and aerospace materials. Also, from 1978 to 1986, 949 Chinese students and 110 engineers were sent abroad to work at foreign firms in 12 countries, and 545 Chinese aerospace industry representatives attended 240 international academic conferences around the world.13 Such activities have taken an increasingly important role in accelerating the transfer of new technologies to China's aerospace industry in the 1990s.

By the late 1980s, China's aerospace industry had developed and manufactured over 12,000 aircraft of 55 types in 25 categories of fighters, bombers, attack aircraft, transports, helicopters, trainers and special purpose aircraft such as RPVs and ultra-lights. Some 35 independent R&D, product design, manufacturing process, and material research institutes, and 116 enterprises, many with their own varied research capabilities, had been established.14 The Chinese central government claims that over 60 per cent of its production was now civil-oriented, and related to many non-aerospace economic development activities. Prior to the 1989 political disruptions in China, the Ministry of Aerospace Industry and Ministry of Foreign Economic Relations and Trade had planned to reorganise their international aerospace export thrust into four new advanced technology groups: China Changzcheng Astronautics Group (for market space launch services in conjunction with the 'First Research Institute'), Changfeng Science and Technology Industrial Group (for development and export of space technology subsystems such as electronic and optical equipment, and affiliated with the 'Second Research Institute'), China Xian Aircraft Group (consisting of Xian Aircraft Manufacturing Company and its R&D branches), and China Nanfang Motive Power Machine Group (consisting of five aerospace factories in Hunan province, three in Beijing and two in Shenzen, this group would have the primary objective of exporting medium-sized piston and gas-turbine aero-engines). As will be explained later, this current trend of China's aerospace industry restructuring is towards similar large, integrated industrial clusters.

Conversion: The New Slogan

As mentioned earlier, the Deng era has brought about significant changes in almost all spheres of activity in China. From Maoist socialism, the reformist leaders have tried to change the course of development by refining the contemporary ideology that works as a guiding principle. This effort toward change has been contemplated mainly on overall economic development. In this regard, the performance of the defence industry was seriously discussed duing the initial years of reforms. While emphasising military production as a first priority, the reformists began to realise that the defence industry had failed to fully utilise its production potential. It was realised that this under-utilisation could be converted to satisfy civilian needs. Under prior conditions of constant alert for war, defence industry was overstructured, overequipped, and overstaffed. With the relaxation of international tension, the decrease by a large magnitude in state orders, and the emphasis on modernisation and development, it was felt that, this surplus capacity could be redeployed to serve national economic construction. Following this strategy, China's aerospace industry began to transform its military oriented structure to a combined military-civilian structure.

The military aviation and aerospace enterprises have now been classified into two kinds of military-civilian combination enterprises—those that are mainly engaged in aviation products and those that are mainly, but not only, engaged in non-aviation products. This policy led to immediate results. From 1978 to 1986, the output value of China's aerospace industry civilian products reached an average yearly growth rate of 37.4 per cent, and the number of products increased from more than two hundred to more than three thousand.15 These included, among others, civilian aircraft, parts and equipment, which are necessary for conversion of China's aerospace industry.

The Deng administration, in contrast to the preceding decades when civil aircraft were not produced on a large scale, launched new projects and tried to upgrade the existing ones for mass production. Some ventures, such as the abortive US$300 million attempt to reverse-engineer a copy of the Boeing 707 (known as the Y-10), failed. After two Y-10 prototypes had been built and flight tested in September 1980, the development programme was terminated because of reasons of market and cost.16 However, other attempts have been successful. Since the early 1980s, many passenger planes have reportedly been diverted to domestic airline services. For example, by late 1994, seventy three Y-7 passenger planes had been delivered to customers. In the 1980s, the Y-8, Y-11, Y-121, and Z-8 were also batch-produced and put into service.

Since the early 1980s, China's aerospace industry has also taken on civilian projects not directly related to aviation—by providing other ministries and industries with spare parts, special equipment, instruments, and services. For example, one-third of the work completed in 1985 by the Ministry of Aeronautics Industry's Fourth Establishment dealing with design and construction had little or nothing to do with aviation.17 In addition, the aerospace industry supplied industrial gas turbine power-generating sets derived from aero-engines to the oil industry; cooperated with the Ministry of Coal Industry to develop a coal mine safety monitor system; built a television set assembly line for the Tanjian Television Factory; designed bicycles, foodstuffs, and textile factories, etc. In the field of civilian aircraft, the aerospace industry has been instrumental in designing and producing Mifeng and Qingting ultra light models, the Q-2 and AD-100 ultra light aircraft, the Mifeng-6 airship, the WZ-5 high altitude reconnaissance pilotless aircraft and the D-4 RPV. Although these aircraft have also served military purposes, they have been used mostly for aero-seeding afforestration, forest-fire prevention, crop seeding, fertiliser spreading, disaster relief, aero-photography, and other allied activities. In brief, most conversion has been achieved by the aerospace industry itself, with active support coming from both government as well as from private quarters.

China's aerospace industry, since the early 1980s, has also become involved in non-aviation projects abroad. In 1980, CATIC established a Design and Construction Engineering Company that soon became active primarily in the Middle East. To upgrade and diversify its aviation products and to introduce more advanced technology into the industry, the aerospace industry began to import foreign technologies, research and test equipment, and promote cooperation with reputed international aircraft manufacturers like Boeing, McDonnell Douglas, Airbus, and others. Since 1979, the aerospace industry began to produce aircraft parts for thirteen foreign firms with which it has since signed some one hundred industrial production contracts.18 It is estimated that by 1994, the total delivery value of these parts reached over US$200 million. Some of these transactions involved the development and production of commercial jetliners. This plan is based on the assumption that 'although China's civil aviation sector continues to grow at an annual rate of over 30 per cent, it still fails to meet the demands of economic development and international and domestic tourism.19 With more than forty airline companies and 420 planes. China's civil aviation is expected to grow at over 20 per cent a year. These examples provide a sense of the extent of China's conversion efforts from domestic and international perspectives.

China's most important aircraft production cooperation project began in 1979 when the Shanghai Aircraft Factory (later became Shanghai Aviation Industrial Corporation, AVIC) began producing landing gear doors for the MD DC-9. Following a decade of exploration and negotiation, in 1985, the two parties signed a 12-year licensing agreement for the production of 25 MD-82s with options of 15 additional aircraft. By 1994, thirty five MD-82 jetliners had already been jointly assembled, five of which were sold back to the United States and thirty to China Eastern Airlines and China Northern Airlines. SAIC and CATIC have also negotiated with Boeing on the establishment of a joint venture to produce the rear sections of Boeing 757 and 737 jetliners. In 1988, the Chengdu Aircraft Corporation and McDonnell Douglas signed a contract for the production of one hundred noses for the MD-80. Other projects include the Y-8, a heavy duty transport based on the Soviet AN-12 that has been produced by the Shaanxi Aircraft Factory since 1984, it incorporates imported electronic equipment from the United States, and has been improved since 1987 in cooperation with Lockheed; EC-120 helicopters; MPC-75 feeder planes; and the Y-7H-500 passenger aircraft.20

The Shenyang Aircraft Corporation (SAC) is one of the major aircraft producers in China. Till date, it has produced, among others, the J-5, J-6, J-7, and J-8 fighter, trainer, and reconnaissance aircraft, as well as the J-8II, one of China's most advanced high-altitude, high-speed, all weather fighters. SAC, in recent years has also begun producing civil aircraft. It has established ties with some of the world's leading aircraft firms to manufacture both aircraft and spare parts of varied uses. Another notable aviation product manufacturer, the China Jiangnan Aviation Industrial Corporation (CJAIC), has also been engaged in manufacturing as well as assembling imported parts to produce light weight trucks. The Guizhou Aviation Industrial Group Corporation (GAIGC) has designed and produced the J-6A supersonic all-weather fighter, the JJ-7 supersonic fighter trainer, the J-7III advanced fighter. In addition to this, it has also produced over eight hundred kinds of auto parts. The Changhe Aircraft Industries Corporation (CAIC) in the eastern suburb of Jingdezhen, Jianxi province, is one of China's leading centres for research and production of large helicopters. To adapt itself to the requirements of a market economy, it also introduced advanced technology and equipment from abroad to set up four production and assembly lines for civilian goods, primarily cars, spare parts, and equipment. It has produced more than 16,000 small cars in 1994 alone. The Harbin Aircraft Manufacturing Corporation (HAMC), a long time producer of H-6 bombers, has started producing for the civilian market. Since 1982, HAMC has subcontracted for the production and assembly of a variety of parts for the Bae-146 and SD3 series.


Since the early 1990s, the total output value of China's aerospace industry has gone up considerably. From 8.6 billion yuan in 1991, it grew to 11.02 billion yuan in 1992, a 28 per cent increase over the previous year. Out of this, more than 70 per cent consisted of civilian production. In 1993, it reached 14.96 billion yuan (a 35.7 per cent increase over 1992), of which roughly 74 per cent represented the value of civilian production. By early 1993, eight thousand kinds of civilian goods were turned out by two hundred production lines in China's aerospace industry.21

In parallel terms, China's aerospace industry's exports have increased CATIC's 1993 export volume of over US$400 million which accounted for nearly half of the US$870 million total exports of the entire industry. In the first half of 1994, the aerospace industry machinery and electronics export value reached US$257 million.22 These exports are expected to increase by US$200 million a year during China's Ninth Five Year Plan (1995-2000) to finally reach US$1.8 billion.23

Since 1994, the CGAIC has begun to implement an ambitious ten- to fifteen-year 'take off plan', aimed at creating a huge aerospace industrial group that will adopt more flexible business mechanisms, develop and expand civil products, adjust to the international market to increase imports and exports, and reach a higher technological level with its aviation and non-aviation products. This plan covers specific development goals in ten areas, one of which is military aircraft. Although the aerospace industry could rely on its so-called high-tech advantages in its conversion efforts, it has always suffered from a chronic shortage of funds. To overcome this disadvantage, the CGAIC, with the support of several overseas companies and banks, set up the China Aviation Foundation. This foundation is entrusted with raising foreign capital for project development in specific industrial areas. This initiative has reportedly proven to be successful. It, within a year of its establishment, managed to raise US$96.6 million in special funds and foreign direct investment (FDI). In 1995, it raised US$200 million. Using these funds, eight new enterprises have begun to operate on new bases, among them Tianjin Tianli Aviation Electronics Ltd., which has received US$7.95 million for new product development.24

Reforms in the aerospace industry, especially conversion, have by no means affected the determination of China's post-Mao leaders to modernise its defence systems in general and its military aviation in particular. Some of the first steps undertaken by the Deng administration were to restore order, and primarily quality, in China's military R&D and production and to establish many new defence technology and industry institutes. Significantly, after a long spell of isolation, China has the option of acquiring weapons and military technologies from the West. However, the Chinese soon realised the limits of this option. Beijing increasingly realised that it was impossible to import modernisation and that it should develop its own weapons and military equipment while importing only a few selected foreign technologies. The take-off plan that emphasises the overall development of the civilian aspects of China's aerospace industry by no means overlooks the military. Although it represents one of the ten areas of development, military development also overlaps with some of the other fields and is quite considerable.

During the Deng era, conditions for conversion of China's aerospace industry are supposed to be the most conducive. Relative political stability provided a framework for a firm and consistent policy, an essential requirement for successful conversion. Reform of the economic system added another important element. The gradual transformation of China's socialist command economy into a socialist market economy has increased its ability to diversify production, generate funds, maximise profits, and participate in the international economy. In this framework, China's aerospace industry has perhaps provided the most visible case for others to contemplate. Within the last fifteen years, three quarters of its overall production capacity, formerly used for military purposes, has been converted for civilian use. Nevertheless, there is little information about the economic viability of this process, particularly in view of the difficulties of the state owned enterprises (SOEs) in general Beijing has provided little information about these problems.

It is argued by many that the civilian production is an outcome of brisk economic expansion rather than real conversion. In some cases, unrelated to military production lines, new civilian production lines have been constructed or acquired from abroad. Like the civilian industries, the military industries have had over capacity that could be converted for civilian use. This, along with special advantages given to the military industry, has obviously resulted in a situation where the military industry has suffered less than its civilian counterpart. Consequently, the total output of the military industries could increase enormously, but this growth itself is deceptive for the simple reason that it can alter the proportion between military and civilian production. This in turn points to another problem of conversion—activating underutilised civilian production capacity at the expense of military production is as good as no conversion. The net result is that even if military production continued to decline in quantitative terms, it has been qualitatively, technologically, and financially upgraded by China's policy of military-civilian combination. Indeed, few military production lines have been converted, and most of them are either too specialised or too outdated to be of use. There is a strict separation between military and civilian production lines and in the case of China, it increases as conversion proceeds. In fact, China's aerospace industry spares no effort in modernising its military production lines. Beijing invests a good deal of human, material, and financial resources in state-of-the-art military aircraft. If this is the scenario, then it is better to term the reforms in the Chinese aerospace industry during the Deng era as 'conversion with Chinese characteristics'.



1. For a detailed description, see, John Frankenstein, 'The People's Republic of China: Arms Production, Industrial Strategy and Problems of History' in Herbert Wulf (ed.) Arms Industry Limited (Oxford: Oxford University Press, 1993), p. 279.

2. National defence was the last one in the priority list of Deng's 'Four Modernisation' agenda. For a detailed account of defence modernisation during the late 1970s, see, Harlan W. Jenks 'The Chinese "Military-Industrial Complex" and Defence Modernisation', Asian Survey, vol. 20, no. 10, October 1980, pp. 965-89.

3. The need to modernise defence industry has been emphasised by Deng even before the modernisation drive officially took off. See, Deng Xiaoping, 'On Consolidating National Defence Enterprises', in Selected Works of Deng Xiaoping: 1975-82 (Beijing: Foreign Language Press, 1984), pp. 39-42.

4. China's Aerospace Industry (London: Jane's Information Group Ltd., 1997), p. 20.

5. Yitzhak Shichor, 'Converting the Military Aviation Industry to Civilian Use', in Jorn Brommelhorster and John Frankenstein (eds.) Mixed Motives, Uncertain Outcomes: Defence Conversion in China (Boulder, Colorado: Lynne Rienner, 1997), p. 113.

6. Shichor, n. 5, p. 113.

7. Shichor, n. 5, p. 114.

8. Shichor, n. 5, p. 114.

9. 'China's Aviation Industry Flies High', Beijing Review, January 30, 1995, p. 28.

10. Defence conversion programme in China, a term that still requires indepth examination, has been carried out since the early 1980s. For a detailed description of definitional and conceptual problems associated with conversion, see, Lloyd J. Dumas (ed.), The Socio-Economics of Conversion From War to Peace (Armonk, New York: M.E. Sharpe Inc., 1995). For a detailed account of China's defence conversion programme, see, Paul Humes Folta, From Swords to Ploughshares? Defence Industry Reforms in China (Boulder, Colorado: Westview Press, 1992).

11. n. 4, p. 21.

12. n. 4, p. 22.

13. n. 4, p. 23.

14. n. 4, p. 24.

15. Xu Xinglin and Gao Xiaoxing, 'The Conversion Experience of Chinese Aviation Industry' in Qian Haiyan (ed.) Restructuring the Military Industry: Conversion for the Development of the Civilian Economy (New York: CAPUMIT and United Nations Department of Development Support and Management Services, 1994), pp. 261-266.

16. Philip J. Lass, 'Avionics in China: China Moves to Counter Effects of Cultural Revolution', Aviation Week and Space Technology, June 6, 1983, pp. 52-64.

17. Shichor, n. 5, p. 118.

18. n. 9, p. 28.

19. Gao Jinan, 'Aero-Industry to Take Off long Flight', China Daily, June 24, 1993, p. 2.

20. Sun Shang, 'Country's Aviation Flying High With Foreign Firms', China Daily, January 23, 1995, p. 1.

21. Shichor, n. 5, p. 124.

22. Shichor, n. 5, p. 124.

23. Gao Jinan, 'Aerospace Industry's Peaceful Products', China Daily, January 29, 1993, p. 1.

24. Xiao Yong, 'Aviation Industry Counting on More Loans', China Daily-Business Weekly, October 2-8, 1994, p. 1.