1. The beginning of changes in military trade during the “14th Five-Year Plan”
The United Nations defines arms trade as “the movement of military equipment between different countries and regions”. Military trade is a special trade activity that serves the core and major interests of the country, and is a concentrated expression of the status of a major power and national defense strength. Since the beginning of the 21st century, the export of military trade has actually been given more meaning, which can be mainly attributed to the three major areas of increasing the country’s political influence (diplomacy), earning foreign exchange (economy), and feeding back the development of the military industry (defense). .
As the second demand side of the military industry, military trade is currently ushering in a major opportunity. Domestically, listed companies in the military industry, among the state-owned enterprises, the UAV revenue continued to grow rapidly and was listed in IPO, Aerospace Rainbow went public through backdoor listing and planned to invest in multiple export UAV models, and Guorui Technology injected shareholders into military trade business through asset restructuring. Relevant assets, Guangdong Hongda’s HD-1 missile system and JK series of guided weapons military trade related matters have been steadily advanced, and AutoNavi, a listed company in the civilian army, has obtained a complete foreign trade procurement contract for the WQ system. At the same time, a large number of products of my country’s military enterprises have appeared at the Zhuhai Air Show and overseas defense exhibitions. On the other hand, in the conflict between Russia and Ukraine, the world’s largest arms exporter, the US arms dealers Lockheed Martin, Northrop Grumman and other stock prices frequently hit record highs.
2. The latest global arms trade and China’s arms trade characteristics have not undergone major changes in a century
Although in 2020, the impact of the new crown epidemic ended the growth trend of global arms trade activities since the 21st century, and the global arms trade activity index hit a new low since 2006, but in 2021, the global arms trade showed a recovery growth, an increase of 8.28% year-on-year . Among them, the arms trade exports of Western countries represented by the United States and France achieved a rapid recovery. While Germany, India, the United Kingdom, and Japan have seen significant increases in military spending, their military import indicators have also increased significantly. The four countries’ military import indicators have grown by 205.8%, 56.9%, 39.8%, and 26.6% year-on-year, respectively.
The characteristics of the world’s major arms trade importers and exporters and the changing trends in 2021 can be summarized as follows: the United States uses military trade to support its military industry, and export indicators continue to grow steadily; Russia uses military trade to promote research and development, and the export volume of military trade is significantly reduced; France uses military trade to support military industry. Trade has created income, and the export of military trade has reached a record high in the past five years; India is still the world’s largest arms purchaser with military trade to make up for its shortcomings. From the perspective of military trade equipment, the “three aviation” (aviation, aerospace, and navigation) equipment is the most popular.
my country’s military trade has entered the development stage of “self-developed equipment”, but in the field of some high-end weapons and equipment, compared with the traditional military trade powers such as the United States, Russia and France, the quality of equipment, customer coverage, price competitiveness, etc. There are still some gaps. At the same time, affected by comprehensive factors such as foreign policy, military industry system, product level, and international political environment, my country’s military trade exports are characterized by concentrated export target countries, few political additional conditions, flexible transaction methods, and emphasis on maintaining world peace and equality.
In the past ten years (2012-2021), my country’s military trade exports have increased significantly compared with the previous decade, with an increase of 103.04%. The top five export target countries are Pakistan, Bangladesh, Myanmar, Algeria and Thailand. Among the military trade products, the export trend of aircraft, air defense weapons and equipment, ships, armored vehicles, naval weapons and equipment, missiles and other weapons and equipment has increased significantly.
We believe that since 2018, with my country’s increased practical exercises and its own national defense construction, the focus of my country’s military production capacity is more used to meet domestic demand is one of the main reasons.
3. Judgment on the global arms trade and the future of China’s arms trade
We judge that the global arms trade is ushering in a recovery cycle, and it is expected to break through the historical peak in 2017 in the next three to five years; my country’s arms trade will enter a period of trade surplus and gradually grow into a major arms trade country. The main reasons are as follows:
1. The conflict between Russia and Ukraine has strengthened the security demands of countries around the world. The world, especially NATO countries, are making long-term and lasting strategic adjustments, successively increasing military spending and military construction, the US Congress has approved the largest defense spending bill in history, and NATO has promised to significantly increase the military budget to deal with the Russian threat. introduced.
2. The impact of the epidemic on global arms supply and demand has weakened. Many Western countries have forcibly lifted the new crown epidemic prevention restrictions, and the impact of the epidemic on the economy of arms importing countries and the production and delivery of arms exporting countries has been greatly weakened.
3. my country will soon have relatively sufficient foreign trade conditions and advantages. At present, the focus of my country’s military industry is to ensure domestic demand, but it is foreseeable that with the increasingly mature technology of my country’s military industry, the rapid increase in production capacity, and the continuous improvement of the supply system, the production capacity of the military industry will meet and exceed domestic demand at some point. We judge that the flexible military trade market will become a new driving force and source of acceleration for the sustained high growth of my country’s military industry in the future.
4. The impact of changes in military trade on the development of the military industry
The impact of the “14th Five-Year Plan” military trade on the military industry can be reflected in the market, financial statements and civilian-joined military enterprises. Including: 1. For the military industry: raise the ceiling of the industry and expand the market space of the military industry; 2. For the financial statements of the military industry: mainly reflected in the income and profit margin;
5. Where will the military enterprises go under the “change in military trade”?
Military enterprises are also expected to take a more proactive and forward-looking layout in the military trade business in order to seize the historic opportunity. It is reflected in: 1. Central enterprises in the military industry strengthen demand guidance, expand the pedigree planning of military trade products, and create a systematic export of equipment; 2. Some civilian-joined military enterprises make full use of military trade opportunities to expand to the downstream assembly market; 3. Actively expand and tap potential new customers, The proportion of high-tech value-added military trade products is expected to increase; 4. Increase investment in military trade R&D and marketing, and strengthen the targeted integration of production, education and research; The integration of industry and finance, mutual promotion of industry and finance, and financial assistance to the development of military trade business of military enterprises.
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