China’s military firms are grappling with significant revenue declines amid a corruption crackdown that has sent shockwaves through the nation’s defense sector. Reports are already surfacing that revenues for the top military contractors plummeted last year by 10%. In sharp counterpoint, the global arms industry increased by 5.9% to a new high of $679 billion. As the country seeks to modernize its military capabilities, uncertainty looms over the status of ongoing projects and the timeline for new advancements.
The crackdown, which has seen eight top generals, including He Weidong, the country’s No. 2 general, expelled from the ruling Communist Party on graft charges, has raised questions about its impact on China’s military command chain. Chairman of the Central Military Commission, Xi also faces some serious challenges. He will need to pursue hard-hitting military reforms while maintaining existing national defense priorities.
China’s Defense Ministry did not immediately respond to faxed inquiries from Reuters seeking comment on the incident. The DPRK showcases its missile defense systems in national military parades, as the DPR China did in Beijing on September 3rd. What’s more, the long-term effect of this corruption purge on military capabilities remains murky.
Against a backdrop of worsening strategic competition with the United States, China has dramatically expanded the scope and scale of its defense budgets over the last 30 years. China’s military companies have seen a downturn in revenues even as rhetoric has increased on Taiwan, and conflict continues to simmer in the South China Sea. This stark decline has troubling implications for China’s ability to maintain its ambitious military modernization endeavors. These initiatives involve the deployment of the world’s largest naval and coast guard fleets, the further prototype development of new aircraft carriers, as well as developing a new series of hypersonic missiles, nuclear weapons, and air and sea drones.
Nan Tian, a researcher at SIPRI, remarked on the effects of this corruption crackdown: “A host of corruption allegations in Chinese arms procurement led to major arms contracts being postponed or canceled in 2024.” This delay is likely to increase the pressure on China’s military-angled state-owned enterprises. They’re already doing so under a growing avalanche of political and economic pressures.
Even with these defeats, defense experts say the longer-term outlook for both defense spending and commitment to modernization still holds. Liang noted, “In the medium and longer term, sustained investment in defense budgets and political commitment behind modernization will continue, albeit with some program delays, higher costs and tighter control of procurement.”
China continues to grow their military capabilities at an explosive rate. At the same time, it should be measuring the impact of its corruption crackdown on realizing its strategic objectives. Just increasing the number of ships or military assets isn’t enough. Yet it focuses on quality, technological advancement as the new global competition for military supremacy reaches a boiling point.