Two state-owned Chinese firms effectively have joined the ranks of the world's 10 largest defense companies in a sign of changing military budgets and export markets, according to a new report on the global arms industry.
China North Industries Corp. and Aviation Industry Corp. of China sit atop as many as four other domestic producers in the global top 20, alongside three state-owned Russian defense companies, according to data compiled by the Stockholm International Peace Research Institute, or SIPRI.
While Western arms makers such as Lockheed Martin Corp. and Boeing Co. still top the think tank's official list, their revenues have been shrinking during the past four years while the double-digit expansion of military budgets in China and Russia has allowed their military suppliers to grow faster than the industry average.
"China feels it is a power that has to beef up its military muscle," said Siemon Wezeman, a senior researcher at SIPRI, whose annual rankings are closely watched by industry and policy makers.
China North Industries, better known as Norinco, is the largest of 10 Chinese aerospace and defense holding companies atop a sprawling array of subsidiaries, some of which are listed in Hong Kong.
Beijing-based Norinco is best known overseas for producing cheap handguns and assault rifles, but is also a prolific exporter of munitions, artillery and air-defense systems in Africa and the Middle East, with additional interests in oil, mining, logistics, explosives and demolition.
AVIC slowly has increased exports of its military planes, including the high-profile partnership with Pakistan Aeronautical Complex to build the JF-17 jet fighter. The company also has sold the L-15 training plane and the Y-12 twin-turboprop, particularly in Africa.
SIPRI estimates both Norinco and AVIC, a maker of combat aircraft, would feature in the top 10. Almaz-Antey OAO—which makes air-defense equipment, such as the S-400 Russia recently deployed to Syria—ranked 11th to top the list of Russian arms makers.
The think tank said China was the third-largest arms exporter after the U.S. and Russia from 2010-14, though it still only accounted for 5% of overseas shipments.
"The international markets are going to be a tough play for U.S. companies for a whole bunch of reasons," Pierre Chao at Renaissance Strategic Advisers said at the industry conference.