China looks to expand into unmanned combat vehicles market
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A CH-3 drone. Credit: China Aerospace Science and Technology Corporation

A CH-3 drone. Credit: China Aerospace Science and Technology Corporation

New entity would gain control of profitable military UAV line

Reports that the Chinese ICT firm Nanyang Technology will acquire a key drone and missile manufacturer to boost Chinese exports of the technology, highlight the growing role of Chinese companies in the global unmanned aerial vehicles (UAV) market. Given the current geopolitical state of affairs, it appears likely that these firms will have ample opportunities for field testing these systems in any number of small brushfire wars or internal security operations in sub-Saharan Africa, South and Central Asia, or the Middle East.

According to the Financial Times, Nanyang Technology will acquire the production line for the Caihong UAV series from the China Aerospace Science and Technology Corporation (CASC), and seek a public stock exchange listing under a new name to drum up capital.

The Caihong series, which encompasses reconnaissance and strike UAVs, sold well in 2015, according to Chinese officials, and is one of the most promising product lines for exports to security services worldwide, alongside the CAIG Wing Loong. China has relatively few customers so far abroad, mostly in the Middle East and also Nigeria and Pakistan, but its emphasis on selling systems to “poor and middle-income developing countries” has proven successful in carving out a niche where US and EU consortiums do not follow.

There are a number of reasons for that. Profitability is one, as some of these nations cannot afford the most high-end models and, in terms of the threats they face, do not actually need or have the base to support the most advanced systems. Mid-range models from China, or even Israel and Russia, can be a better value for some nations.

China is an interesting position, though, in that while it now has far fewer export controls on combat models than US entities, it may put more limits on exports once it finds itself having to deal with the minutiae of proliferation issues. That said, two buyers, the UAE and Saudi Arabia, are probably putting Caihongs through their paces in the Yemeni Civil War.

Armed Caihong models has also been exported to Iraq and Nigeria where they serve in a counterinsurgency role. Pakistan is developing its own drones, derived from the Caihong CH-3, with Chinese assistance as the US is more reluctant to involve itself in the country’s drone development projects.

Alongside rising consumer demand in China itself, and the US, for civilian models, the next few years promise to be quite lucrative for Nanyang and other Chinese defense contractors. Despite concerns about industrial espionage and intellectual property rights, US investors have followed to invest in commercial operations. (A company like Nanyang, though, would be another kettle of fish entirely since the Caihong line is explicitly military in nature and has benefitted from intelligence collection efforts targeting US UAV manufacturers.)

Not just in the air

Though not on the Nanyang acquisitions menu apparently, Chinese enterprises are also pursuing more unmanned maritime and ground solutions. The US government estimates, “Chinese demand for military UAVs will grow 15 percent annually on average,” coming to $10.5 billion within ten years.

Similar to the robotics challenges held in the US by DARPA every year, China hosted an autonomous vehicle contest in Beijing this year with entries from major defense contractors in the fields of self-driving trucks or cars, helper robots, and unmanned light AFVs. At sea, the Chinese Navy is developing its underwater drone capabilities as part of its base shoring-up strategy for the South China Sea.

Given the development trends in other countries, it is likely that such efforts will also be a boon to domestic UAV manufacturers like Nanyang, to help integrate land-sea-air systems. This means using drones in a greater capacity to supplement China’s conventional weapons systems’ accuracy in key chokepoints along the sea lanes astride the country’s maritime spheres of influence.

 

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