A security guard walks past an advertisement for the China North Industries Group Corp. (Norinco) LD2000 ground-based close-in weapons system during the China International Aviation & Aerospace Exhibition in Zhuhai, Guangdong province, China, on Thursday, Nov. 13, 2014. The air show takes place from Nov. 11-16. Photographer: Brent Lewin/Bloomberg
Defence procurement was once the preserve of a few secretive Chinese state-owned conglomerates © Bloomberg

China’s military is increasingly enlisting smaller private sector start-ups in the race to create the next generation of high-tech weaponry.

Once the preserve of a few secretive Chinese state-owned conglomerates, the lucrative realm of defence procurement is gradually being opened to nimbler, cheaper and more innovative private sector start-ups.

While the process of including the private sector in military procurement tenders on a large scale started in 2013, it is only recently that the People’s Liberation Army has sourced sensitive next-generation technology such as drones and artificial intelligence from private start-ups.

The new strategy has been pioneered by President Xi Jinping who this year created a Military-Civil Integration Development Commission with himself as head. 

The fruits of the strategy were on display last week at Beijing’s “Civil-Military Integration Expo”, where private companies’ military hardware, from autonomous armed boats to virtual reality goggles, were on display.

Uniformed PLA officers aimed electromagnetic anti-drone guns designed by Beijing tech company YNRD, while children with fathers in tow battled foreign invaders on a video game simulation designed by electronics company Huaru.

Some private companies say that being allowed to compete for military contracts is partly an effort to cut hardware costs: private companies can produce equipment for a fraction of the cost of their state-run counterparts.

But private companies and start-ups are also widely judged to be better at some types of innovation and offer cutting-edge technology in areas such as facial recognition and batteries.

A representative of China Aerospace Science and Industry Corporation, one of the state-owned companies with a booth at the expo, said the reason for allowing competition with the private sector was simple: “This is what everyone is doing now, especially the US. That is why we must do this as well.”

He said this had even spurred reforms in the state companies aimed at cost-cutting in order to compete with private start-ups.

Randall Steeb, senior engineer at US think-tank the Rand Corporation, said in a phone interview that batteries and solar cells were one area where the Chinese private sector led the state companies in technology.

“There is a push for much greater endurance for the UAVs [unmanned aerial vehicles], with higher energy-density batteries and fuel cells coming from the commercial side,” he said. “There is a lot depending on the private sector.”

“Most of our clients are Chinese military,” said Cai Songlin, a marketing manager at Hikvision, a Shanghai-listed video surveillance company. “Among the world’s video surveillance companies, Chinese ones are some of the strongest.” 

One of the most imposing items at the expo was an unmanned boat mounted with a machine gun turret, designed by Yunzhou Tech Corporation, based in the southern city of Zhuhai.

The technology resembled an experimental unmanned robot boat fielded by the US Office of Naval Research in 2014. “We’re behind the US now, but give us three to four years and we’ll have caught up,” said a company representative, adding that it was awaiting a quality certificate from the ministry of defence but was confident it would soon be making the boats for the PLA.

Asked what advantages his company had over a state defence conglomerate, he said: “We’re faster, and we’re cheaper. We don’t have a lot of retired people who need pensions, and our salaries are not very high.”

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