China Replaces U.K. in U.S.-Led Top-Five Arms-Export List

China pushed the U.K. out of the top-five weapons exporters for the first time in more than 60 years as the Asian country’s growing military and economic might translated into global arms sales.

The U.S. led Russia, Germany, France and China in deliveries from 2008 to 2012, the Stockholm International Peace Research Institute said in a report today. Global exports rose 17 percent from the five-year period ended 2007, as China’s foreign sales of major conventional weapons surged 162 percent.

China has worked to reduce dependence on arms imports and has begun exporting indigenously developed military equipment, such as JF-17 combat jets to Pakistan. The government-owned defense industry has been promoting equipment for sales abroad, including the L-15 jet trainer aircraft and various missiles, many with Russian design heritage.

“This is a tale of China’s rise,” Paul Holtom, director of SIPRI’s arms transfers program, said in a phone interview. “China is looking to move beyond developing countries for sales, such as deals in north Africa with Algeria and Morocco.”

The U.K. dropped out of the top five for the first time since 1950, SIPRI said. Even though exports from companies based there, such as BAE Systems Plc (BA/), were largely flat while those from France and Germany fell, the U.K. still lost its fifth place, Holtom said.

U.S. Dominance

The British government accounts for deals differently to SIPRI and said it was the second-largest exporter of weapons in 2011, the last year for which it has published figures.

The U.S. held the top spot in the five-year period with a 30 percent market share, ahead of Russia’s 26 percent. China’s share rose to 5 percent from 2 percent, and sent most of its exports to Asia, with Pakistan accounting for 55 percent of the total, SIPRI said.

“Exports of military aircraft could provide potential upside” for China’s aerospace and defense industry, Alex Chang, an analyst for Citigroup, said in a note last week. The Hongdu Aviation-made L-15 trainer “with its highly competitive performance and price, has just received its first order and could be China’s next flagship export product in military aircraft.”

Chinese interests go beyond selling weapons. “For some companies involved in the import-export side, the arms deals certainly are not the major money maker,” Holtom said. “They grease the wheels in getting access for the more lucrative deals for infrastructure projects.”

Indian Imports

China fell to second place for weapons imports in the period, ranking behind India, Russia’s largest client, and ahead of Pakistan, South Korea and Singapore.

Imports by European countries slumped 20 percent as government austerity measures across the region reduced spending. Greek imports declined 61 percent, making the country the 15th-largest importer, down from fourth in the 2003-to-2007 period, SIPRI said.

European budget woes are also spurring efforts to sell equipment. “With the financial crisis in Europe, the withdrawal from Iraq and the drawdown in Afghanistan, we can expect to see Europe trying to export a considerable volume of surplus military equipment,” Mark Bromley, senior researcher at SIPRI, said in a statement.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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