Recent research from the Stockholm International Peace Research Institute (SIPRI) reveals that revenues for China's top military firms declined by 10% in 2024. This downturn contrasts sharply with global trends, where the defence industry experienced robust growth driven by ongoing conflicts in Ukraine, Gaza, and escalating regional tensions.

The revenue dip among Chinese military companies is largely attributed to a stringent anti-corruption crackdown initiated under President Xi Jinping’s leadership. This campaign, which began in 2012 and intensified to target senior military officials in 2023, has led to the postponement or cancellation of significant arms contracts.

Key figures implicated include eight high-ranking generals expelled from the Communist Party for graft, notably He Weidong, once the deputy chairman of China's Central Military Commission. Their removal underscored the breadth of the crackdown within the People’s Liberation Army (PLA), although diplomats remain uncertain about the long-term impact across China’s military hierarchy.

While China's military firms saw their revenues decline, other nations’ defence industries flourished. Japan reported a striking 40% surge in arms revenue, Germany rose by 36%, and the United States grew by 3.8%. Globally, the top 100 arms firms posted a combined revenue increase of 5.9%, reaching a record $679 billion.

China’s decline caused the Asia-Oceania region to be the sole area registering a drop in arms industry revenues. This comes even as Beijing continues to increase its defence budget, reflecting a strategic rivalry with the United States and persistent tensions in the Taiwan Strait and South China Sea.

Despite the setbacks, China continues to advance its military modernisation. The country boasts the world's largest naval and coast guard fleets, including the development of a potentially sophisticated new aircraft carrier. Its expanding arsenal includes hypersonic missiles, nuclear weapons, and advanced air and sea drones.

Among the firms affected, AVIC—the state-owned aerospace giant—Norinco, which produces land systems, and CASC, an aerospace and missile manufacturer, all saw revenue declines. Norinco experienced the steepest drop, down 31% to $14 billion. The corruption probes prompted leadership upheavals, government reviews, and project delays that slowed military deliveries and procurement processes.

The timeline for new advanced systems delivery, particularly for the PLA’s Rocket Force, could face disruption. The Rocket Force manages China’s ballistic, hypersonic and cruise missile arsenal, which are crucial to Beijing’s strategic deterrence. Aerospace and cyber defence projects may also see similar uncertainties.

The pressure to meet the PLA’s goal of achieving enhanced war-fighting readiness by its 100th anniversary in 2027 is now under question. Yet, experts stress that mid- to long-term investments and political support for military modernisation will endure, although programme delays and tighter controls on procurement are likely.

According to SIPRI analyst Xiao Liang, China’s military modernisation will persist with sustained defence budgets but adjusted timelines and costs. The corruption crackdown signals a more cautious approach to procurement, shaping the future course of China’s defence capability expansion in an increasingly complex geopolitical environment.

Based On Reuters Report