BMI View: In recent years China has cemented its position as one of the largest arms exporters in the world. China benefits from having comparatively cheap (although technologically inferior to American and Russian) products that can be bought by many nations subject to arms embargoes by Western states. This gives the nation a particular niche for countries with a limited military budget or who fall out of favour with Western institutions and states. The domestic defence sector is strong though largely state-owned. This, however, is beginning to change, with greater private-sector involvement being encouraged in an effort to increase levels of spending, add dynamism and to attain greater economies of scale. We note that continued modernisation and heightening tensions in the South and East China Seas will drive demand for defence products in China over the long term: with the PLAN and PLAAF in particular seeing rising investmen t.
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