Eyeing exports, China steps up research into military drones

By Megha Rajagopalan

BEIJING (Reuters) - China is stepping up research into military drones as its arms industry looks to increase export volumes, hoping to gain traction with cheaper technology and a willingness to sell to countries Western states are reluctant to.

While its technology lags the United States and Israel, the biggest vendors of unmanned aerial vehicles (UAV), China is attracting a growing list of foreign buyers including Nigeria, Pakistan and Egypt.

China has previously had limited success exporting manned military aircraft but is hoping to do better with UAVs given they are cheaper and easier to manufacture.

"Research and development on drones in our country has now entered a phase of high-speed progress," said Xu Guangyu, a retired major general in the People's Liberation Army.

"We have some distance to catch up with developed countries - that's certain - but the export market is growing."

Market researcher Forecast International pegged the value of production for military drones worldwide at $942 million last year. It will grow to $2.3 billion by 2023, the firm said.

China's biggest drone maker, Aviation Industry Corp of China (Avic), is predicted by Forecast to become the world's largest maker of military drones by 2023.

Its Wing Loong drone sells for just $1 million according to Chinese media reports. The U.S.-made MQ-9 Reaper, to which it has sometimes been compared, is priced at around $30 million.

The Stockholm International Peace Research Institute (SIPRI)estimates China became the second country in the world to openly export armed drones when it delivered five of them to Nigeria in 2014. Nigeria, which had vainly sought UAV from the U.S., has used them against the militant group Boko Haram.

The U.S. has only exported armed drones to Britain and says it considers a series of factors when agreeing to foreign sales including human rights and the regional power balance.

Though China is discreet about its weapons exports, it has sold various types of military drones to at least nine countries, according to state media reports, including Pakistan, Egypt and Nigeria.

SOUGHT AFTER TECHNOLOGY

China's weapons exports jumped 143 percent in the five years to 2014 compared to the previous five, though it still only accounts for around 5 percent of the global arms market according to SIPRI.

Military drones provide an opportunity for the country to gain more market share given dozens of governments are trying to gain access to the technology while the U.S. has strict export curbs on them.

The U.S. State Department said in February it would allow exports of armed U.S. military drones under strict conditions, including that sales must be made through government programmes, and that recipient nations must agree to certain "end-use assurances".

China's Foreign Ministry declined to comment on the country's policy on drone exports.

Last month the ministry said China was "extremely cautious and responsible" with its weapons exports, and followed the principle of aiding countries that bought their weapons in building reasonable self-defence capabilities.

The growth of the market is proving a boon for Chinese arms makers.

Yun Jianfei, the Beijing-based chief of Beijing Heweiyongtai Science and Technology Co. Ltd., a private firm that sells police equipment, including drones, to domestic and foreign customers, said he had already sold surveillance UAVs to countries in the Middle East and Africa, without specifying which ones.

"We're placing high importance on them," said Yun.

"Demand for all of our products has shot up -- it's simply because the world has become more chaotic," he said.

Ma Hangzhong, director of China Aerospace Science and Industry Corp.'s Unmanned Aircraft Research Institute, told the official China Daily this month that many of China's defence giants, including his own, are allocating "significant resources" to drone development.

"The industry has a very low entry threshold," he said, adding his company is focussing on military drones that can play a role in counter-terrorism and riot control operations.

Many defence firms also make and sell missiles and rockets to arm drones, heightening the appeal for international buyers, analysts said.

"Admittedly our technology is not first-rate compared with developed countries, but we don't want to be left behind," said Ni Lexiong, a naval expert at the Shanghai University of Political Science and Law.

(Additional reporting by Ben Blanchard, Siva Govindasamy in SINGAPORE and Katharine Houreld in ISLAMABAD; Editing by Rachel Armstrong)