The Role of Technology Transfers in China’s Defense Technological and Industrial Development and the Implications for the United States

China’s defense science, technology and innovation system has engineered a remarkable turnaround in its fortunes in the past two decades. External technology and knowledge transfers and the defense industry’s improving ability to absorb these inputs and convert into localized output has played a central role in accounting for this progress. China has pursued an intensive campaign to obtain defense and dual-use civil-military foreign technology transfers using a wide variety of means from spending heavily on importing large amounts of technologies and engaging in joint collaboration to the use of more nefarious means, such as industrial and cyber espionage. A number of questions are addressed. How has China been able to exploit access to foreign defense and dual-use technologies and knowledge and how has the defense industry been able to assimilate these inputs? How successful have Chinese efforts at defense technological re-innovation been, and how does this compare with and complement its longer-term efforts at original innovation? How, and to what extent do recent Chinese defense technological innovations support the ability of the People’s Liberation Army (PLA) to protect the country’s expanding international interests? What are the challenges that confront the Chinese defense industry in its continuing efforts to modernize and support the PLA in its efforts to be able to fight and win future wars? An analytical framework to examine the relationship between technology transfers and China’s defense innovation is put forward. The concept of absorptive capacity is explored along with mapping the imitation to innovation environment to provide the context and benchmarks in which to identify the Chinese defense industry’s progress. Eight categories of imitation and innovation are defined in the typology beginning with duplicative imitation through to radical innovation. China has put forward a three-step strategy to indigenous innovation: introduction, digestion, assimilation and re-innovation. Three case studies provide detailed insights into China’s military and commercial technological development arc, the central role that foreign technology transfers play, and the difficult struggle with absorbing these capabilities: 1) Acquisition of Britain’s Spey Mk202 jet engine; 2) advanced imitation of the Russian Su-27 jet fighter; and 3) China’s involvement in producing the Boeing 787 and how this has helped in the development of China’s homegrown C919 airliner. There is also analysis of the impact of this technology absorption by the Chinese defense industry on the enhancement of the PLA’s force projection capabilities, especially on the aviation, naval, and precision strike sectors. The principal challenges facing China’s defense industry in its goal of becoming a world-class original innovator will also be discussed along with examination of Xi Jinping’s efforts to pivot from re-innovation to original homegrown innovation. The paper concludes by looking at the global implications of an increasingly innovative Chinese defense establishment, focusing on intensifying U.S.-China technological competition.Naval Postgraduate School Acquisition Research ProgramN00244-17-1-000