U.S. intelligence concerned by AVIC efforts to buy minority stake in aerospace giants
A Commercial Aircraft Corp. of China Ltd. (Comac) C919 aircraft stands under assembly / Getty Images
BY: Bill Gertz
July 10, 2018 5:00 am
A Chinese state-run aircraft and missile manufacturer linked to military programs and past espionage is attempting to purchase interests in major U.S. aircraft manufacturers.
According to Trump administration officials, the Aviation Industry Corp of China, known as AVIC, is seeking to gain access to advanced technology through attempts to buy minority stakes in major aircraft companies.
The attempts were detected by U.S. intelligence agencies several months ago and reported internally within the U.S. government.
One unit that has been tracking the activity is a special Air Force group known as the Office of Competitive Economic Analysis.
Spy agencies are concerned about the buy-in effort since AVIC already has made inroads into the U.S. aircraft supply chain by buying aviation support companies and those involved in commercial aviation.
“AVIC is a bad actor that is one of several state-owned enterprises that is working to mop up western technology,” said an administration official familiar with the AVIC activities.
No details of the Chinese efforts to buy into American aircraft companies such as Boeing, Northrop Grumman, General Dynamics, and Lockheed Martin could be learned.
However, information on AVIC covert operations targeting American industry may have come from a source in the state-run conglomerate. The Hong Kong newspaper Apple Daily reported in May 2016 that Guo Enming, deputy director of AVIC’s Science and Technology Commission had dropped out of sight and was suspected of spying.
AVIC espionage was revealed in the case of Dongfan “Greg” Chung, an aerospace engineer for Boeing who was convicted of economic espionage in 2009 for supplying aviation and space secrets to China.
Chung worked with another Chinese spy, Chi Mak, who worked with a Gu Weihao, who is described in court papers as a senior official of AVIC that is under the direct leadership of the PRC State Council.”
The court papers describe AVIC as a consortium of aircraft manufacturers, including companies known as Chengdu, Harbin, Xian, and Nan Chang, that make up a total of 111 enterprises, 36 research institutes, and six universities and colleges with a total staff of 560,000 people.
Chung supplied information to China on the B-1 bomber, the Space Shuttle, and U.S. rocket launchers and was sentenced to nearly 16 years in prison and Mak was sentenced to 24 years in prison.
AVIC builds fighter aircraft, helicopters, and drones for the Chinese military and also is involved in automobile manufacturing and other ventures.
The company was founded 1993 when the Ministry of Aerospace Industry was corporatized into AVIC and later split into AVIC I and AVIC II before being recombined in 2008.
Its military fighters include the FC-20, FC-1, and F-8 jets.
The company also makes military transport aircraft, commercial aircraft, air-to-air missiles, surface-to-air missiles, and anti-ship cruise missiles.
Boeing spokesman Chaz Bickers said he was not aware of the AVIC attempts to buy a minority stake in the company but would look into the matter. He did not respond to a follow up email.
A spokeswoman for Lockheed Martin declined to comment.
Spokesmen for Northrop Grumman and General Dynamics did not return emails seeking comment.
Administration officials said AVIC already has made inroads into the U.S. aviation sector by purchasing companies that are suppliers to U.S. corporations.
The Pentagon’s Defense Innovation Unit Experimental (DIUx) warned in a report on Chinese technology acquisition that China is now posing risks to U.S. national security.
“China’s transformation to be the manufacturer for the world means more supply chains are owned by China which creates risks to U.S. military technology and operations,” the report said.
“For example, the Aviation Industry Corp. of China (AVIC) is a Chinese-state owned aerospace and defense company which has now procured key components of the U.S. military aircraft supply chain.”
AVIC has been a target of tougher White House policies toward China’s unfair trade practices and covert technology acquisition efforts.
A U.S. Trade Representative office report published in March on Chinese technology theft included an extensive section on AVIC.
The state-run company is playing a major role in the China’s technology acquisition program by buying aviation-related companies, the USTR report said.
“Chinese firms have acquired at least 11 U.S. aviation companies, established three joint ventures, and signed five cooperation agreements since 2005,” the report said.
“The central state-owned Aviation Industry Corp. of China (AVIC) leads this investment effort, and, since 2010, has spent more than $3 billion acquiring U.S. and European aviation companies to address key gaps in general aviation technologies.”
AVIC in addition to building commercial aircraft is the sole domestic supplier of military aircraft to the PLA, the report said.
“AVIC’s acquisitions have facilitated the transfer of engine, avionics, and production processes to China, resulting in so-called ‘breakthroughs’ in domestic piston engine technology, solutions to production bottlenecks, and the development o advanced Unmanned Aerial Vehicles (UAV) manufacturing (for both Chinese military use and for export to foreign countries),” the report said.
AVIC also has purchased companies that provided China with a full-scale general aviation aircraft engine business.
General aviation companies bought by China include Epic Aircraft in 2010, including all the company’s intellectual property and technology; Teledyne Technologies that developed full authority digital engine control technology; and Cirrus Aircraft, a large manufacturers of piston-engine powered aircraft.
AVIC also bought Southern Avionics & Communications Inc. a leader in avionics; United Turbine and UT Aeroparts that provides turbine aircraft engine services; Align Aerospace involved in supply chain services for the aerospace industry; and Danbury Aerospace that specializes in engine design and certification.
The USTR report quoted AVIC President Tan Ruisong as saying the company is engaged in “coordinated development” of both civilian and military products.
AVIC in 2010 created a $3 billion private equity fund to buy dual-use technology companies and to invest in research and development for Chinese aviation.
Chinese government support for AVIC purchases in the United States has included funding from the People’s Bank of China, the state bank, and the China Ex-Im Bank.
The tech transfers have allowed China’s defense industry to achieve a breakthrough in indigenous production of turbine and piston aircraft engines.
“Key breakthroughs were achieved in gasoline modified heavy oil technology, electric fuel injection technology, and turbocharging,” the report said.
The defense firm Jane’s IHS Markit, in a report on China’s advanced weaponry noted that AVIC also has purchased non-U.S. aircraft companies, including Germany’s Thielert Aircraft Engines, which makes diesel aircraft engines; and Britain’s AIM Altitude which makes both civilian and military aircraft components, including radar panels, missile containers, radomes, and sensor probes.
The Chinese also invested $30 million in Britain’s Gilo Industries, a company the produces rotary engines for unmanned vehicles.
The Jane’s report said China is seeking to invest in U.S. aircraft companies that are seeking access to the Chinese commercial aircraft market. Recent mergers and acquisitions by AVIC have included deals with Henniges, Align, Southern Avionics, Mooney, Enstrom, Glasair, Cirrus, Nexteer, Teledyne, Superior, and Brantly, the report said.
Joint ventures in the aviation sector have included deals between AVIC and GE, Cesna, and Brantly.
Greg Levesque, an expert on AVIC with the consulting firm Pointe Bello, said AVIC activities “greatly enhance China’s aviation manufacturing and technical capabilities which contribute to advances in PLA programs.” Sectors that benefit include advanced aircraft materials and engine technology.
“AVIC has through mergers and acquisitions filled critical gaps in its domestic general aviation industry over the last decade,” Levesque said.
“We’ve seen evidence of AVIC partnering with U.S. corporates to bid on U.S. government aircraft programs,” he added, noting a failed deal to build the VXX Marine One helicopter.
Rick Fisher, senior fellow at the International Assessment and Strategy Center, said the AVIC effort to buy into American firms is dangerous.
“If the Chinese become significant minority stakeholders in U.S. defense-aerospace or U.S. defense contractors, their strategy may be to have Chinese officers appointed to the leadership of these companies, constituting a very crude but obvious espionage threat,” Fisher said.
“If such Chinese, or loyal-to-China officers have access to company data bases, or even ‘keys’ to the headquarters building, that poses a significant espionage threat.”
The U.S. government should prohibit any stake by a Chinese state run company in any U.S. defense or aerospace firm, Fisher said.
China affairs experts Gordon Chang agrees.
“Beijing, with its attempts to buy American aircraft companies, looks absolutely determined to make CFIUS the most important agency in the Federal government,” Chang said of the Treasury Department-led Committee on Foreign Investment in the United States.
“There ought to be a law: No acquisitions of U.S. assets by Chinese state-owned entities unless Congress approves,” he said. “The last thing we should do is permit a militant Chinese state to buy assets, especially assets with military applications.”
Source: Washington Free Beacon “Chinese Aviation Firm Seeking Investment in U.S. Aircraft Makers”
Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
Kelvin Wong, Singapore – Jane’s International Defence Review
29 January 2018
State-owned aerospace and defence prime Aviation Industry Corporation of China (AVIC) will expand its Wing Loong family of strike-capable reconnaissance medium-altitude long-endurance unmanned aerial vehicles (MALE UAVs) with the Wing Loong I-D platform, state news agencies reported on 25 January.
Officials from AVIC’s Chengdu Aircraft Design and Research Institute (CADI) subsidiary were quoted as saying at the Wing Loong UAV Development Conference that the company is aiming to ready the Wing Loong I-D for its maiden flight and entry into the international market within 2018.
“The Wing Loong [I-D] is the first of a new generation of improved reconnaissance-strike UAS [unmanned aerial systems] in China,” said Li Yidong, chief designer of the Wing Loong UAV family and vice-chief designer of CADI. “It will help enhance the influence of [the] Wing Loong brand in the global military trade market with other members of the family.”
The Wing Loong I-D is reportedly an improved version of the Wing Loong I UAV, which has entered service with the People’s Liberation Army Air Force (PLAAF) under the designation of Gongji-1 (Attack-1).
A scale model of the new design was revealed for the first time at Airshow China 2016. According to specifications provided by AVIC during the event, the Wing Loong I-D is expected to be approximately 8.7 m in length, 3.2 m in height, and have a wingspan of 17.6 m.
The Wing Loong I-D will also be powered by a piston engine of unknown providence, with the company aiming to achieve a maximum speed of 280 km/h and a service ceiling of 7,500 m (24,600 ft). An operating endurance of 35 hours is also desired.
Source: Jane’s 360 “China’s AVIC aims to roll out Wing Loong I-D in 2018”
Note: This is Jane’s 360’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
China has the ambition to export its FC-31 (also know as J-31 internationally) stealth fighter jet to grab a market share from U.S. F-35 but has the problem of the lack of China’s homegrown engines. Its J-31 has been tested for 2 years but previously it used Russian RD-93 engines. Whether Russia is willing to provide RD-93s for the J-31s exported by China remains a serious question. Moreover, RD-93 is not tailor made for J-31 so that it cannot meet the design requirements of J-31.
Now, China’s official military forum mil.huanqiu.com quotes in its report today U.S. media DefenseNews as saying that according to Chinese officials at Dubai Air Show, J-31 is equipped with twin engines made in China, not the Russian RD-93 engines previously on the aircraft.
In addition, mil.huanqiu.com quotes DefenseNews as saying, “Officials touted the aircraft’s ‘outstanding situational awareness’ achieved with advanced radar, high maneuvering capabilities, and multi-spectrum low-observability.”
DefenseNews says in its report, “The Aviation Industry Corporation of China (AVIC) is ‘in negotiations’ with the Chinese Air Force to buy the multi-role FC-31, AVIC project manager Lin Peng told reporters on Sunday (November 8).”
As described in my previous posts, J-31 has been developed by AVIC on its own without government funding. It is previously believed that China concentrates its funds and efforts on the development of its J-20 heavy stealth fighter for air dominance so that without government funding, AVIC can only recover its R&D expense from export, but so far AVIC has not received any order from abroad. However, it seems AVIC has developed J-31 quite successfully so that it now can attract government order. With government funding, AVIC will certainly be able to begin mass production of J-31 earlier and make its performance more satisfactory.
According to DefenseNews, Lin Peng told reporters that AVIC was planning first flight of the production aircraft in 2019, with initial operational capability scheduled for 2022 and that J-31 would be fully operational in 2024.
Source: mil.huanqiu.com “U.S. media says China’s air force is negotiating for the purchase of J-31, which is equipped with homegrown engines and to begin mass production in 2019” (summary by Chan Kai Yee based on the report in Chinese)
Source: DefenseNews “China Touts Stealth Fighter Jet, But So Far No Takers”
Full text of the DefenseNews report can be viewed at http://www.defensenews.com/story/defense/show-daily/dubai-air-show/2015/11/08/china-touts-stealth-fighter-jet-but-so-far-no-takers/75409824/
Related posts at tiananmenstremendousachievements.wordpress.com:
China’s stealth fighter could ‘take down’ foreign rival – industry exec dated December 10, 2014
China’s Secret in Developing Top Aircrafts Quicker, Less Costly dated December 9, 2014
Mystic Lines at China’s J-31 Wings, Test for Design of Improved Version? Dated September 27, 2014
China hopes to snatch sales from US with J-31 4th-generation fighter jet dated August 26, 2013
China: J-31 Indicates Trend of Weapon Development without Government Funding dated August 2, 2013
Busy Test Flights of J-31 Stealth Fighter in the New Year dated February 10, 2013
Display of China’s J-31 stealth fighter jet at Zhuhai airshow last month has attracted great interest both at home and abroad. CCTV tried to learn the secret technologies in the aircraft. Its reporter interviewed Lin Zhoming, President of Aviation Industry Corporation of China (AVIC) According to Lin, J-31 ranks the first in the world in its substantial reduction of the number of its parts and components. Compared with the traditional design, the revolutionary design of the aircraft enables the reduction of 50% in number of parts and components and 54% tools and moulds used, resulting in lots of saving in time and costs. That is the secret of AVIC’s ability to develop J-31 so quickly and to grab market share from US F-35. As for the secret of J-31’s revolutionary design, Lin said that J-31 was special in its integration of design. For example, its wings and mid-section of fuselage are one integrated piece. As a result, in transportation the wings of the aircraft cannot be dismantled and put into a container for secrecy. Hearing that the reporter showed Lin the photo of an aircraft wrapped in cloth on a truck traveling on an expressway in early July 2012. As it took place around the Dragon Boat Festival, the aircraft wrapped in secrecy was referred to as a Dragon Festival dumpling aircraft by Chinese military fans. Lin said that it was precisely a J-31 being transferred to a test center. It was tightly wrapped for secrecy. This blogger’s note: Arrogant US military believes that only the US is capable of invention so that China has been capable of quick development of its advanced aircrafts because China has stolen US design and technology through hacking. Now, every country wants to steal another country’s secret weapon technology and design, but a country may not be the number one in military strength by stealing. After all, it is not able to steal all the secrets. Moreover, by stealing, one can only copy other’s weapon in producing similar weapon not as good as the original. We should ask: What China copies from the US in its another dumpling aircrafts wrapped in cloth that appeared on expressway later in October 2013? Has the US any aircraft better than F-22 and F-35? China is developing the next generation of advanced aircrafts according to its established practice of “improving existing, developing the next, preliminary development of the third and research into the fourth generations.” With reduced funds, the US has to make a revolutionary change in its weapon development strategy to concentrate its funds on projects that may enable it to win in its arms race with China and refrain from wasting funds in developing weapons that are too advanced but soon to be obsolete. Both the US and China are developing their prompt global strike capabilities. US sophisticated aircraft carrier will be obsolete when China has such capability. Why shall the US spend lots of money to replace its existing carriers with Ford-class ones? Its existing ones are already much more advanced than that any other country is capable of making. In addition, so far no other countries have the financial and technological resources to build a fleet of aircraft carriers comparable to US fleet. Source: qianzhan.com “World unique technology in PLA’s J-31 fighter jet: Referred jokingly as dumpling aircraft” summary by Chan Kai Yee based on the report in Chinese)
The Civil Aviation Corporation of China yesterday gave first public display of J-15, J-10 fighter jets, L-15 training aircraft and WZ-10 helicopter to more than 150 Chinese medias at Nianliang, Xian, Shaanxi Province.
It revealed that China’s carrier-based J-15 fighter jet still has to use Russian AL-31F engines.
Source: huanqiu.com “First public display of J-15, which still uses Russian engines” (summary by Chan Kai Yee based on the report in Chinese)
I only post 2 of the 15 photos of J-15 here. All the 15 photos of J-15 and 3 photos of J-10 in the report can be seen at mil.huanqiu.com/photo_china/2013-11/2716162.html.
China: Homemade Engine Usable for J-15 Fighter, but Needs Improvement dated March 11
China: Lots of J-15 Carrier-based Fighters Are Being Produced dated May 14
China: J-15 Fighters to Station on China’s first Aircraft Carrier dated June 20
Over the past 2 years, China surprised the world in test flights in quick succession of its J-15 carrier-based and J-16 fighter jets, J-20 and J-31 and J-18 VTOL stealth fighter jets and Y-20 large transport aircraft.
What has enabled China to make such quick progress?
Chinese media have tried hard to find an answer from the stars in China’s aviation industry at recent NPC and CPPCC sessions.
Reporters chased closely Sun Cong, chief designer of J-15 carrier-based fighter jet and kept on asking lots of questions about carrier-based aircrafts.
Sun kept on replying, “Sorry, sorry, I really cannot say anything.” Faced with reporters’ question, he was worried that he might betray some secrets as soon as he opened his mouth. As a result, he kept his mouth tightly shut and always replied the questions with smiles. However, pressed by reporters who never relaxed the pressure on him, he after all revealed quite a few “secrets”.
He said that he was able to develop J-15 from nothing in such a short period because of the use of the laser direct manufacture technology to make parts of titanium alloy and M100 steel.
That is a brand new technology. The US began to research into it in 1984, but did not make public about it until 1992. The biggest part the US is able to make is a titanium alloy force bearing frame for F-22 fighter.
As the US was not able to make highly strong large titanium alloy part, Aeromet, the major producer of such parts, closed down due to its inability to produce complicated parts of titanium alloy with commercial value.
China, however, began its research into the technology in 1999 in accordance with the state’s 863 and 973 plans for metal parts, but did not do the research for parts of titanium alloy until 1995. However, it has soon caught up with and surpassed the US. It is now able to use the technology to make complicated parts of titanium alloy of the size exceeding 12 square meters.
The use of that technology is now a major strong points of China’s aircraft industry in developing new type of aircrafts.
In CCTV’s news footage today, we saw Tang Changhong, chief designer of Y-20 large transport aircraft at Aviation Industry Corporation of China (AVIC) saying that China was able to conduct test flight of Y-20 so quickly because it has used the laser direct manufacture technology.
It took China only 5 years in developing the aircraft, a mere two thirds of the shortest time that any other country has taken in developing similar aircraft.
Source: mil.huanqiu.com, mil.chinanew.com, CCTV
In an exclusive interview with china.com.cn reporter, CPPCC (China People’s Political Consultative Conference, a consultative organization to the party) member Sun Cong, deputy chief engineer of Aviation Industry Corporation of China, said that after the successful taking off and landing of J-15 carrier-based aircrafts on China’s aircraft carrier the Liaoning, there shall still be test flights for finalizing their design. Besides, there will be training of a number of pilots. It will not take long for the combat capability to take shape.
According to Sun Cong, J-15 is a third-generation carrier-based fighter jet. As the first attempt of the country’s development of carrier-based aircraft, it has already been an advanced starting point and commencement.
“J-15 can be equipped with homemade engines,” stressed Sun. “At present, homemade engine has already satisfied the usable standards, but there is still some work to do to make it meet ideal standards.
He finally stressed that the year of 2012 is the year of excessively bumper harvest in China’s aviation industry. “The excessive achievements of China’s aviation industry have shocked the world. What have shocked the world are no merely the breakthroughs in technology, but in my personal feeling, the Chinese speed reflected in the development of our aviation industry, i.e. China’s fast speed of progress has shocked the world.”
Source: china.com.cn “Homemade Engine Usable for J-15 Fighter, but Needs Improvement” (translated by Chan Kai Yee)