China's AVIC is World's Number 2 Defense Firm in Revenue

The Aviation Industry Corporation of China (AVIC) has secured the second spot in the "Defense News Top 100 for 2024" list, surpassing other global defense firms.

The annual rankings, published by U.S.-based Defense News, are based on 2023 defense revenue data.

AVIC, a China-based company, reported $44.9 billion in defense revenue for 2023, trailing only Lockheed Martin, which took the top spot with $64.5 billion. AVIC develops military air platforms for the Chinese Army and export customers.

Notably, six Chinese companies made it to the list this year, including newcomers China State Shipbuilding Corporation Limited (8th place) and China Electronics Technology Group (11th place). Other Chinese companies, such as NORINCO (9th place), China South Industries Group Corporation (12th place), and China Aerospace Science and Technology Corporation (52nd place), also featured on the list.

The rise of Chinese defense and aerospace companies can be attributed to merger strategies, where smaller companies are consolidating under larger entities to create larger structures and increase turnover, thereby moving up the rankings.

AVIC's U.S. Footprint

AVIC is subject to U.S. sanctions due to its ties to China's military. The U.S. has flagged AVIC as a potential national security threat since 2020, imposing sanctions to hinder its growth. Despite this, AVIC's U.S. affiliates, including Cirrus, have continued to grow.

"As the People’s Republic of China attempts to blur the lines between civil and military sectors, ‘knowing your supplier’ is critical,” then-Pentagon spokesman Jonathan Hoffman said in June 2020.

Cirrus, a Minnesota-based company, is a small part of the AVIC empire, with 2022 revenue of $890 million. Cirrus' vice-chairman, Hui Wang, is a director of AVIC Heavy Machinery, which is on a Treasury sanctions list and a Pentagon list of Chinese military companies. Another Cirrus director sits on the boards of two sanctioned AVIC subsidiaries. Furthermore, Cirrus has worked with AVIC-owned China Aviation Industry General Aircraft Zhejiang Institute to make a training aircraft since 2019. The U.S. put this partner on a Commerce Department Military End User list in 2020, restricting certain exports without a special license.

While Cirrus produces general aviation aircraft, its expertise could potentially be valuable to military customers, raising concerns about the transfer of skills and technology. The company has received U.S. government approval for exports to China and has strictly complied with its export license from the Bureau of Industry and Security.