The Aviation Industry Corporation of China (AVIC) is the main supplier of military planes and helicopters to the People's Liberation Army Air Force (PLAAF). They produce the J-20 stealth fighter, FC-1, and FC-8 fighters, the 5th-generation FC-31 stealth fighter, and aerial reconnaissance and attack drones. In 2007, Chinese hackers stole secrets about the U.S. F-35 that were incorporated by AVIC into the Chinese FC-31.Because we left them where they could steal them.
Given how U.S.-China relations are deteriorating in Asia, the U.S. military in the Pacific region could someday fight these Chinese aircraft -- or at least play dangerous games of brinkmanship. In March 2016, a Chinese military helicopter in the South China Sea lifted off from a PLA Navy frigate and charged a U.S. Navy cruiser. It was likely a Z-9 helicopter, capable of carrying torpedoes that could target the U.S.N. cruiser. The Z-9 is produced by AVIC.
AVIC is seeking to build its general aviation capabilities to directly compete with U.S. commercial and military aviation, including for U.S. and international contracts. In 2011, for example, AVIC attempted to use a tiny and unprofitable California company, U.S. Aerospace, to compete for the next iteration of Marine One helicopters used by the U.S. President. AVIC also sells components for U.S. civilian planes, and seeks to sell aviation parts to the U.S. for use in U.S. military aviation. AVIC sees these as first steps towards competing for U.S. military contracts such as air force trainer jets.
In order to build its general aviation capabilities, AVIC launched a global campaign to obtain technology through purchase of small and medium-sized aviation companies. AVIC is close to buying AIM Altitude, based in Dorset, U.K. AIM Altitude specializes in aerospace and military composites that will be useful for AVIC's continued development of military aerospace technologies, including stealth and drone technologies.
AVIC also produces civilian aircraft, but the "civilian" aviation technology they seek will almost always be useful for their military aircraft development. According to CEO Patrick Jenevein of Tang Energy, which has partnered with AVIC in the past, "What China is doing with AVIC is making sure they have access to technologies that they wouldn't have otherwise."
AIM Altitude is AVIC's first purchase of a U.K. aerospace company, but not its first purchase in the West. In the last twenty years, AVIC has purchased half a dozen economically distressed U.S. and international aerospace companies. Some of these technologies are export-controlled, and U.S. law strictly forbids their transfer to foreign entities. The law applies even when those foreign entities own or control the U.S. entities in possession of the export-controlled technologies.
However, there are easy technical means for foreign owners that want to access export-controlled technologies in U.S. companies they control. According to my sources, it could be a relatively simple insider cyber-attack, or embedded Chinese employees photographing technical processes when other workers leave the site. The CEO of the purchased U.S. company typically wants to please his or her foreign owner, and is disincentivized to implement due care that ensures the foreign owner cannot access the export-controlled technology. According to one source, "As an American company, there are certain technologies that we can't send to China. But if AVIC owns the servers, they can access them."
Sounds something like treason to me.
"Our arms exports and technology control policies need a root-and-branch review, said Dr. Patrick Cronin in an email. Dr. Cronin is Senior Advisor at the Center for a New American Security in Washington, D.C. "We are preventing good-enough technology from being easily exported to allies and partners, but we are at risk of losing control over leading-edge technologies."