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August 23, 2017 Issue No. 21
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 GENERAL DEFENSE INDUSTRY ISSUES |
Shares in high-growth Chinese defense companies whose current valuations are low may be in hot demand in the next two to three years, following a gradual improvement in industry fundamentals, experts said. On Aug 5, more than 30 defense shares rose 5 percent with nine stocks, including Addsino Co Ltd, hitting the daily upper limit, following Sino-Indian border tensions. The military standoff "is a catalyst" for the current rise in shares, but the defense industry's "endogenous development" has also begun, said Wang Zongchao, chief analyst of defense stocks with Huatai Securities.
Although much of the media coverage to date has focused on the symbolic and political importance of the parade as a powerful reaffirmation of the military's loyalty to the CCP and Chairman Xi Jinping ahead of the pivotal 19th Party Congress later this year, the parade reveals a force that is still growing and developing, concurrently envisioning itself as a modern, advanced military and acknowledging its own weaknesses. The parade demonstrated an important development in the PLA's pursuit of developing improved joint operations capabilities by incorporating the key components necessary for combat operations, supported by information support, electronic warfare, logistics support, and other non-combat units. The air-assault demonstration, the integration of the SSF through the information operations group, and the prominent display of the PLA's latest and most advanced missiles are clear signs of the PLA's developing operational capabilities and evolving force structure.
The acquisition of technology has always been a central part of China's economic reform effort. But until recently, the pursuit was characterized mostly by technology purchases-or in some cases, by out-and-out intellectual property theft. China's government and firms sought technology through business deals and joint ventures. They bought technology products wholesale, and encouraged foreign firms to set up shop in China with technology-heavy operations. Sometimes, they reverse engineered foreign technologies and developed indigenous alternatives, efforts that subsequently helped to modernize China's own industrial base. But the last decade has added two additional dimensions.
Military giant Poly Group Corp. is taking over two state-owned trading companies of light industrial products, helping the Chinese government reach its goal for the year early and slim down the number of SOEs to 99. The two companies - Sinolight Corp. and China National Arts & Crafts (Group) Corp. - have been completely transferred to Poly Group, without financial transactions, the government supervisor over SOEs said Tuesday. Sprawling Poly Group businesses include defense manufacturing, real estate, cinemas, film distribution and art auctioning.
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U.S. Army Halts Use of Chinese-Made Drones over Cyber Concerns | Ecns.cn
The U.S. Army has ordered its members to stop using drones made by the world-leading SZ DJI Technology Co Ltd because of "cyber vulnerabilities" in the products. Service members who use DJI drones and systems that use DJI components or software should "cease all use, uninstall all DJI applications, remove all batteries/storage media and secure equipment for follow-on direction," according to an Army memo posted online on Wednesday. SZ DJI is a Chinese drone manufacturer based in south China's innovation-hub Shenzhen. The memo said DJI drones are the most widely used by the Army among the off-the-shelf equipment of that type.
China Drone Maker Steps Up Security After U.S. Army Ban | Reuters
Chinese drone maker SZ DJI Technology Co Ltd is tightening data security on its drones after the U.S. Army ordered its members to stop using DJI drones because of "cyber vulnerabilities," a company official told Reuters on Monday. The privately held Shenzhen-based company is speeding deployment of a system that allows users to disconnect from the internet during flights, making it impossible for flight logs, photos or videos to reach DJI's computer servers, Brendan Schulman, vice president of policy and legal affairs at DJI, said in an interview. The security measure had been in the works for several months but DJI said it is bringing it out sooner than planned because of an Army memo earlier this month that barred service members from using DJI drones.
China's CASC Plans App-Based Control System for CAI Hong UAVs | IHS Jane's
Engineers at the Beijing-based China Academy of Aerospace Aerodynamics (CAAA), the unmanned aerial vehicle (UAV) platform, systems, and technology business unit of defence prime China Aerospace Science and Technology Corporation (CASC), are developing a new app-based UAV management system specifically designed to reduce the complexities of operating larger, multirole air vehicles in the medium-altitude long-endurance (MALE) class.
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China's first home-grown aircraft carrier, the Type 001A, is likely to join the navy of the People's Liberation Army by late next year, earlier than scheduled, analysts said. The earlier-than-expected start to the carrier's service marks a key acceleration of China's effort to build up a blue-water navy to secure the country's key maritime trade routes and to challenge the US's dominant position in the Asia-Pacific region, especially in the South China Sea and the East China Sea. Two military sources told the South China Morning Post the navy had expected the Type 001A would be delivered to them as early as the end of 2018, or by 2019. Hu Wenming, general manager of the Type 001A project, told China's state television that the carrier's propulsion system, namely the engine part, underwent tests, and the results were all good.
China's Making Major Progress With Its Aircraft Carrier Tech | Popular Science
Though China launched its much-ballyhooed Type 001A aircraft carrier just a few months ago, the People's Liberation Army Navy is hardly resting on its laurels, instead making steady progress on technology for its second home-built carrier, the Type 002. The Type 002 carrier, development for which is slated to wrap in 2020 or 2021, will be a 70,000-ton aircraft carrier with catapults designed to launch heavier aircraft. And giant catapults aren't the only new tech in development. Pictured above, the CGT-60F is a heavy duty, F-class gas turbine (which typically have a power output of 170-230 megawatts) designed by Tsinghua University's Gas Turbine Research Center with the Dongfang Electric Group and Shanghai Electric Group. It's completely domestic design that exceeded expectations for cooling and temperature distribution-vital factors for large turbines. As such, the state-run China Daily suggested that the CGT-60F would be a suitable candidate to power a large warship, such as an aircraft carrier.
China's Quantum Submarine Detector Could Seal South China Sea | New Scientist
On 21 June, the Chinese Academy of Sciences hailed a breakthrough - a major upgrade to a kind of quantum device that measures magnetic fields. The announcement vanished after a journalist pointed out the invention's potential military implications: it could help China lock down the South China Sea. "I was surprised by the removal," says Stephen Chen of the South China Morning Post, who raised the issue. "I have been covering Chinese science for many years, and it is rare."
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China's Satellite Sends Unbreakable Cipher from Space | Xinhua
Chinese scientists have become the first to realize quantum key distribution from a satellite to the ground, laying the foundation for building a hack-proof global quantum communication network. The achievement based on experiments conducted with the world's first quantum satellite, Quantum Experiments at Space Scale (QUESS), was published in the authoritative academic journal Nature on Thursday.
Quantum sensing could be used in a number of technologies with direct military applications. In particular, quantum radar can be used to detect targets that cannot be discerned through conventional radar, and quantum navigation similarly leverages quantum properties to create a precise form of positioning system that may eventually replace GPS. Together, such technologies could be critical to China's future military capabilities and might become a key focus of U.S.-China technological competition.
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| NUCLEAR INDUSTRY |
A joint venture to develop and produce small, floating nuclear power plants has been set up by State-owned China National Nuclear Power Co and four other domestic companies, according to an announcement released late Thursday. The new venture would have 1 billion yuan ($150 million) in registered capital, the announcement said. Such marine plants can sail to where they are needed and be used for many different needs, industry experts say. The demand for such power plants is expected to grow, according to analysts. They can be used to operate drilling machinery for offshore oil and gas fields, meet heating and desalination needs and run nuclear powered icebreakers, the announcement said. Exploitation of marine resources is vital to China's efforts to build itself into a maritime power, said Wang Yiren, deputy director of the State Administration of Science, Technology and Industry for National Defense.
Vice Director Wang Yiren of the National Defense State Administration for Science, Technology, and Industry said that China would prioritize the development of floating nuclear reactors in order to provide offshore oil and gas rigs with power, as well as to operate desalination plants and equipment on remote islands, such as disputed features in the South China Sea. The floating nuclear reactors could also power Chinese underwater mining operations, in which China has already invested heavily, and deepwater logistical bases for naval usage.
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Defense Secretary James Mattis Envies Silicon Valley's AI Ascent | Wired
Defense Secretary James Mattis has a lot on his mind these days. North Korea, obviously. China's expanding claims on the South China sea. Afghanistan, Iraq, Syria. And, closer to home, the Pentagon lagging behind the tech industry in leveraging artificial intelligence. Mattis admitted to that concern Thursday during the Silicon Valley leg of a West Coast tour that includes visits to Amazon and Google. When WIRED asked Mattis if the US had ambitions to harness recent progress in AI for military purposes like those recently espoused by China, he said his department needed to do more with the technology.
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| REGIONAL ACTORS |
North Korea's Missile Success Is Linked to Ukrainian Plant, Investigators Say | New York Times
North Korea's success in testing an intercontinental ballistic missile that appears able to reach the United States was made possible by black-market purchases of powerful rocket engines probably from a Ukrainian factory with historical ties to Russia's missile program, according to an expert analysis being published Monday and classified assessments by American intelligence agencies.
North Korea's Missile Success Is Linked to Ukrainian Plant, Investigators Say | New York Times
https://www.nytimes.com/2017/08/14/world/asia/north-korea-missiles-ukraine-factory.html
North Korea's success in testing an intercontinental ballistic missile that appears able to reach the United States was made possible by black-market purchases of powerful rocket engines probably from a Ukrainian factory with historical ties to Russia's missile program, according to an expert analysis being published Monday and classified assessments by American intelligence agencies.
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