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Heating Up the Arms Race

Naval standoff: China's rapid arms buildup has neighboring countries worried.
  • Why it matters

    Why it matters

    • The seas around China with their competing territorial claims are widely considered to be one of the world‘s most dangerous military flashpoints. European exporters have been arming all sides.
  • Facts


    • German arms exports almost doubled from 2014 to 2015 to reach €7.86 billion, the highest level on record.
    • China has been using German technology to build modern warships, including silent submarines and several classes of destroyers.
    • An April 2015 report by the U.S. Office of Naval Intelligence describes the German-equipped Luyang-class destroyer as “comparable in many respects to the most modern Western warships.”
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The crew of the USS Kitty Hawk never saw it coming. The American aircraft carrier was on a training exercise in the deep waters off the of coast Okinawa, Japan, when a Chinese Song-class attack submarine surfaced within nine kilometers of the ship. The submarine’s diesel engines, made by the German company MTU Friedrichshafen, were so silent that the Kitty Hawk’s sonar equipment had not picked up any signals at all.

The incident was a major embarrassment to the U.S. Navy, which should not have allowed a submarine to get within firing range of its carriers. It was also a shock: The West had not realized at the time that the Chinese had developed such a sophisticated submarine fleet, and that they had done so with help from Germany. The game-changing incident happened in 2006, but it was only the start of many such challenges to come. Just last October, another silent Chinese sub tailed the nuclear-powered carrier USS Ronald Reagan. Military analysts believe this sub also had engines based on a German design.

The stand-off has produced a textbook arms race.

German companies, along with French and British arms exporters, are playing a crucial role in heating up the world’s most dangerous military tinderbox. In July, China indignantly rejected a United Nations ruling that voided most of China’s territorial claims in the South China Sea, where it is in conflict with the Philippines, Vietnam, Malaysia and Brunei. With the rapid build-up of its navy, China has also laid claim to waters traditionally controlled by Japan. China is now on a collision course with almost every neighbor as well as with the U.S., which has increased its naval drills in the region to support its Asian allies.

The stand-off has produced a textbook arms race. Since 2009, the countries bordering the South China Sea hiked their defense imports by 71 percent, to $6.7 billion in 2015, according to the Global Defence Trade Report. In the East Asian arms race, German companies not only equip China, but most of its opponents too, including Brunei, Malaysia and Vietnam.

This is the dark side of Germany’s champion export industry. In 2015, German arms exports reached €7.86 billion, the highest level on record and almost double the amount in 2014. Germany is the world’s fifth-largest exporter of military equipment, after the U.S., Russia, China and France.


But it is German sales to China that have the U.S. and its Asian allies worried. Both the European Union and the United States have had an arms embargo against China since 1989. But while the U.S. bans all transfers of military equipment and related components, the EU embargo is full of loopholes. Officially, arms sales to China aren’t allowed, but components, parts of systems, and “dual-use” equipment that has both civilian and military purposes are. Take those super-silent MTU engines: Since they are used in civilian shipbuilding as well, they don’t fall under the EU embargo. But for China, they’re a crucial part of the country’s naval buildup, used not only in several classes of submarines, but three types of destroyers as well. German-equipped Luyang destroyers, one of China’s most modern types of warship, now patrol contested waters in the South China Sea.

French and British defense companies also happily make use of the EU’s leaky embargo rules to equip Chinese fighter-bombers with jet engines and navy ships with sonar technology. From 1990 to 2015, France sold arms worth some $4 billion to China, according to the Stockholm International Peace Research Institute. For Britain, sales during the same period added up to $800 million. Compared to these two, the German total of $259 million seems tiny.

In the East Asian arms race, German companies not only equip China, but most of its opponents too.

But the number belies the true impact of German sales in the region. Much maritime equipment, including those silent diesel- engines, fall outside the official numbers. MTU’s engines, mainly built under license in China, are classed as civilian, even if they play a key role in China’s naval buildup. The other main German supplier to China is MAN Diesel & Turbo. Information posted on Chinese military websites shows that two of China’s newest classes of frigate, the Jiangkai I and II, are powered by engines from MAN Diesel’s French subsidiary, S.E.M.T. Pielstick. These warships have also taken part in South China Sea drills. Both MTU and MAN tell Handelsblatt that they are operating entirely within EU and German law.

Countries on the other side of the arms race, concerned about China’s growing aggression, have also turned to Germany to upgrade their navies. Malaysia, which also lays claim to some of the Spratly Islands, where China is building military bases, ordered six Kedah Class MEKO A-100 corvettes from Germany. These ships, designed to evade radar and have low noise, are patrolling the South China Sea. The German shipbuilder Lürssen has delivered gunboats to Brunei, another country whose maritime claims China does not recognize. Singapore, too, is upgrading its navy with two submarines from ThyssenKrupp Marine Systems, due for delivery in 2020, in a deal worth $1.6 billion. India, which is increasingly seeing Chinese submarines patrolling its seas, has also ordered German equipment.

On July 12, a United Nations tribunal was supposed to calm down the dangerous stand-off with a ruling on the region’s competing maritime claims. But instead of settling the dispute, the ruling has only inflamed China, which wants the old sea borders to be overturned in its favor. To buttress its claims, China goes on reclaiming land, building artificial reefs and unilaterally claiming islands in the contested areas. One of these is the Spratly Islands, claimed by all nations surrounding the South China Sea. At five locations in the archipelago, specialized sea-going dredgers, 127 meters tall, have been creating new islands that China then claims as its territory. These dredgers, too, are German, designed by the German-Dutch engineering company Vosta LMG and built under license in China. Germany does not have to sell arms to contribute to the conflict.


Meera Selva reports for Handelsblatt Global Edition from Singapore. Ms. Selva is an editor with Handelsblatt Global Edition and has covered security issues and terrorism in Britain, Africa and Berlin before. To contact the author:

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