The CATIC Group was established in 1979 as a subsidiary organization of the pre merger Aviation Industries Corporation of China (AVIC) which oversees the R&D, production and sale of all military and civilian aircraft in China. CATIC overseas 7 specialized companies, 10 regional subsidiaries, and 56 branches worldwide.

The CATIC Group is a broker entity that sells AVIC produced products to foreign customers:

• Fighters
• Bombers
• Trainers
• Helicopters
• Transporters
• General Aviation aircraft
• Associated Airborne Equipment
• Ground Support Equipment
• Various Components and Spare Parts

Products

CATIC invested and assisted in the development of high performance aircraft the K-8 trainer, JF-17 fighter and EC-120 helicopter. CATIC has subcontracted to Boeing, Airbus, GE, Rolls Royce, Pratt & Whitney, SNECMA, Honeywell and Rockwell Collins. CATIC's US $1.5 billion in annual business is evenly divided between exporting and importing and export revenue is evenly divided between the sale of military aviation equipment, civilian aviation equipment and nonmilitary equipment. The primary body overseeing exports of aviation products is the Division of the Export of Government Products. There are ten departments within the export division: Market Planning, Asia, Western Asia and Northern Africa, Africa, America and Pacific, Programs, After-sales Services, Marketing I of Non-aviation Products, Marketing II of Non-aviation Products and General Administration

Exports

Over the past two decades, CATIC has been responsible for the export of F-6 and F-7 light fighters, K-8/FT-7 jet trainer, F-8II fighter-bomber and A-5 ground attack aircraft. These systems have been sold to countries such as Iran, Pakistan, Myanmar, Egypt and Sri Lanka. In 1998 CATIC began cooperating with Pakistan to co-develop the FC-1/Super-7 aircraft. In addition, CATIC sells air-to-air, ship-to-ship and land-to-ship cruise missiles and related components produced in AVIC factories. Some of the specific missile systems CATIC exports include the PL-5B, PL-7, PL-9, FL-1 (CSS-N-1 Mod 2), FL-2 (CSS-NX-5), and FL-7 cruise missiles. CATIC may also have played a role in exporting Silkworm missiles to Iran which were possibly produced at the Nanchang Aircraft Factory.

In the early 1990s, CATIC was the sole organization within AVIC which could negotiate for the import or export of AVIC products. CATIC negotiated the deals and was responsible for getting the products from the factory to the customer; CATIC also provided after-sales maintenance contracts. However, this changed with the adoption of the factory manager responsibility system because individual factories began negotiating contracts themselves and stopped going via CATIC.

CATIC also faced competition from the PLA Air Force (PLAAF) which undermined CATIC's profit making ability. The PLAAF began competing with CATIC for post-sale maintenance contracts through its Aeronautical Engineering Department (AED) which had an office in Poly Technologies and over 20 overhaul and maintenance factories.

Recent Developments

In recent years AVIC and CATIC have not fared well economically due to a significant drop in the demand for their products, in both the domestic and international markets. The Chinese government has preferred to buy civilian aircraft from Boeing and Airbus rather than from CATIC and domestic manufacturers. In the military realm, the PLA in 1994 concluded a deal with Russia for the purchase of 52 Sukhoi-27 aircraft and assembly kits for the aircraft, largely due to AVIC's inability to produce a fighter with equivalent capabilities.

Given AVIC's systemic difficulties producing military aircraft and the resulting decline in domestic orders for Chinese fighters, CATIC will likely continue to look to the international market to sell its military aircraft. One example of this is CATIC's cooperation with Pakistan on the FC-1 fighter, in part due to the PLAAF's refusal to buy the aircraft and co-development is needed to help to reduce the overall research, development, testing and evaluation (RDT&E) costs of the fighter.

The Bolivian government is set to acquire six CATIC K-8 armed jet trainers from China. The contract will include six aircraft, two spare engines, test vehicle, interactive media instructor system, spare parts, training and maintenance equipment. The deal is valued at US$ 57.8 million.

CATIC was placed on U.S.sanctions list in 2005 for supply of high technology to Iran, in violation of the Iran Non-proliferation Act of 2000.

Sources:
[1] Jane's Strategic Weapon Systems, various issues.
[2] Elizabeth D. Olmo, "China's Nuclear Agenda and the Implications for United States Foreign Policy," Naval Postgraduate School, Monterey, California, September 1993, p. 83.
[3] Defense & Foreign Affairs Weekly, 26 February 1990, p. 3; "Israeli-China Joint Venture," Flight International, 10 April 1996.
[4] Vernon Loeb and Bill Miller, "McDonnell Douglas Indicted for Equipment Sold to China," Plain Dealer. 20 October 1999. p. 16A.
[5] "Egypt buys fighters turned down by PLA," AFP, 27 March 2000; Philip Finnegan, "Chinese Trade Authority Searches For New Military, Civilian Markets," Defense News, 27 March 2000, p. 16.
[6] "Brief Introduction of the Company," China National Aero Technology Import Export Corporation, 2009, in CATIC website, www.catic.com.cn.
[7] James Murphy, "US imposes sanctions on companies alleged to have sold military equipment to Iran," Janes Defense Industry, 29 December 2005, in Jane's Defense Weekly, www.janes.com.
[8] Inigo Guevara, "Bolivia Orders K-8 in place of L-159s," Jane's Defense Weekly, 6 October 2009, www.janes.com.