Europe-Japan GCAP fighter racing against China's rising air power

The UK, Japan and Italy are turbocharging their sixth-generation Global Combat Air Program (GCAP) stealth fighter ambitions in a race to outpace China's fast-rising and now battle-proven airpower.
The South China Morning Post (SCMP) recently reported that GCAP's acceleration reflects growing concern over China's growing edge in military technology. That was on display in the recent India-Pakistan skirmishes, where Pakistan's Chinese-made fighters reportedly downed at least one of India's French-made Rafales.
Brigadier General Edoardo de Santo of Italy's Leonardo SpA, the lead Italian partner in the tri-national venture, defended the decade-long project at the Defence and Security Equipment International conference held this month near Tokyo, stating it was essential for confronting future threats.
Formalized in 2023, GCAP is set to deliver a fighter by 2035 that surpasses fifth-generation aircraft like the F-35 in stealth, sensor integration and battlefield coordination, effectively serving as an airborne command hub for drones and networked assets.
With each partner, Leonardo, BAE Systems (UK), and Japan's JAIEC (Japan Aircraft Industrial Enhancement Co.), holding equal stakes in a new UK-based joint firm, the program is positioned to replace both the Eurofighter Typhoon and Japan's F-2 jets. While specific costs remain undisclosed, the UK has already committed 14 billion pounds (US$19 billion).
Recent reports indicate Saudi Arabia may join the program, with Australia and India viewed as potential export markets. De Santo emphasized the dual-use nature of the fighter's advanced technologies, underscoring its strategic and economic significance.
To outpace China and remain relevant in the Indo-Pacific, the GCAP must deliver a survivable, long-range sixth-generation fighter without falling prey to past procurement failures, export pitfalls and geopolitical risks.
As to why sixth-generation aircraft would be essential in the Indo-Pacific, Justin Bronk mentions in a March 2025 article for the Royal United Services Institute (RUSI) that such aircraft are essential in the theater due to the vast operational distances and the vulnerability of aerial refueling assets.
Bronk emphasizes that such aircraft need to operate securely beyond missile threats, thereby reducing reliance on susceptible tankers. He says that their significant fuel capacity and weapons bays enable longer missions and sophisticated munitions use.
Additionally, he says their robust electronic warfare suites are built to counter network disruptions, ensuring effectiveness in contested environments.
Adding urgency to GCAP's timeline, some reports speculate that China may already be testing sixth-generation designs, such as the three-engine J-36 and tailless lambda-wing J-50. However, much remains unknown about these aircraft.
GCAP still faces significant hurdles. A January 2025 UK House of Commons report warns that the program must avoid pitfalls that plagued past efforts, particularly the Eurofighter Typhoon, and that expanding international participation must not jeopardize the ambitious 2035 timeline.
The report highlights that exportability would be the key to GCAP's success while acknowledging the need to transition the Eurofighter Typhoon workforce and prevent the cost-death spiral and delays associated with previous multilateral defense projects.
In an April 2023 RUSI article, Bronk argues that if GCAP's financial support proves inadequate, the UK should scale down its ambitions and instead pursue a smaller, more affordable fleet of unmanned combat aerial vehicles (UCAVs).
In terms of exportability, Bronk points out that the GCAP program is unlikely to produce a viable competitor to the F-35 for export markets, considering US defense giant Lockheed Martin's vastly larger funding and successful stealth aircraft programs such as the F-22 and F-117.
Bronk argues that despite its flaws, the F-35 still holds a significant edge in capability. He contends that even if GCAP succeeds, it will likely face competition from upgraded 'fifth-generation-plus' variants of the F-35.
While GCAP is firmly rooted in UK-Japan-Italy cooperation, the consortium has explored opportunities to broaden its base. Countries like Saudi Arabia, Australia and India have emerged as potential partners or future customers, each with different motivations, strategic priorities and integration challenges.
As for letting Saudi Arabia into the GCAP program, Bilal Saab argues in a January 2025 Breaking Defense article that access to Saudi capital could cover costs, shorten export timelines, generate revenue through sales and ease the financial burden on the UK, Italy and Japan.
In line with that, Shigeto Kondo writes in a September 2023 Afkar article that Saudi Arabia, given its large defense budget, is sure to place a large order for the GCAP if the project pushes through.
Such sales, Kondo notes, would secure the fighter market in the Middle East and prevent competitors like China and Russia from gaining a foothold in the region through fighter sales.
However, Alessandro Marrone warns in a March 2025 article for the Institute of International Affairs (IAI) that allowing Saudi Arabia to join GCAP poses several risks that could undermine the delicate trilateral balance between the UK, Italy and Japan.
Marrone notes that as the program's current governance structure relies on equal footing and shared sovereignty over core technologies, Saudi Arabia's inclusion, even as a junior partner, could strain decision-making and dilute existing industrial and strategic equities.
He observes that politically, Saudi Arabia's controversial human rights record and unpredictable strategic behavior could raise reputational concerns and complicate export controls, especially for Japan, which recently revised its restrictive arms export laws with great caution.
In addition, he says the integration of Saudi-specific requirements could complicate GCAP's design and delay its already ambitious 2035 deadline.
Beyond Saudi Arabia, other countries have expressed varying degrees of interest in GCAP. For instance, National Defense Magazine reported in March 2025 that senior Royal Australian Air Force (RAAF) officers requested information about the aircraft as its F/A-18 Super Hornets and EA-18G Growler fleet ages and next-generation capabilities mature.
However, the report notes that there are still too many unknowns about the GCAP, and it wouldn't be possible to present the Australian government with a list of options at this time. Also, Australia is already heavily integrated with the US defense industrial base, with a fifth-generation-plus F-35 being a feasible option over the GCAP.
Meanwhile, Japan has also reached out to India about potential participation in GCAP. According to an April 2025 The Mainichi report, Japanese officials proposed India's involvement in GCAP during a February visit.
The report notes that Indian Prime Minister Narendra Modi's administration expressed interest, viewing the proposal as consistent with its 'Make in India' policy aimed at strengthening domestic arms production.
However, India's longstanding weapons dependency on Russia would likely hinder its participation in the GCAP program. India operates Su-30MKI fighter jets and S-400 air defense systems, which pose a threat to the GCAP's classified technologies, especially if Russian-origin systems must interoperate within a shared architecture, an issue that could risk inadvertent technology leakage.
Ultimately, GCAP's success will hinge not only on technical breakthroughs but also on lessons learned from past failures, political will and the strength of its partnerships. In an increasingly contested Indo-Pacific, the GCAP's success and relevance may prove to be less about technology and more about alignment.

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Asia Times

4 hours ago

• Asia Times

China's industrial policy has an unprofitability problem

Analyzing American economic policy isn't that interesting these days, except perhaps as a grim spectacle. So I've been thinking a little about Chinese economic policy. China's leaders leave much to be desired, but to their credit, they still think economic policy is about strengthening their nation, enriching their people and improving their technology instead of pursuing domestic culture wars by other means. Anyway, China has a lot of policy initiatives right now — cleaning up the fallout from the real estate bust, retaliating against America's tariffs, improving their health care system, and so on. But their most important policy — and the one everyone talks about here in the US — is their big industrial policy push. If you want to understand Chinese industrial policy, I recommend starting with Barry Naughton's free book, 'The Rise of China's Industrial Policy: 1978 to 2020.' The basic story is that until the mid-to-late 2000s, China didn't have a national industrial policy as such. It had a bunch of local governments trying to build up specific industries, usually by attracting investment from multinational companies. And it had a central government that tried to make it easy for local governments to do that, using macro policies like making sure coal was cheap, holding down the value of the Chinese currency in order to stimulate exports and so on. But it was not until the end of Hu Jintao's term in office — and really, not until Xi Jinping came to power — that China developed a national industrial policy, in which the government tries to promote specific industries using tools like subsidies and cheap bank loans. If you want a good primer on just how big those loans and subsidies are, and which industries they're going to, I recommend CSIS' 2022 report, 'Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective.' It's a lot. Here are the authors' estimates from 2019: Source: CSIS In some respects, this policy was successful. 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In 2023, you saw charts like this: Source: Shanghai Macro via Bert Hofman Along with this industrial policy, you saw a massive surge of Chinese-manufactured exports flowing out to the rest of the world. The most recent export surge has been labeled the 'Second China Shock', but in fact, the trend was already headed in that direction well before the pandemic: Source: CSIS China's competitive success in manufacturing industry after industry has been nothing short of spectacular. In just a couple of years, China went from a footnote in the global car industry to the world's leading auto exporter: Source: Visual Capitalist Obviously, this export surge is the most important way that people in countries like the US experience the results of China's industrial policy. So most commentary on the policy has focused on exports, trade balances and so on. But it's important to remember that most of what China is producing in this epic manufacturing surge is not being exported. For example, take cars. Even though China is now the world's top car exporter, most of the cars it makes are sold within China: Source: Brad Setser China's auto industry is actually unusually domestically focused, compared to other auto powerhouses like Germany, South Korea, and Japan: Source: Bloomberg via Noahopinion In fact, this pattern holds across the whole economy. For an industrialized country, China is unusually insular — its exports as a percent of its GDP are higher than the US, but much lower than France, the UK, Germany, or South Korea: Source: World Bank Most of China's enormous manufacturing subsidies are not actually for export manufacturing; they're for domestic manufacturing. The rest of the world is just getting a little bit of spillover from whatever Chinese companies can't manage to sell domestically — except for a country as huge as China, a 'little spillover' can seem like a massive flood to everyone else. And here lies the rub. Essentially, China is huge and most of its trading partners are pretty small. There's a limited amount of Chinese cars, semiconductors, electronics, robots, machine tools, ships, solar panels, and batteries they can buy. And on top of that, some of China's biggest trading partners are levying tariffs against it. For most Chinese manufacturers, export markets are simply not going to replace the domestic market. And this means that Chinese manufacturers will be forced to compete against each other for a domestic market whose size is relatively fixed, at least in the short term. That competition will eat away at their profit margins. In fact, this is already happening. Vicious price wars have broken out in the Chinese auto industry, and even the country's top carmakers are under extreme pressure: Chinese carmakers' price war is putting the industry's balance sheet under strain…Current liabilities exceeded current assets at more than a third of publicly listed car manufacturers at the end of last year…China's leading carmakers are being forced to…fight for market share amid heavy [price] discounting… The dominant electric-vehicle maker BYD is deepest in negative territory with its working capital, followed by rivals Geely, Nio, Seres and state-backed BAIC and JAC, while the total net current assets of 16 major listed Chinese carmakers [saw] a 62 per cent decline from…the first half of 2021… 'Given the current downward trend, China's auto industry is expected to enter an industry-wide elimination phase . . . in 2026 at the latest,' [an analyst] warned. 'During the process, some companies will die of liquidity crises.'… BYD recently came under pressure to defend its financial numbers and business practices after Wei Jianjun, chair of rival Great Wall Motor, called for a comprehensive audit of all major domestic carmakers…'An Evergrande exists in [China's] auto sector at the moment — it just hasn't blown up,' he told local media, raising the spectre of the industry following the property sector into a spiralling debt crisis. How can these mighty world-conquering automakers be skating on the edge of bankruptcy when the government is pouring so many subsidies and cheap loans into the auto industry? The answer is simple: China's government is paying its car companies to compete each other to death. The Chinese government pays a ton of different car companies to make more cars. Chinese banks, at the government's behest, give cheap loans to a bunch of different car companies to make more cars. So they all make more cars — more than Chinese consumers want to buy. So they try to sell some of the extra cars overseas, but foreigners only buy a modest amount of them. Now what? Unsold cars pile up, prices are cut and cut again, and all the car companies — even the best ones, like BYD — see their profit margins fall and fall. It's not just autos, either — similar things are happening in solar, steel, and a bunch of other industries. Manufacturing profit margins are plunging across China's entire economy: Source: Bloomberg via Noahopinion A Chinese buzzword for this sort of excessive competition is 'involution.' Why is this bad, though? Who cares about profit, anyway? After all, China's workers are getting jobs, and China's consumers are getting a ton of cheap cars and other manufactured stuff. So what if rich BYD shareholders and corporate executives take a loss? Well, in fact, there are several problems. The first is macroeconomic. Price wars across much of the economy create deflation. In fact, China is already experiencing deflation: China's consumer prices fell for a fourth consecutive month in May…with price wars in the auto sector adding to downward pressure…The consumer price index fell 0.1% from a year earlier…CPI slipped into negative territory in February, falling 0.7% from a year ago, and has continued to post year-on-year declines of 0.1% in March, April, and now May…Separately, deflation in the country's factory-gate or producer prices deepened, falling 3.3% from a year earlier in May[.] A lot of this is probably due to weak demand from the ongoing real estate bust, but price wars prompted by industrial policy will make it worse. Deflation will exacerbate the lingering problems from the real estate implosion. Debts are in nominal terms, meaning that when prices go down, those debts become harder to service. 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But if China's top manufacturers are constantly skating on the edge of bankruptcy, that means they'll have fewer resources to invest in long-term projects like technological innovation and new business models. Basically, prices are signals about what to build, and China's industrial policies are sending strong signals of 'build more stuff today' instead of 'build better stuff tomorrow.' There's also the danger that China's government won't allow the price wars to end. Ideally, you'd want these price wars to be temporary; eventually, you'd want weak producers to fail, allowing top producers to increase their profitability. This good outcome relies on the government eventually cutting subsidies and letting bad companies die. But letting bad companies die means a bunch of people get laid off. Bloomberg recently had a good report about the political pressures on the Chinese government to keep the subsidies flowing: Local leaders laden in debt are rolling out tax breaks and subsidies for companies, in a bid to stave off the double whammy of job and revenue losses…For China's top leaders, employment is an even more politically sensitive issue than economic growth, according to Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute's Center for China Analysis…Already there are signs the weakening labor market is becoming a touchy subject: One of China's largest online recruitment platforms Zhaopin Ltd. this year quietly stopped providing wage data it's compiled for at least a decade. Already, Bloomberg reports that economic protests are proliferating across the country; with the real estate crisis ongoing, the government will be under even more political pressure to keep manufacturing employment strong. This could mean keeping crappy companies on life support. These so-called 'zombie' companies, kept alive only by a never-ending flood of cheap credit, were a big part of why Japan's economy slowed down so much in the 1990s. So this is the scenario where China's industrial policy ends up backfiring. Subsidies and cheap bank loans dished out to high-quality and low-quality companies alike could flood the market with undesired product, spurring vicious cutthroat price wars, destroying profit margins, exacerbating deflation, and generally making the macroeconomic situation worse. And then China's government could double down by trying to protect employment, by never halting subsidies for companies that fail. Usually, when we think of the costs of industrial policy, the main thing we think about is waste, and there is certainly plenty of waste in China's current approach. But China's experience is illuminating a second problem with industrial policy — the risk of vicious price wars and deflation due to the subsidization of too many competing companies. This article was first published on Noah Smith's Noahpinion Substack and is republished with kind permission. Become a Noahopinion subscriber here.

South China Morning Post

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Pakistan gets caught in Iran-Israel disinformation crossfire

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HKFP

7 hours ago

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Taiwan pursues homegrown Chinese spies as Beijing intensifies espionage

Taiwan is vetting hundreds of thousands of military service members, public school teachers and civil servants in a bid to root out potential homegrown Chinese sympathisers, as Beijing intensifies espionage on the island. Alarm is growing in Taiwan over the extent of China's infiltration on the self-ruled island, which Beijing claims is part of its territory and has threatened to seize by force. Prosecutors last week charged four recently expelled members of the ruling Democratic Progressive Party — including a former staffer in President Lai Ching-te's office — for sharing state secrets with Beijing. While Taipei and Beijing have spied on each other for decades, analysts warn the threat to Taiwan is more serious given the risk of a Chinese attack. The main targets of Chinese infiltration have been retired and active members of the military, persuaded by money, blackmail or pro-China ideology. Lai, an outspoken defender of Taiwan's sovereignty and loathed by Beijing, has branded China a 'foreign hostile force' and sought to raise public awareness about Chinese actions he says threaten national security. After a sharp rise in the number of people prosecuted for spying for China in recent years, the government is trying to identify people within its own departments, military and public schools with a possible allegiance to Beijing. Anyone on the public service payroll found with Chinese residence or other identification cards risks losing their Taiwanese household registration, effectively their citizenship. 'The reason we started to survey (for Chinese IDs) is because China uses this way to coerce Taiwanese people, to penetrate our system, especially the public service,' DPP lawmaker Wang Ting-yu told AFP. 'The threat is getting worse and worse and we have to deal with that.' 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Legal scholar Su Yen-tu said there were limits on the government's 'investigatory power' to find out who held Chinese ID cards in Taiwan. If Taiwanese people did not voluntarily disclose the information, 'there's not much the government can do,' said Su, a research professor at Academia Sinica. Collecting records was still 'potentially useful', Jamestown Foundation president Peter Mattis told AFP, particularly if someone under investigation in the future is found to have lied about their documents. Taiwan has also asked around 10,000 Chinese spouses and their China-born children for proof they have given up their Chinese household registration, a decades-old requirement under Taiwanese law. 'It's a fight every day' The notices sparked criticism that the government was being heavyhanded, but Wang said stricter enforcement was needed because some 'new immigrants' from China had spied for Beijing and interfered in Taiwan's elections. 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