The Anatomy of Modernization: A Financial and Strategic OSINT Analysis of China's Future Military Power

Preface: The PLA's Systemic Revolution – A Financial and Strategic OSINT Analysis by Extrema Ratio

The People's Liberation Army (PLA) of the People's Republic of China (PRC) is in the midst of the most ambitious military transformation in modern history. This is not a simple inventory upgrade, but a systemic revolution aimed at achieving global technological superiority through Intelligentization (Zhìnéng huà).

Central to this monumental effort is the doctrine of Civil-Military Fusion (CMF), elevated to the status of a national strategy by Xi Jinping. CMF acts as a seamless bridge between civil innovation – particularly China's exceptional leadership in Artificial Intelligence (AI) – and the demands of the battlefield. This strategy enables the absorption of cutting-edge technologies from private giants (like Baidu and Tencent) directly into command and weapon systems.

The race toward Intelligentization – the operational core of China's military future – is analyzed here through a dual and complementary lens: the financial perspective (drawn from reports by institutions like Sinolink Securities and Shanxi Securities, which track capital flows and assets) and the strategic assessment (based on OSINT and specialist analysis by Extrema Ratio). This article dissects investment priorities – from space and missile dominance to the construction of an AI-powered combat network likened to 'Skynet' – offering a comprehensive overview of the challenges and opportunities guiding the PLA toward its crucial milestone: operational readiness by 2027.

by Gabriele and Nicola Iuvinale

1. The Institutional Context: 2027 and Civil-Military Fusion (CMF)

China's military modernization is not a linear process, but is defined by political deadlines and a two-decade strategic doctrine known as Civil-Military Fusion (CMF).

The 2027 Factor and Xi Jinping's Imperative

The crucial date is 2027, the centenary of the PLA's founding, which requires achieving basic "mechanization, informatization, and intelligentization" capabilities.

• CMF as the "Backbone": The CMF doctrine (Junmin Ronghe) is the backbone of China's technological development. General Secretary Xi Jinping calls it the "inevitable choice" for realizing the integrated goal of a "rich country and a strong military" in the new era.

• Centralized Control: Xi Jinping has centralized political control through the Central Committee for Civil-Military Fusion Development, underscoring the commitment to integration.

• Long-Term Goals: Full modernization by 2035 is distinguished by Intelligentization, the pervasive integration of Artificial Intelligence (AI).

2. Dominance of the Fourth Environment: The Space Strategy (航天強國)

China views space as the "fourth dimension" and the new "制高點" (commanding height) of international strategic competition. Controlling space means controlling the battlefield and strategic initiative.

The Imperative of "Space Power"

• Technological Development: The US Department of Defense (DoD) and the Intelligence Community (IC) predict that by 2030, China could reach a world-class level in almost all sectors of space technology.

• Key Projects for "Informatized Warfare":

  • BeiDou Navigation System (BDS): China's global navigation system is a direct competitor to GPS and is crucial for military navigation and positioning.

  • High-Resolution Earth Observation System (高分專項 - Gaofen): A strategic project to build a space-based Earth observation infrastructure with high-precision resolution capabilities (up to 0.1 meters for LEO satellites), essential for military reconnaissance and missile accuracy.

3. The Skynet Combat Architecture: The Resilient AI-Based Kill Web

The PLA's strategic objective is the construction of a highly resilient and self-healing AI-based combat network, which analysts liken to the science fiction concept of Skynet.

The Multi-Domain Precision Warfare (MDPW) Architecture

The Chinese military is developing an AI architecture for Multi-Domain Precision Warfare (MDPW), aimed at:

• Integrating multiple armed forces and unmanned systems to form an AI-powered drone and robotic ecosystem.

• Operating with centralized command, decentralized execution, and coordinated operations.

• Having a self-healing and highly resilient nature, capable of surviving and almost instantly regenerating in the event of infrastructure collapse, making it similar to the Skynet concept.

The Role of Corporations and Private Industry

Major state-owned defense giants and private industry are accelerating this transformation:

• AVIC (Aviation Industry Corporation of China), CASC (China Aerospace Science and Technology Corporation), and CSSC (China State Shipbuilding Corporation) have established "Intelligent Research Institutes" focused on AI and unmanned systems.

• CMF in Action: Integration is extremely close. According to approximately 3,000 AI-related contracts issued by the PLA in 2023 and 2024, over 85% of major Chinese suppliers are private companies, non-military universities, and other entities.

4. China's Defense Giants: Key Industries and Areas of Expertise

The industry is dominated by these massive State-Owned Enterprises (SOEs), which are the primary recipients of capital flows, complemented by emerging private companies critical for AI.

Sector	Corporation Name (Group)	Focus and Key Platforms
Aeronautics	AVIC (Aviation Industry Corporation of China)	Fighter jets (J-20, J-16, J-10), helicopters.
Aerospace/Missiles	CASC (China Aerospace Science and Technology Corp)	Leader in missile technology (ICBM, rocket launchers) and space programs.
Aerospace/Missiles (Diverse)	CASIC (China Aerospace Science and Industry Corp)	Cruise missiles, air defense systems, electronic warfare (crucial for hypersonic missiles).
Naval/Shipbuilding	CSSC (China State Shipbuilding Corporation)	Design, construction, and repair of warships and submarines.
Electronics/Radar	CETC (China Electronics Technology Group Corp)	Primary supplier of radar systems, electronic warfare, communication, sensor technology for informatization.

5. Civil-Military Fusion (CMF) and Supremacy in Artificial Intelligence

CMF is the engine that leverages China's global leadership in Artificial Intelligence (AI) intellectual property (IP).

Global Leadership in AI and Intellectual Property

China's leadership in AI intellectual property (IP) is proof of CMF's success:

• Quantitative IP Dominance: As of April 2025, the total number of Chinese AI patent applications reached 1.576 million, accounting for 38.58% of the world's total, ranking first globally.

• Generative AI (GenAI): The advantage is even more pronounced in Generative AI: between 2014 and 2023, China applied for over 38,000 GenAI patents, six times the number of the United States. In 2024, China's contribution reached 61.5% of new global patents filed.

• Mechanism of Technology Transfer: The Equipment Development Department of the Central Military Commission (CMCEDD) has opened thousands of cooperation projects and declassified defense patents for private use. The Strategic Support Force (SSF), responsible for space and cyber warfare, actively engages with major innovation centers to ensure software integration.

6. Financial Forecasts from Sinolink Securities (Guojin Securities)

The medium-term analysis by Sinolink Securities (Guojin Securities) for 2025 offers a bullish outlook on the sector.

• Trend Reversal: The military sector bottomed out in Q1 2025, with contractual liabilities (new orders) and financial results showing a turning point. This acceleration is driven by the push to complete the objectives of the 14th Five-Year Plan (2021-2025).

• Asset Revaluation: The main investment themes are Military Trade, New Combat Capabilities (新质战斗力), and Military Electronics.

• Global Expansion: The demonstrated success of Chinese weapons in regional conflicts is expected to boost the market share of Chinese equipment.

7. Further Considerations, Geopolitics, and Operational Challenges

Risk of Arms Race and Ethical Issues

• Global Risk: Experts warn that China's rapid development of AI weapon systems could trigger a global arms race, with potentially devastating risks.

• Autonomous Killer Robots: The rise of autonomous killer robots raises urgent ethical and regulatory challenges internationally regarding the use of force.

• Data Security: Tensions are evident: US senators have expressed concern about the potential use of US data by Chinese AI companies for the Chinese military.

PLA Operational Challenges

• Joint Command: Despite the vast acquisition of hardware, the main challenge for the PLA remains the effective implementation of joint command operations and the seamless integration of information provided by its extensive space (BeiDou, Gaofen) and cyber systems.

• Space Vulnerabilities: The growing reliance on space assets makes the PLA vulnerable to anti-satellite (ASAT) attacks.

In conclusion, China's military development is an intense and focused race for supremacy in next-generation warfare technology. The goal is to build an AI-based military "Skynet" for Multi-Domain Precision Warfare, an endeavor made possible by the aggressive and centralized strategy of Civil-Military Fusion, which leverages China's enormous leadership in AI patents and private sector innovation.