February 17, 2009: Russia has admitted, for the first time, that China is producing unlicensed copies of the Su-27 fighter. Russia has known about this theft for some time. It all began in 1995, when China paid $2.5 billion for the right to build 200 Su-27s. Russia would supply engines and electronics. But after 95 of the Chinese built aircraft were built, Russia cancelled the agreement. They claimed that China was using the knowledge acquired with the Su-27 program, to build their own copy of the Su-27, the J-11. Russia kept the piracy issue quiet, and warned the Chinese that simply copying Russian technology would produce an inferior aircraft. Apparently the Chinese do not agree, and are continuing their work on the J-11, using only, what they claim is, Chinese technology.
Late last year, Russia and China signed an agreement, in which China promised to stop stealing Russian military technology. It appears that the main function of the new "military technical cooperation" agreement was to stop China from exporting their copies of Russian equipment, and competing with the Russian originals.
For the last six years, the Russian government has been trying to deal with the growing problem Russian defense manufacturers have had with China tolerating, or even encouraging, Chinese manufacturers to steal Russian military technology. It's not usually entire weapons systems the Chinese are stealing (like aircraft or ships), but components. Radars and electronic systems in particular were being copied, often using samples and technical data provided by Russian manufacturers, in anticipation of a sale. What often happened was that there was no sale, and then, a few years later, the Chinese came out with a copy, often a blatant copy, of the Russian radar, missile or electronic warfare gear. The Chinese have produced several copies of Russian artillery systems (like the 2S19M1 self-propelled 155mm gun or several multiple rocket launcher systems.) The Chinese used their status as a major buyer of Russian aircraft and warships to deflect demands that the copying cease. The Russians feared that the Chinese would copy major systems, like aircraft or ships, and continue to ignore Russian demands that their intellectual property rights be respected.
This is ironic for the Russians. During the Cold War, much Western military and civilian technology was blatantly copied, including microprocessors and computers themselves, by the Russians. Since the end of the Cold War, Russia has been more careful about this, because the collapse of the Soviet Union opened up the Russian defense labs, and their large store of discoveries that had not been developed into anything useful yet. American manufacturers were eager to get rights to this technology, once they got a good look at it. The Western firms paid, and the billions of dollars that entered the Russian economy that way forced the Russians to reciprocate, and pay for Western technology they wanted.
The Chinese have been forced by the West to cut back on some of their blatant theft of foreign technology, except for Russian military stuff. The Russians were getting fed up, and the government was under growing pressure to crack down on the Chinese theft. Russia, flush with oil revenues and a booming economy, was not as desperate for Chinese arms business as they used to be. So for the last year, Chinese purchases of Russian military equipment have declined, as the Chinese were increasingly offering stolen Russian technology for export sales. Finally, Russia threatened legal action on an international scale. Thus the new agreement was a Chinese effort to avoid that sort of legal entanglement. But the stealing continues.