Marco Caceres, a space analyst with the Teal Group, called the CSM change a "win-win" for both sides.

"Every time you cooperate, every time you fulfill or submit a request, that is how you build relationships," Caceres said. "Particularly if the US is coming to see China as their next military rival in space, and they are doing an awful lot and spending a lot more money on both military and non-military space, potentially [this new agreement] could be significant because it strengthens the relationship."

"This tells us three things: One, this new export campaign is an export of an export; two, they don't have the technology themselves; and three, they're relying on Russian engines, which are no great prize," says Richard Aboulafia, VP of Analysis at the Teal Group Corporation.

He also has numerous questions about what's inside the FC-31. For example, how advanced are the jet's active electronically scanned array (AESA) radars, electronic warfare systems, and sensor fusion? "That's a big capability—fusing all the sensor inputs together into an air combat management picture for the pilot," Aboulafia says. "That's huge. It's one of the key enablers in fighter technology."

He doubts there's much of a foreign market for the FC-31, especially not in China-leery East Asia. And while the Chinese could begin serial production of their own J-31 fighter in five years, "it's not really clear what they get out of that," he says. By the end of the decade, the United States would have already rolled out hundreds of Joint Strike Fighters, which, development problems aside, will be superior planes.

It's probably not a deal-breaker for a country like Pakistan if Chinese drones lack the ability to transmit information, or resolution, the way American-made models do. "The Chinese technology will be less advanced," Phil Finnegan, the director of corporate analysis for Teal Group, says. "But it's a big advance over not having the technology at all." Pakistan may actually get a better deal partnering with China to tailor still-developing technology to its desired range for lethal strikes, and custom-fit weapons it already has for drones.

Phil Finnegan, director of corporate analysis at the Teal Group, agreed that the control regime could prevent U.S. drone manufacturers from accessing emerging markets.  “There’s definitely a risk of losing market share because of MTCR,” he said. “As this technology spreads worldwide, the U.S. and Israel are not going to be the only exporters. New potential exporters include Turkey and India. China is developing a wide range of UAVs and is beginning to get into the export market.”

Turkey is one of 34 MTCR members. Israel, China and India do not have to abide by the regime’s export rules.  Some change has occurred in the interpretation of the MTCR, allowing U.S. allies to purchase certain systems, Finnegan said. The Australian Navy has purchased the Triton, the U.S. Navy’s maritime version of the Global Hawk for surveillance missions at sea. South Korea is also interested in the Triton, while Japan has indicated a desire to own the U.S. Air Force’s version of the UAV, he said.

“You are also seeing a trend where U.S. companies are being proactive and trying to develop export versions of UAVs that are saleable,” Finnegan said. General Atomics did just that with its Predator XP, an unarmed version of the medium-altitude, long-endurance UAV flown by the U.S. military. The United Arab Emirates was able to procure an XP because it is specifically designed to not carry weapons and its maximum payload is below the 500-kilogram threshold.  General Atomics officials declined to comment for this story.  

“Allies will buy these versions that may not have the capabilities that U.S. forces use but suit their purposes fine,” Finnegan said. “That opens the way for a country like Saudi Arabia to purchase these kinds of high-end UAVs.”

Aviation consultant Richard Aboulafia of Virginia-based Teal Group, who has read the report, said Rand did “a good job of documenting (what) has been an open secret in the airplane business,” which is that flawed government policies have led to the failure of Chinese aircraft manufacturing. “The Chinese have great talent, a great market, and great resources,” Aboulafia said. “You have to work awfully hard to destroy its prospects of getting into commercial aviation.”