I will agree that a personal arms industry is not as efficient to national power as the regular military, but the way I see it is like this.
The average chinese citizen has alot of sectors where people would like to personally spend money on but cannot, they include hard drugs, prostitution, guns,... In all cases, there are very good reasons for government to limit consumer choice.
But remember, each time you restrict a consumer from spending on certain things, they will spend it on others. I believe firearms and night vision/thermal sensors/body armor is one where the restrictions can be relaxed slightly. I would envision allowing people to own firearms, but not being allowed to own bullets and only being able to shoot at a firing ranges which supplies bullets.
There is a lot of money spent in China on military models, airsoft, military paraphernalia which is basically just a substitute for firearms. Those items also do not have any synergy with military defense, unlike the civilian firearms industry in the US. Basically I am encouraging a civilian participation in the Chinese arms industry as an augment to the MIC rather than to replace it. Also, having a civilian arms industry would make china more export competitive in arms as well. You hear alot in the US how chinese arms are not designed well from a consumer usability perspective, and with a domestic market, china could focus on it. Small arms can also lead to more general awareness of chinese industry, facilitating heavy arms sales. China is being strangleholded by the US across many markets, but it has never aggressively developed small arms. While I dont expect china to develop a top tier small arms export (like italy, germany, or US) china should still not abdicate that market altogether.
Norinco, while capable, treats the arms market with exactly the sophistication of a 80's deng-era SOE. We need private versions of HK, Sig Sauer, Remington, Winchester like we have with DJI and Huawei.
