China's fifth-generation stealth fighter, the J-35, bearing naval markings and the "Flying Shark" emblem, was first clearly revealed during rehearsals for the military parade marking the 80th anniversary of victory in the War of Resistance against Japan on September 3rd. This development confirms the aircraft's official integration into China's naval aviation system, making China the second country in the world to operate two distinct types of fifth-generation stealth fighters (alongside the Air Force's J-20).

Details such as the registration numbers "0011" and "0012" indicate the commencement of low-rate initial production, signifying that small-scale mass production has begun with the aim of equipping the armed forces with initial operational and logistical capabilities. The leaked images are believed to be a deliberate official release to showcase the development progress of the J-35. The "Flying Shark" emblem, previously reserved for the naval fighter J-15, symbolizes technological inheritance and the J-35's legitimate status as a naval aircraft.

Market Signals

Sector-wide Implications: The J-35's production bolsters China's naval air power, driving increased defense spending and technological development among regional and global competitors.
Competitor Positioning: The U.S. and its allies will need to reassess their defense strategies, potentially accelerating the development of next-generation fighter programs and investment in anti-stealth technologies.
Stock Movements: Aerospace and defense companies involved in the J-35's supply chain could see increased demand, while competing firms might face mounting pressure.

Stakeholder Impact

China's defense industry and the PLA Navy will benefit from increased orders, revenue, and technological leaps. Conversely, US and allied aviation companies may face escalating competition and a heightened security challenge, necessitating increased defense spending.

Action Timeline

Immediate: Explore investment opportunities within China's aviation supply chain, particularly key suppliers to Shenyang Aircraft Corporation.
Short-term: Monitor potential export deals for the J-35, especially for nations seeking advanced capabilities at lower costs.
Long-term: Assess the J-35's impact on the Indo-Pacific power balance and accelerate the development of anti-stealth technologies.

Risk Assessment

Geopolitical Tensions: The deployment of the J-35 will likely exacerbate existing tensions in the Indo-Pacific.
Market Volatility: An arms race could lead to market volatility in the aerospace and defense sectors.
Supplier Dependencies: China may still rely on foreign suppliers for certain critical components.

Key Indicators

Market Signals: China's entry into the serial production phase of its naval stealth fighter, the J-35.
Leading Indicators: Plans to reach 1,000 J-35 units by 2030, with an estimated cost of approximately $80 million per unit.

Regional Perspective

The J-35 underscores the enhancement of China's naval aviation capabilities, altering the security landscape in the Indo-Pacific and compelling neighboring nations to increase their defense investments.

Immediate Implications

What's Next: Integration of the J-35 onto China's aircraft carriers, particularly the "Fujian" carrier.
Time-Sensitive Opportunities or Risks: Increased demand for defense suppliers and advanced materials, and the necessity to develop anti-stealth technologies.

What to Watch

Leading Indicators: Successful integration of the J-35 onto Chinese aircraft carriers, announcements of export deals.
Expected Next Developments: Responses from the U.S. and its allies, the production ramp-up rate of the J-35.

Analysis

The emergence of the J-35 into serial production marks a significant shift in the global air power balance. Its superior capabilities, relatively lower cost, and ability to operate from advanced aircraft carriers make it a key player in the global defense arena, necessitating a comprehensive reassessment of global defense strategies.