China is cashing in on the demand for armed drones, according to a new Department of Defense report.

China was the fifth largest arms supplier in the world between 2012 and 2016, the report, titled “Assessment on U.S. Defense Implications of China’s Expanding Global Access,” said. The Chinese completed more than $20 million in sales with the country’s second largest arms sales going to the Middle East and North Africa “likely due to the demand for armed” unmanned aerial vehicles.

The report, dated December 2018 but made available Jan. 14, is mandated by law.

The report notes that the drone and armed drone market is a niche market but China is one of the world’s few suppliers.

In large part to China’s apparent willingness to export such technology to other nations, the number of nations across the globe with armed drones has grown significantly in recent years.

The United States was the first nation to use this technology in combat zones. However, the United States has historically been limited in sharing its technology with other nations and partners due to export rules, much to the frustration of friendly nations, though the Trump administration has sought to change that.

Vice Chairman of the Joint Chiefs of Staff Gen. Paul Selva said previously that U.S. export policies denying the sale of certain systems, such as large unmanned systems, creates a self-limiting factor.

The United States has allies and partners who want to buy MQ-1 Predator and MQ-9 Reaper drones, so they go to the Russians, the Chinese, the Israelis, the French — all whom are more than willing to sell their technology to others, he said. So the United States ends up with an ally that has systems that are not interoperable with U.S. systems, noting “that’s a problem.”

As a result, China faces little competition to sell these systems given most nations that produce armed drones are restricted from selling the technology as signatories of the Missile Technology Control Regime and/or the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the DoD report notes.

DoD’s report notes, however, that Chinese arms are lower quality and less reliable than those offered by top international arms suppliers.

“Most of China’s customers are developing countries that prefer less expensive Chinese arms,” the report states. “These arms generally come with few end-use restrictions, which is attractive to customers who may not have access to other arms sources for political or economic reasons.”

For example, China’s ability to remain one of the top five nations in global arms sales hinges on continued strong sales to Pakistan and demand for their armed drones, the report says.

The report points out key developments for China recently include sales of armed drones to Iraq, Saudi Arabia, Egypt and the United Arab Emirates.