China and Grumman (USA) signed a $550 million agreement to modernize 55 J-7 Fighters under the project called "Super-7". However the project was cancelled due to political problems and significant increases in the cost.
As a substitute to Super-7, China started the FC-1 project. In February 1992, CATIC (China Aero Technology Import and Export Corporation) invited the Pakistan to invest in the project in return for huge Transfer of Technology and participation in R&D of the project. Pakistan Accepted. The First Flight was planned in 1996, but it got delayed because Pakistan wished to upgrade the characteristics in response to India's acquisitions of Su-30MKI. The project began to Stagnate. But in 1998, Pakistani PM's visit to China resulted in the continuation of the Programme. In 1999, sanctions on Pakistan led to serious setbacks on the programme. Pakistan hoped to install Western Avionics on the plane, which was now not possible. Year 2001 saw the changes in approach to develop the fighter plane. The development of airframe was de-linked from the development of Avionics. The Comprehensive design was completed in September 2002 while the development of different aircraft systems progressed. The First Aircraft was assembled by May 2003.
A new redesigned prototype emerged in April, 2006, this was in response to flaws that were discovered in earlier flight tests. The main changes included re-designed air intakes, larger leading edge root extensions (LERX), longer ventral fins underneath the rear of the fuselage, a taller vertical stabilizer fin with a rectangular electronic warfare equipment housing at the tip.