Chinese army’s paid-for services coming to a full stop, finally

By Swordsman Linghu, Silvi Media (Aug 1, 2018)

 

* Controversial system dates to the era of Deng to easy burden of national economy.

* All commercial activities will be ceased “without any compromise, said Xi, who also noted that armed forces should focus on improving combat capability.

 

Chinese President Xi Jinping has, once again, put a full stop to all paid-for services of his country’s mighty armed forces, during a speech to China’s powerful the Central Military Commission (CMC) on Tuesday, one day ahead of Army Day, or Aug 1.

China’s armed forces, which are involved in businesses ranging from kindergartens to property rental services, should have all their commercial activities ceased “without any compromise” by the end of this year, Xinhua reported.

Chinese leaders, have since the early 1990s, tried every effort to end this controversial system of paid-for services, which has been associated with corruption since its early days.

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Actually, the system dates to the era of Deng Xiaoping, who in the 1980s shifted the nation’s budget priorities away from the military and towards economic development.

After coming to power in 2012, Xi, who is also chairman of the CMC, managed to quickly consolidated his power with the Chinese military.

He has made it clear and repeatedly stressed that the armed forces should focus on enhancing combat capabilities, as Beijing finds the international environment gets increasingly complicated in recent years.

Below is a brief timeline of how the system of paid-for services evolved in China:

 

1980s

In early 1985, it was then CMC chairman Deng Xiaoping who raised the idea of allowing the armed forces do commercial activities to easy the burden of the country’s mounting military spending.

It was understandable as China’s major challenge then was trying its utmost to further the “reform and open-up policy” which was launched by Deng in 1978.

Decision was made by the State Council and the CMC in Apr/May 1985 to give Deng’s proposal a green light. The People’s Liberation Army (PLA) was then allowed to set up companies and contracts with outside firms, leading to a vast web of revenue streams.

Military hospitals and hotels took in civilians, barracks and warehouses were rented out, the famed song and dance troupes appeared at outside functions, military construction expertise was opened to bidders and the elite academies and institutions once reserved for cadets and officers threw open their doors to regular students.

“However, senior officers began to abuse their position and promote their own business interests,” the South China Morning Post claimed.

Actually the decision had been controversial from its very early days.

General Zhang Aiping, China’s defense minister from 1982-1988, was a staunch opponent.

Zhang Aiping

In a meeting of CMC’s standing committee members, he said allowing paid-for services will “definitely” cause corruption within the army.

He later called the decision “a severe mistake” made by the central government.

Commercial activities of China’s armed forces quickly flourished in late 1980s and early 1990s. However, some of the country’s top leaders began to realize the problems the phenomenon could cause.

 

1990s

In 1992, General Zhang Zhen, former vice-chairman of the CMC, made it clear that the armed forces would not be allowed to expand business operations.

“Doing business will certainly lead to corruption, while no corrupted army is able to fight!” he has stressed.

As of the first half of 1993, Chinese army already had a total of more than 10,000 business units, with more than 800,000 employees, according to a statistics. The PLA then had more than 70 car plants (about 20 percent of China’s total, nearly 400 pharmaceutical companies, and roughly 1,500 hotels, according to the Janes Defense Weekly, of the UK.

In July 1993, the CMC spent three half days to discuss the issue of the PLA doing business, reaching a consensus that images of the army and the national government would be tarnished if the trend continued without any restriction.

Three months later, decisions were made to correct and limit business operations of the armed forces. Combat forces, for example, were banned from business activities.

On Jul 22, 1998, Jiang Zemin, then Chinese president and CMC chairman, announced in national TV news that Chinese army would no longer do business.

Two months later, then Chinese premier Zhu Rongji said the Chinese army was deeply involved in smuggling. He said the country’s total value of smuggled goods reached 800bn yuan, and “at least 500bn from the army”. (1 yuan equaled to 0.157 dollar then.)

In the same year, Jiang ordered the PLA to close its commercial subsidiaries and also put some army-run enterprises under the control of local governments.

Long after his retirement, Jiang said, in a humble manner, in 2009 that banning the army from doing business was one of the “small jobs” he had accomplished when he was in office.

However, the army was permitted some exceptions.

 

New century

Many military hospitals continued to outsource resources in its specialist departments, such as fertility, gynecology, cosmetology and plastic surgery to private physicians and sometimes even unlicensed doctors.

An unnamed expert from Hong Kong estimated in 2013 that China then had a total of more than 15,000 enterprises with military background, and their total annual sales revenue might reach roughly 150bn yuan, equaling 2 percent of the country’s total GDP.

Xi has been determined to give the controversial system a full stop since coming to power in 2012.

Xi

The CMC, chaired by Xi, announced in March 2016 that the People’s Liberation Army and the armed police must end their so-called paid-for services within three years.

The system is expected to come to an end at the end of this year, according to Xi’s order this week. All business activities, including running of kindergartens, will have to be ceased or re-arranged “without any compromise”.

“Re-arrange” means certain commercial activities will escape being shut down, but their ownership and management may be transferred from the military to the local government.

By the end of June, around 100,000 of the businesses had been shuttered, Xinhua said, though another 6,000 “sensitive and complicated” remain operational.

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