Military Has Given Up Businesses, China Says

China’s military has relinquished all of its massive business holdings to civilian control, just five months after a sweeping order to hand over the commercial ventures, government media trumpeted Tuesday.

But experts said that the achievement, announced on the front pages of the country’s major newspapers, is mostly just on paper so far.

And the messy process of deciding how to run those enterprises and compensate the People’s Liberation Army for its financial losses will continue for months, well beyond Tuesday’s official deadline for the PLA to disentangle itself from its corruption-riddled commercial holdings, analysts said.

“There are many more steps to go,” said Tai Ming Cheung, a Hong Kong-based expert on China’s armed forces--at up to 3 million strong, the world’s largest.

Beijing’s announcement that the PLA had smoothly transferred all of its business dealings came sooner than many had expected, given the enormous scope of the PLA’s empire of about 15,000 businesses, which encompass everything from five-star hotels in the center of the Chinese capital to the manufacturer of a popular stomach tonic to Shanghai’s gleaming new stock exchange building.

Many of the changes, however, were superficial. Businesses once belonging to the PLA and the People’s Armed Police now officially report to the State Economic and Trade Commission and to various local authorities, while important decisions regarding their operation and viability are still to be made in the coming year.

“We’re talking about thousands of companies and [just] dozens of bureaucrats in charge at the central level,” said Cheung, who predicted that the process of determining the exact size of the PLA’s portfolio and coming up with a compensation package will take “a couple years at the very least.”

Still, even the surface transfer of the military’s business enterprises to civilian supervision represents a significant victory for Chinese President Jiang Zemin, who surprised China-watchers by ordering the PLA, one of the most backward and ill-equipped uniformed forces among major nations, to disentangle itself from business in July.

Jiang, the successor to late “paramount leader” Deng Xiaoping, has never enjoyed strong control of the nation’s military, a key power base in the Communist regime that made Deng’s and, before him, Mao Tse-tung’s rule absolute.

Jiang, who holds the chairmanship of China’s crucial Central Military Commission, issued his edict after officials blamed the PLA and the People’s Armed Police for widespread smuggling, which costs Beijing an estimated $12 billion a year.

Top military officers also complained that the PLA’s economic sidelines distracted the army from its goal of becoming a modernized fighting force able to hold its own against other regional and international powers.

The business ventures “corroded the thinking of the troops and gave rise to negative and corrupt phenomena, thus influencing the army’s image and fighting ability,” the Liberation Army Daily said in a front-page editorial Tuesday, which called on the army to “make persistent efforts” to “carry the task to completion.”

The PLA’s foray into the business world--at almost all levels of the military, from high-ranking officials on down--exploded into major activity in the 1980s when Deng began slashing defense spending to focus on China’s remarkable economic reforms.

As a result, the PLA found itself having to compete for survival, eventually raking in yearly profits of between $1 billion and $3 billion from its commercial holdings, money that went to upgrading the army’s outdated hardware and lining the pockets of officers.

Now, as the PLA removes itself from business in a policy about-face, Beijing has pledged to increase spending to support the military, although not necessarily matching the amount that the PLA is forgoing by jettisoning its companies, some of which are huge conglomerates listed on Hong Kong’s stock exchange.

Cheung said that switching the PLA’s businesses over to civilian control will have little effect on the size of the military, which has steadily decreased in recent years. Most military businesses are staffed by civilians, and “only the top half-dozen on the board” of a major corporation might have military affiliation, Cheung said.