China's Answer to the US Military-Industrial Complex

On January 22, China’s Xi Jinping added a new title to his long list of state and party functions: the chairman of the Central Commission for Integrated Military and Civilian Development (CCIMCD). The aim of this commission is to cut costs and integrate existing civilian technologies and services into the People’s Liberation Army (PLA). Two months later, China announced its smallest military budget increase in a near decade. Improving efficiency and tapping into China’s existing economic power has become the new trend in China’s civil-military relations.

Background on the Commission and Chinese Civil-Military Integration

The CCIMCD is a coordination body for the integration of civilian and military sectors and is staffed by members of the Politburo and the Standing Committee. The aim of the commission is to promote innovation for dual-use technologies and integrate civilian sector services into the PLA. In practice, the CCIMCD is the latest of Xi’s efforts to reform the PLA and create efficiency for the largest standing army in the world. To understand the CCIMCD, one should first look at the developments leading up to China’s proposed civil-military integration.

Over the years, China made its own efforts to “catch up” (at all costs) to the United States. The latest attempt is to build a domestic version of the defense military-industrial complex. Xi noted as early as March 13, 2016 that “military innovations should take a central role in producing indigenous military wares; and that the governments from the state to the local levels should promote integration between the civilian and the military sectors.” This announcement was followed up by a report released from the PLA Daily on March 27 on reducing compensated services to the civilian sectors and drawing service directly from the civilian sector.

On July 21, the Recommendation on Integrating Economic and Defense Developments was issued by the Central Military Committee. In the recommendation, the term “civil-military integration” was first mentioned as a reform to provide the military with better services while at the same time helping advance the Chinese economy. The broad Keynesian statement should not be unfamiliar to China watchers, but the recommendations also laid out a military strategic goal for China. The recommendation stated that by 2020, collaborations between civilian and military sectors should provide better dual-use technologies, direct civilian participation, and services for the PLA. The recommendation also called for a loosening of the barriers between military technologies and services that had been long withheld from the private sector, a new training and promotion program for civilian experts, and a co-development scheme for Chinese military installations by civilian contractors. Especially on the last point, the recommendation emphasized that maritime installations should be a key priority.

The July recommendation was endorsed by Xi and officially adopted on January 22, 2017, after a series of high-profile conferences and expositions demonstrating existing dual-use technologies and services. Branding civil-military relation as a new policy agenda, the CCIMCD was established to coordinate the July recommendation to create efficiency and political support for China’s national security strategies.

Xi’s chairmanship on the committee raises speculations for the private sector. To many, the CCIMCD may create an opportunity to set a low bar for private sector businesses to gain entrance into the lucrative defense market. From January, civil-military integration has since risen to one of the most frequently used terms in Chinese mainstream media, and many are speculating about the economic incentives for the Chinese private sector to be engaged with the patriotic duty of providing service and technology to the PLA. However, what may seem to be a boon for private sectors may also cause trouble in the long run.

Domestic Implications of Civil-Military Integration

One may draw casual comparisons between the U.S. military-industrial complexes with China’s civil-military integration. But at this stage, there is no visible comparison to be made. For a long time, the center of gravity for weapons development in China has been under the direct control of the PLA. Despite the goal of establishing technological integration, the PLA and the state-owned enterprises (SOEs) are still the biggest players in Chinese weapons development.

The risk runs high for the Chinese private firms entering into the defense contracting business. High entry costs along with the risk of losing autonomy prevent companies from entering into the defense market. Though in theory, civil-military integration aims to provide the private sector a greater role in defense contracting, established SOEs with years of defense-related R&D experience crowd out the private sector companies. Unless there is genuine competition for innovation, the private sector can only supply service and limited technological innovations to the PLA.

Instead, SOEs will benefit from civil-military integration. The CCIMCD may help SOEs to secure funds from the private sector and diversify certain operations (e.g. facility maintenance) down to the more cost-efficient private sector. By focusing on purely defense-related R&D and productions, SOEs can free themselves from bureaucratic burdens traditionally tied-in when dealing with the PLA. Furthermore, SOEs can gain insights from the business practices of the private sectors to create more cost-efficient managements.

Security Implications of Civil-Military Integration

Civil-military relations have long been a grey area in China, but civil-military integration has implications for China on the security front. The maritime and cyber domains are two sectors that can benefit from the adoption of civil-military integration.

Beijing can exploit grey zones by incentivizing the private sector to develop in disputed areas in the East and South China Seas. Recently, a new cruise line was opened to provide civilian tour packages and service to the disputed Paracel Islands claimed by China in the South China Sea. Though this is a service as opposed to dual-use technology, in this case, the civilian sector is already heavily integrated with China’s military agenda. Beijing has shown flexibility in using militias or “little blue men” in its maritime disputes. In this regard, the private sector could be seen as a potential player in the territorial disputes by servicing and developing the disputed artificial islands, providing resource extraction, and conducting maritime surveying without directly involving the PLA Navy (though indirectly, Beijing and the Chinese navy will probably oversee all commercial operations in the area).

The cyber and space domains could also benefit from civil-military integration. Integrating civilian expertise into the military sector would help China to develop cyber warfare capabilities and train next-generation cyber and space experts. Alternatively, joint development programs between the civilian and the military sectors will also help Chinese companies to compete in the emerging space and cyber industries.

Conclusion

The purpose of this piece is not to raise alarms but to depict a new trend in Chinese civil-military relations. As the Chinese economy grows, economic agendas have linked with national security interests. And the Central Commission for Integrated Military and Civilian Development is a reflection of this new trend.

The new trend for Chinese civilian-military relations is fueled by China’s growing economic power and by civilians directly participating in China’s military strategies. And without a response, the hypothetical reality of China “catching up” to the United States may not be so hypothetical after all.