Why and how China's military-industrial complex was able to become the basis for the country's economic take-off
During perestroika, the word "conversion" was very popular in Russia. In the minds of the citizens of the not yet disenchanted Soviet Union, this concept implied that surplus military production would quickly switch to the production of peaceful products, flood the market with previously scarce goods and provide a long-awaited consumer abundance.
The conversion of the USSR failed along with perestroika. The huge industrial capacities of the highly developed Soviet military-industrial complex never became the flagships of capitalist industries. Instead of a sea of conversion goods, the visible consumer abundance was provided by imports, primarily of goods made in China. But until now, few people know that mass Chinese consumer goods are, to a large extent, also a product of conversion, only Chinese. Conversion to the PRC began a little earlier than in the Gorbachev Soviet Union, continued longer and completed much more successfully.
Agricultural divisions of nuclear war
By the time of Mao Zedong's death in 1976, China was a vast and impoverished militarized country with the largest army in the world. Four million Chinese "bayonets" were armed with almost 15 thousand tanks and armored vehicles, over 45 thousand artillery pieces and rocket launchers, over five thousand combat aircraft.
In addition to the armed forces, there were another five million so-called cadre militias - two thousand territorial regiments armed with small arms, light artillery and mortars.
Military parade at Tiananmen Square in Beijing, China, 1976. Photo: AP
All this sea of weapons was exclusively local, Chinese production. In 1980, almost two thousand military industry enterprises operated in China, where millions of workers produced all types of conventional weapons, as well as nuclear missiles. China at that time possessed the most developed military-industrial complex among all Third World countries, yielding in terms of military production and military technologies only to the USSR and NATO countries.
China was a nuclear power with a well-developed rocket and space program. In 1964, the first Chinese atomic bomb exploded, in 1967 the first successful launch of a Chinese ballistic missile took place. In April 1970, the first satellite was launched in the PRC - the republic became the fifth space power in the world. In 1981, China was the fifth in the world - after the USA, USSR, Great Britain and France - to launch its first nuclear submarine.
At the same time, China until the early 1980s remained the only country on the planet that was actively and actively preparing for a world nuclear war. Chairman Mao was convinced that such a war of massive use of atomic weapons was inevitable and would happen very soon. And if in the USSR and the USA, even at the height of the Cold War, only the armed forces and enterprises of the military-industrial complex were preparing directly for the nuclear apocalypse, then in Maoist China almost everyone, without exception, was engaged in such preparation. Everywhere they dug bomb shelters and underground tunnels, almost a quarter of the enterprises were evacuated in advance to the so-called "third line of defense" in remote, mountainous regions of the country. Two-thirds of China's state budget in those years was spent on preparing for war.
According to Western experts, in the 1970s, up to 65% of the funds allocated in the PRC for the development of science went to research related to military developments. Interestingly, it was planned to launch the first Chinese into space back in 1972. But China did not have enough money to simultaneously prepare for manned space exploration and an immediate nuclear war - the economy and finances of the PRC were still weak at that time.
With this militarization, the army and the military-industrial complex of China were inevitably involved in all spheres of life and economy of the country. It was a kind of conversion, on the contrary, when army units and military enterprises, in addition to direct tasks, were also engaged in self-sufficiency in food and civilian products. In the ranks of the People's Liberation Army of China (PLA), there were several so-called production and construction corps and agricultural divisions. Soldiers of agricultural divisions, in addition to military training, were engaged in the construction of canals, planting rice and raising pigs on an industrial scale.
Special Export Regions Soldiers
The situation began to change radically in the early 1980s, when Deng Xiaoping, who had become entrenched in power, began his transformations. And although his economic reforms are widely known, few people know that the first step towards them was the refusal to prepare for an immediate atomic war. The highly experienced Dan reasoned that neither the US nor the USSR really want a "hot" world conflict, especially a nuclear one, and that having its own nuclear bomb gives China sufficient security guarantees to abandon total militarization.
According to Xiaoping, for the first time in modern history, China was able to focus on domestic development, modernizing its economy and only as it develops, gradually strengthening its national defense. Speaking to the leaders of the CPC, he gave his own conversion formula: "Combination of military and civil, peaceful and non-peaceful, development of military production based on the production of civilian products."
Almost everyone knows about the free economic zones, from which the triumphal march of Chinese capitalism began. But almost no one is aware that the first 160 objects of the first free economic zone of China - Shenzhen - were built by people in uniform, 20 thousand soldiers and officers of the People's Liberation Army of China. In the headquarters documents of the PLA, such zones were called in a military way - "a special export area."
International Trade Center in Shenzhen Free Zone, China, 1994. Photo: Nikolay Malyshev / TASS
In 1978, civilian products of the Chinese military-industrial complex accounted for no more than 10% of production; over the next five years, this share doubled. It is significant that Xiaoping, unlike Gorbachev, did not set the task of carrying out the conversion quickly - for all the 80s it was planned to bring the share of civilian products of the Chinese military-industrial complex to 30%, and by the end of the 20th century - to 50%.
In 1982, a special Commission on Science, Technology and Industry in the interests of defense was created to reform and manage the military-industrial complex. It was she who was entrusted with the task of converting military production.
Almost immediately, the structure of the military-industrial complex of the PRC underwent radical changes. Previously, the entire military industry of China, according to the patterns of the Stalinist USSR, was divided into seven strictly secret “numbered ministries”. Now the "numbered" ministries have officially ceased to hide and received civil names. The second Ministry of Mechanical Engineering became the Ministry of Nuclear Industry, the Third - the Ministry of Aviation Industry, the Fourth - the Ministry of Electronics Industry, the Fifth - the Ministry of Armaments and Ammunition, the Sixth - the China State Shipbuilding Corporation, the Seventh - the Ministry of Space Industry (it was in charge of both ballistic missiles and "Peaceful" space systems).
All these declassified ministries established their own commercial and industrial corporations, through which from now on they were to develop their civilian production and trade in civilian products. Thus, the "Seventh Ministry", which became the Ministry of the Space Industry, established the "Great Wall" corporation. Today it is the world famous China Great Wall Industry corporation, one of the largest companies in the production and operation of commercial Earth satellites.
In 1986, a special State Commission for the Engineering Industry was established in China, which united the management of the civilian Ministry of Engineering, which produced all industrial equipment in the country, and the Ministry of Armaments and Ammunition, which produced all artillery pieces and shells. This was done to improve the efficiency of the management of the national engineering industry. From now on, the entire war industry, which provided numerous Chinese artillery, was subordinated to civilian tasks and civilian production.
Further changes in the structure of the PRC's military-industrial complex took place in 1987, when many enterprises of the “third line of defense” in mainland China, created for a nuclear war, were closed or moved closer to transport hubs and large cities, or donated to local authorities for organizing civilian production. In total, over 180 large enterprises that were previously part of the system of military ministries were transferred to local authorities that year. In the same 1987, several tens of thousands of workers of the Ministry of Atomic Industry of China, previously employed in uranium mining, were reoriented to gold mining.
However, in the early years, Chinese conversion developed slowly and without high-profile achievements. In 1986, the enterprises of the military-industrial complex of the PRC exported a little more than 100 types of civilian products abroad, earning only $ 36 million that year - a very modest amount even for the still undeveloped economy of China.
At that time, the simplest goods prevailed in Chinese conversion exports. In 1986, factories subordinate to the PLA's Main Logistics Directorate exported leather jackets and winter down-padded coats to the USA, France, the Netherlands, Austria and 20 other countries of the world. The proceeds from such an export, by order of the PLA General Staff, were sent to prepare the conversion of factories that were previously exclusively engaged in the manufacture of military uniforms for the Chinese army. To facilitate the transition to civilian production for these factories, by the decision of the PRC government, they were also entrusted with the task of providing uniforms for all railway workers, stewardesses, customs and prosecutors in China - all non-military people who also wear uniforms by the nature of their service and activities.
"Bonuses" from the West and the East
The first decade of China's economic reforms passed in a very favorable foreign policy and foreign economic environment. From the late 1970s to the events on Tiananmen Square, there was a kind of "honeymoon" of communist China and Western countries. The United States and its allies sought to use the PRC, which was openly in conflict with the USSR, as a counterweight to Soviet military power.
Therefore, the Chinese military-industrial complex, which began the conversion, at that time had the opportunity to closely cooperate with the military-industrial corporations of the NATO countries and Japan. Back in the mid-1970s, China began purchasing computer hardware, communications equipment and radar installations from the United States. Profitable contracts were signed with Lockheed (USA) and English Rolls-Royce (in particular, licenses for the production of aircraft engines were purchased). In 1977, the PRC purchased samples of helicopters and other equipment from the famous German company Messerschmitt. In the same year in France, China acquired samples of modern rocketry, and also began to cooperate with Germany in the field of nuclear and missile research.
In April 1978, the PRC received the most favored nation treatment in the EEC (European Economic Community, the predecessor of the European Union). Before that, only Japan had such a regime. It was he who allowed Xiaoping to begin the successful development of "special economic zones" (or "special export regions" in the PLA headquarters documents). Thanks to this most-favored-nation regime, Chinese army uniform factories were able to export their plain leather jackets and down jackets to the United States and Western Europe.
Without this "most favored nation treatment" in trade with the richest countries in the world, neither China's special economic zones nor the conversion of the PRC's military-industrial complex would have had such a success. Thanks to Xiaoping's cunning policies, who successfully used the Cold War and the West's desire to strengthen China against the USSR, Chinese capitalism and conversion at the first stage developed in “greenhouse conditions”: with widely open access to money, investments and technologies of the most developed countries of the world.
China's flirtation with the West ended in 1989 after the events in Tiananmen Square, after which the "most favored nation" regime was abolished. But the bloody dispersal of Chinese demonstrators was just a pretext - China's close contact with NATO countries interrupted the end of the Cold War. With the beginning of Gorbachev's de facto surrender, China was no longer of interest to the United States as a counterweight to the Soviet Union. On the contrary, the largest country in Asia, which began to develop rapidly, became a potential competitor for the United States in the Pacific region.
Workers at a textile factory in Jinjia, China, 2009. Photo: EPA / TASS
China, in turn, has successfully used the past decade - the flywheel of economic growth has been launched, economic ties and the flow of investments have already gained "critical mass." The cooling of political relations with the West by the early 1990s deprived China of access to new technologies from NATO countries, but could no longer stop the growth of the Chinese export industry - the world economy could no longer do without hundreds of millions of cheap Chinese workers.
At the same time, against the background of a cold snap with the West, China was lucky on the other side: the USSR collapsed, whose power was feared in Beijing for many years. The collapse of the once formidable "northern neighbor" not only allowed the PRC to quietly reduce the size of its ground army and military spending, but also gave additional, very important bonuses to the economy.
The republics of the former Soviet Union, firstly, have become a profitable, almost bottomless market for the still low-quality goods of young Chinese capitalism. Second, the new post-Soviet states (primarily Russia, Ukraine and Kazakhstan) have become an inexpensive and convenient source of both industrial and, above all, military technologies for China. By the beginning of the 1990s, the military technologies of the former USSR were at a completely global level, and the technologies of the civilian industry, although they were inferior to the leading Western countries, were still superior to those in the PRC of those years.
The first stage of China's economic reforms and military conversion took place in a very favorable external environment, when the state, officially calling itself the Middle, successfully used both the East and the West for its own purposes.
Brokers in uniform
Due to the favorable situation, the Chinese conversion proceeded simultaneously with the reduction of the large army. Over the decade, from 1984 to 1994, the PLA's numerical strength dropped from about 4 million to 2.8 million, including 600,000 regular officers. Outdated samples were removed from service: 10 thousand artillery barrels, over a thousand tanks, 2, 5 thousand aircraft, 610 ships. The reductions almost did not affect special types and types of troops: the airborne units, special forces ("quantou"), rapid reaction forces ("quaisu") and missile troops retained their potential.
Large-scale economic activities of the PLA were allowed and developed since the early 1980s as a support to the national economy. In addition to the conversion of defense enterprises, which were gradually switching to the production of civilian products, a specific conversion took place directly in the military units of the People's Liberation Army of China.
In the military districts, corps and divisions of the PLA, like mushrooms, their own "economic structures" arose, aimed not only at self-sufficiency, but also at capitalist profit. These army "economic structures" included agricultural production, the production of electronics and household appliances, transport services, repair services, the sphere of leisure (the development of audio-video equipment and even the organization of commercial discos by the army), banking. An important place was also taken by the import of weapons and dual-use technologies, trade in surplus and new weapons with third world countries - the flow of cheap Chinese weapons went to Pakistan, Iran, North Korea, and the Arab states.
According to estimates of Chinese and foreign analysts, the annual volume of China's "military business" in its peak in terms of scale and results (the second half of the 90s) reached $ 10 billion annually, and the net annual profit exceeded $ 3 billion. At least half of this commercial profit was spent for the needs of military construction, for the purchase of modern weapons and technologies. According to the same estimates, the commercial activities of the PLA in the 90s annually provided up to 2% of China's GDP. This is not about the conversion of the military industry, but about the commercial activities of the PRC army itself.
By the mid-1990s, the Chinese army was in control of nearly 20,000 commercial enterprises. According to Western experts, up to half of the personnel of the ground forces, that is, more than a million people, were not actually soldiers and officers, but were engaged in commercial activities, provided transportation or worked for machines in military units, which in essence were ordinary civilian factories. products. In those years, such army factories produced 50% of all cameras, 65% of bicycles and 75% of minibuses made in China.
By the mid-1990s, the conversion of the actual military industry also reached impressive volumes, for example, almost 70% of the products of the Ministry of Armaments and 80% of the products of naval shipbuilding enterprises were already for civil purposes. During this period, the PRC government ordered the declassification of 2,237 advanced scientific and technical developments of the defense complex for use in the civilian sector. By 1996, enterprises of the Chinese military-industrial complex were actively producing more than 15 thousand types of civilian products, mainly for export.
As the official newspapers of China wrote in those years, when choosing directions for the production of civilian goods, enterprises of the military-industrial complex act according to the principles of "looking for rice to feed themselves" and "hungry in food is indiscriminate." The conversion process was not complete without spontaneity and thoughtlessness, which led to the mass production of low-quality products. Naturally, Chinese goods at that time were a symbol of cheap, mass and low-quality production.
According to the Institute of Industrial Economics of the Academy of Social Sciences of China, by 1996 the country had managed to transform the military-industrial complex from a manufacturer of only military equipment to a manufacturer of both military and civilian products. Despite all the vicissitudes of reforms and a rather "wild" market by the end of the 1990s, the Chinese military-industrial complex consisted of more than two thousand enterprises, which employed about three million people, and 200 research institutes, where 300 thousand scientific workers worked.
By the end of the 20th century, China had accumulated sufficient industrial and financial potential in the course of market reforms. The active economic activity of the PRC army was already clearly interfering with the growth of its combat effectiveness, and the funds accumulated by the country already made it possible to abandon the commercial activities of the armed forces.
Therefore, in July 1998, the CPC Central Committee decided to end all forms of commercial activity of the PLA. Over two decades of reform, the Chinese military built a huge entrepreneurial empire that ranged from the transport of commercial goods by military vessels and aircraft to show business and securities trading. The involvement of the military in smuggling operations, including the import of oil beyond the control of state structures, and the sale of duty-free cars and cigarettes, was no secret to anyone. The number of army trade and manufacturing enterprises in the PRC reached several tens of thousands.
The reason for the ban on army commerce was the scandal associated with the J&A, the largest brokerage company in the south of the country, created by the PLA. Its leadership was arrested on suspicion of financial fraud and convoyed to Beijing. Following this, a decision was made to end free military entrepreneurship.
"Great Wall of China" military corporations
Therefore, since 1998, a large-scale reorganization of the PLA and the entire Military-Industrial Complex began in the PRC. To begin with, more than 100 legislative acts on the military industry were declassified and revised, and a new system of military legislation was created. A new law of the PRC "On State Defense" was adopted, the Committee for Defense Science, Technology and Industry was reorganized, and a new structure of the Chinese military-industrial complex was established.
11 market-oriented large associations of the Chinese military industry emerged:
Nuclear Industry Corporation;
Nuclear Construction Corporation;
The first corporation of the aviation industry;
Second Corporation of the Aviation Industry;
Northern Industrial Corporation;
Southern Industrial Corporation;
Shipbuilding Corporation;
Heavy Shipbuilding Corporation;
Aerospace Science and Technology Corporation;
Aerospace Science and Industry Corporation;
Corporation of Electronic Science and Technology.
During the first five years of their existence, these corporations have made a great contribution to the modernization of defense and the development of the national economy of China. If in 1998 the defense industry was one of the most unprofitable industries, then in 2002 Chinese military-industrial corporations became profitable for the first time. Since 2004, the shares of 39 military-industrial complex enterprises have already been quoted on Chinese stock exchanges.
The military-industrial complex of China began to confidently conquer civilian markets. So, in 2002, the military-industrial complex, in particular, accounted for 23% of the total volume of cars produced in the PRC - 753 thousand cars. China's defense industry has also mass-produced civilian satellites, aircraft, ships and reactors for nuclear power plants. The share of civilian goods in the gross output of China's defense enterprises reached 80% at the beginning of the 21st century.
What a typical military-industrial corporation of the PRC is can be seen in the example of the China North Industries Corporation (NORINCO). It is the country's largest association for the production of weapons and military equipment and is under the direct control of the State Council of the People's Republic of China, has more than 450 thousand employees, includes more than 120 research institutes, manufacturing enterprises and trading companies. The corporation develops and manufactures a wide range of high-tech weapons and military equipment (for example, missile and anti-missile systems), and at the same time produces a variety of civilian products.
Major General of the Philippine Army Clemente Mariano (right) and a representative of the China North Industrial Corporation (Norinco) at a stand with China-made mortars at the International Aviation, Navy and Defense Exhibition in Manila, Philippines, February 12, 1997. Photo: Fernando Sepe Jr. / AP
If in the military sphere, the Northern Corporation produces weapons from the simplest Type 54 pistol (a clone of the pre-war Soviet TT) to multiple launch rocket systems and anti-missile systems, then in the civil sphere it produces goods from heavy trucks to optical electronics.
For example, under the control of the Northern Corporation, several of the most famous brands of trucks in Asia are produced and one of the most significant and largest factories, Beifang Benchi Heavy-Duty Truck, operates. In the late 1980s, this was a key project for the PRC, the main goal of which was to solve the problem of the lack of heavy trucks in the country. Thanks to the "most favored nation" regime in trade with the EEC that existed in those years, Beifang Benchi cars (translated into Russian - "North Benz"), these cars are produced using Mercedes Benz technology. And now the company's products are actively exported to Arab countries, Pakistan, Iran, Nigeria, Bolivia, Turkmenistan, Kazakhstan.
At the same time, the same "Northern Corporation" is not without reason suspected by the United States of military cooperation with Iran in the development of missile weapons. In the process of investigating these relations between the Chinese corporation and the Ayatollahs of Tehran, the US authorities discovered eight Norinco subsidiaries engaged in high-tech activities on their territory.
All military-industrial corporations of the PRC, without exception, operate in the civilian sphere. So the nuclear industry of the PRC, which previously produced mainly military products, follows the policy of "using the atom in all spheres of economy." Among the main activities of the industry are the construction of nuclear power plants, the widespread development of isotope technology. To date, the industry has completed the formation of a research and production complex, which makes it possible to design and build nuclear power units with a capacity of 300 thousand kilowatts and 600 thousand kilowatts, and in cooperation with foreign countries (Canada, Russia, France, Japan) - nuclear power units with a capacity of 1 million kilowatt.
In the space industry of China, an extensive system of scientific research, development, testing and production of space technology has been formed, which allows launching various types of satellites, as well as manned spacecraft. To ensure their support, a telemetry and control system has been deployed, which includes ground stations in the country and sea vessels operating throughout the World Ocean. The Chinese space industry, not forgetting its military purpose, produces high-tech products for the civilian sector, in particular, programmed machine tools and robotics.
Chinese unmanned aerial vehicle for military and civilian use in China at Aviation Expo, 2013. Adrian Bradshaw / EPA / TASS
The borrowing and production assimilation of foreign experience in aircraft construction allowed the PRC to take a firm place in the foreign market as a supplier of aircraft parts and components to most developed countries. For example, the First Corporation of the Aviation Industry (the number of employees is over 400 thousand) in 2004 signed an agreement with Airbus on participation in the production of spare parts for the world's largest serial airliner Airbus A380. In Russia, the representative office of this corporation has been actively promoting its heavy mining excavators in our market since 2010.
Thus, China's defense industry has become the base for the PRC's civil aviation, automotive and other civilian industries. At the same time, China's conversion military-industrial complex not only contributed to the rapid development of the Chinese economy, but also significantly raised its technical level. If 30 years ago China had the most developed military-industrial complex among the Third World countries, lagging far behind in advanced developments from NATO and the USSR, then at the beginning of the 21st century, thanks to thoughtful conversion and skillful use of favorable external circumstances, China's defense industry is confidently catching up with the leaders, entering the top five the best military-industrial complexes of our planet.
