During part of the 1980s and 1990s, the Central Military Commission (CMC) of the Chinese Communist Party (CCP) allowed the People's Liberation Army (PLA) and the People's Armed Police (PAP) to legally engage in business and trade. This policy was officially promulgated on 2 April 1985. Later, the CMC believed that its drawbacks of this policy were too great, so it gradually rolled back the decision. On 15 December 1998, the PLA and PAP completed the decoupling of most of their operating enterprises. In July 2019, the CMC announced the cessation of all paid services by the military. Currently, only the Xinjiang Production and Construction Corps (XPCC) still operates its own businesses.
In 1985, at the enlarged meeting of the Central Military Commission of the Chinese Communist Party, Deng Xiaoping, Chairman of the Central Military Commission, advocated saving military expenditure for the sake of reform and opening up. As a result, tight military expenditure gradually became a prominent problem faced by the central government and governments at all levels at that time. Under this background, the military was allowed to engage in business. On 2 April 1985, the General Staff Department, the General Political Department and the General Logistics Department of the People's Liberation Army (PLA) formulated the Interim Provisions on the Military Engagement in Production, Operation and Foreign Trade, which was forwarded and implemented by the State Council and the Central Military Commission on 4 May 1985. The "Interim Provisions" made clear provisions on the production, operation and foreign trade activities of the troops. The main contents include:
Under the leadership of the three headquarters of the Central Military Commission of the Chinese Communist Party, each branch of the military established a joint airline and an ocean shipping company. Subsequently, the major military regions followed closely and established their own economic and trade groups, among which the most representative were Southern Industry and Trade and Northern Industry ; driven by their superiors, the various group armies also entered the business world. The income from military operations did improve their training grounds and camp conditions. Subsequently, provincial military regions and military sub-districts also gradually started. The deepening of military business has led to a more complex property structure of military-run enterprises, with joint ventures between different military units, joint ventures between military units and non-military units, and even joint ventures between military units and foreign capital. The military gradually used its military power to exert pressure on the industrial and commercial, tax, customs, forestry and other departments.
The military's business activities were strongly opposed by senior generals, led by Zhang Aiping, then Minister of National Defense. At the Standing Committee of the Central Military Commissio, he strongly pointed out the disadvantages of the military's business activities:
Zhang added: "If we, the people working in the Military Commission, cannot even stop this, and if things continue like this, who will be killed in a war in the future? We will be killed first. If we are killed, we will be cursed, disgraced, and infamous! Even our corpses will be tainted for eternity!... When the time comes, you can't blame others for wanting to overthrow you!" However, the voices in support of the military engaging in business outweighed the opposition, and the policy of the military engaging in business was eventually implemented.
After 1987, Zhang Aiping retired and Chi Haotian joined the Central Military Commission. Zhang invited Chi to his home, during which he cited a line from Yue Fei's poem Man Jiang Hong that reads "The shame of Jingkang has not yet been avenged" and said, "In order to make up for the shortage of military funds, the emperors of the Song dynasty promoted the strategy of letting the army engage in business. As a result, the military was neglected and military discipline was lax. Facing a small country like Xixia, they were defeated again and again. When the Jin army invaded, the central government lost control and the two emperors Huizong and Qinzong were captured. This is the 'Jingkang Shame' in history." Zhang's talk about "drinking poison to quench thirst" shocked Chi. After Zhang's death, Chi wrote an article "Standing Up to Heaven, and Chasing the Wind and Clouds with Heroic Spirit" to recall this incident.
According to the situation reflected over the years, doing business is very harmful to the army. According to the documents investigated at that time, the first problem is that doing business distracts the attention of leading cadres and organs at all levels. A considerable number of cadres and troops are engaged in business and do not do their jobs properly, which to a certain extent weakens the army's ability to perform its functions and combat effectiveness. Second, using the gun to engage in business to compete with local governments and the people for profits, the unfairness affects the relationship between the military and the government, and disrupts the national economic order. Third, doing business is prone to corruption, corrupting cadres, and undermining the morale of the troops. The military's commercial interests have expanded rapidly and have developed into a huge network. It involves thousands of loosely connected companies, from hotels, nightclubs, golf courses to airlines, pharmaceutical companies, stock brokers, etc. In addition, some units embezzle normal funds in business, which is actually a diversion of national defense funds. After deducting the embezzled funds, the actual income is very little, and some are even negative.
After Jiang Zemin became the CMC Chairman, he began to adopt a method of gradual contraction and phased rectification under the advice of Vice Premier Zhu Rongji and Vice Chairmen Zhang Wannian and Chi Haotian. In 1991, the CMC stipulated that combat units at the division level and below were not allowed to run businesses. On September 19, 1993, the Central Military Commission decided that combat units below the army level were not allowed to engage in business and issued the "Decision on the Rectification and Reform of Production and Operation", requiring that "based on the overall interests of the Party and the country and the long-term development of the army, we must resolutely rectify and reform production and operation, straighten out relations, promote benefits and eliminate disadvantages, and ensure the healthy development of production and operation in the army".
By January 1995, enterprises of combat units below the army level, enterprises run by departments, political affairs, logistics and other organs of major military region and deputy major military region level units, and enterprises run by the second-level departments of the three headquarters were all put under centralized management in accordance with regulations. All soldiers and equipment sent out by various units for labor services have been withdrawn. Various types of mechanical construction teams and transport teams have been reorganized and reduced, and are under the unified management of major units. The army originally had 15,327 enterprises and more than 860,000 employees. Through rectification, the number of enterprises has been reduced by 6,238, accounting for 40.7% of the total; the number of employees has been reduced by more than 60,000.
In 1995, the Central Military Commission decided to conduct a cleanup and rectification of the military's production and business activities in coastal economically developed areas and special economic zones. In early 1996, the Military Commission decided to further clean up and rectify the production and business of the entire army, divest local affiliated enterprises, and clean up and control cross-regional operations. In March 1998, the Military Commission decided that non-combat troops would not engage in production and business. In July 1998, the Central Committee of the Chinese Communist Party decided to focus on combating smuggling activities across the mainland. It was discovered that some units and individuals in the army and armed police forces were also involved in smuggling activities. Subsequently, the Central Military Commission decided to thoroughly investigate and stop all business activities of the army and armed police forces.
On July 22, 1998, Jiang Zemin, Chairman of the Central Military Commission, wrote a letter stating:
On the same day, Chairman of the Military Commission Jiang Zemin gave a clear conclusion at the meeting on combating smuggling in the entire army: the PLA and the armed police force should stop all business activities and âÂÂall be paid by the governmentâ from January 1 next year. Subsequently, the Central Committee and the Military Commission both set up leading groups for the army to clean up business enterprises. In October 1998, the CCP Central Committee, the State Council, and the Central Military Commission held a meeting on the military, armed police force, and political and legal organs no longer engaging in business activities and adopted the âÂÂImplementation Plan for the Military and Armed Police Forces to No Longer Engage in Business ActivitiesâÂÂ. Subsequently, the General Staff Headquarters, the General Political Department, the General Logistics Department, and the General Armaments Department jointly issued the âÂÂOpinions on Implementing the Implementation Plan for the Military and Armed Police Forces to No Longer Engage in Business ActivitiesâÂÂ.
Hu Jintao, then a member of the Politburo Standing Committee, served as the leader of the leading group for the military, armed police, and political and legal organs to stop engaging in business activities. Hu said:
By December 1998, the military had transferred 2,937 enterprises to the national and local governments, with total assets of 80.4 billion yuan, net assets of 24.1 billion yuan, and 209,000 employees. 3,928 enterprises were closed down, with total assets of 15.1 billion yuan, net assets of 6.4 billion yuan, and 104,000 employees. All of them had ceased operations. The 258 security enterprises and 1,088 welfare enterprises that were retained were reviewed and approved in accordance with policy regulations, thus achieving the strategic decision to completely decouple the military and armed police forces from operating enterprises by the end of 1998. On 15 December 1998, the People's Liberation Army and the People's Armed Police completed their separation from all business enterprises.
On 23 April 2009, Jiang Zemin, former Chairman of the Central Military Commission of the Chinese Communist Party, visited the China United Engineering Corporation (formerly the Second Design Institute of the Ministry of Machinery Industry in Hangzhou where he had worked. During a discussion with the cadres and staff of the company, he mentioned his contributions to the central government.
The military's business activities were curbed after 1998. Some enterprises and other units of the military and armed police were transferred to local governments without compensation, but a part of them continued to operate in the name of "paid services". This special scope was concentrated in military and armed police hospitals. In November 2009, with the approval of the Central Military Commission, the four headquarters studied and formulated the "Opinions on Strengthening the Management of Paid Services Provided by Military Units to the Outside World" and issued it to the entire army and armed police for implementation. In 2010, the Leading Group for the Management of Paid Services Provided by the Whole Army was established. The Wei Zexi incident in 2016 and other events have once again led to public opinion calling on the military and armed police to completely stop providing paid services.
On 12 July 2019, Vice Premier Han Zheng announced at a summary and commendation meeting on the work of completely stopping the military's paid services that the task of completely stopping the military's paid services had been basically completed and the goal of the military not engaging in business activities had been basically achieved.