Checkpoint Asia

China Has Rid Its Military of 100,000 For-Profit Ventures Ranging From Catering to Agriculture to Hotels

Much-needed reform started in 2016 is just about done

China is setting up a new enterprise under the central government’s control to take over commercial assets from the military, Caixin learned from several sources close to the matter.

China Rongtong Group, overseen by the State Council’s State-owned Assets Supervision and Administration Commission (SASAC), will manage military assets in agriculture, real estate, hotel and other profit-making sectors, sources said. Senior managers of the new company have been appointed.

The establishment of China Rongtong is another step in China’s three-year plan to spin off commercial assets from the army. In January 2016, the Central Military Commission (CMC), China’s top military body, issued a document requiring all military departments to stop running for-profit businesses. In March that year, the CMC ordered that the People’s Liberation Army and the People’s Armed Police, a paramilitary police force, terminate business activities and spin off related assets in three years.

A commentary published by the CMC-backed newspaper PLA Daily said the reform would rectify the political environment of the army and make it concentrate on its core missions.

Jiang Luming, a professor of the PLA National Defense University in Beijing, told the official Xinhua News Agency that the PLA and the Armed Police since 1998 expanded into a wide range of businesses including education, publications, telecom, construction, culture and sports, transportation, mechanics, agriculture and real estate.

A 2018 set of guidelines regarding the spinoff outlined detailed measures for the military to take in disposing of the commercial assets. Under the guidelines, most business operations were to be terminated or restructured into civilian operations, while those with greater social and military value should be transferred to designated state-owned enterprises (SOEs) to manage.

As of June 2018, the military had withdrawn 94% of its total business operations, according to official sources, with remaining assets mainly in real estate, agriculture and catering and accommodation services.

The PLA Daily reported in July 2018 that the military ended 100,000 of its 106,000 for-profit projects.

In late May, SASAC announced the launch of China Anneng Construction Group, a centrally administered SOE, to take over part of the civil engineering and water project construction business from the Armed Police.

Caixin learned that China Rongtong named Wen Gang, former chairman of China North Industries Group Corp (Norinco), as chairman and party chief. Norinco is a defense corporation that manufactures civilian and military products.

Ma Zhengwu, former chairman of China Chengtong Holdings Group — a state-owned investment and asset operating company — was named China Rongtong’s general manager, Caixin learned.

Wen and Ma left their previous positions in January and February for “job transfer,” according to announcements from their former employers.

Source: Caixin