Not For Profit

　

But, domestically, the problems associated with the commercial activities of the PLA have long been considered a major issue that needs to be tackled as part of any serious attempt to reform China’s military.　

　

As the central leadership has announced major administrative changes, including a reconfiguration of military regions and an overhaul of the general command structure, the effort to curtail the commercial wing of the PLA has also gained momentum.　

　

In March, the Central Military Commission (CMC), the country’s top military body, which is chaired by Xi, issued a decree ordering all military institutions not to enter into new contracts or renew existing ones with civilian partners. Contracts between the military and local partners, if negotiable, “should be terminated immediately,” the document read.　

　

Then, on May 7, the PLA launched a pilot program to explore ways to shut down all activities officially referred to as “paid services” run by the military. Zhao Keshi, head of the CMC’s Logistic Support Department, told officials that the pilot program, which would cover 17 military institutions that engage in commercial enterprise, including real estate agencies, publications, hotels and military hospitals, will collaborate to develop an overall strategy to eventually terminate all paid services operated by the military.　

　

If effectively implemented, the reform will end the Chinese military’s decades-long participation in the marketplace.　

　

Tradition The PLA’s involvement in economic activity dates back to its revolutionary role as a guerrilla force conducting largely self-sufficient operations away from major supply lines. After the founding of the People’s Republic of China and the official formation of the PLA in 1949, the military continued to have a stake in the planned economy, mostly through internal logistics, maintaining military factories, farms and shops serving its hundreds of thousands of personnel and their families, in addition to railroad and infrastructure construction.　

　

The turning point for the military to expand its role in the economy came in the 1980s, when China’s leaders liberalized economic policy, shifting national priorities away from ideology and towards economic development. As military budgets stagnated as a result of this shift, it was argued that, by allowing the military to “support local economic development,” the PLA could also generate its own revenue, reducing dependency on the national coffers and creating a mutually beneficial ecosystem linking the military and civilian economies.　

　

In 1992, the CMC officially endorsed this practice, allowing the military to provide commercial services in 11 fields, including telecommunications, personnel training, storage, hospitality, medical services, construction and engineering, and real estate.　

　

However, as military enterprises have become increasingly profitdriven, multiple problems have surfaced, the most egregious of which has been rampant corruption within the PLA, eroding overall morale and significantly denting its public image.　

　

Moreover, as China’s military institutions are not subject to any civilian oversight, the abuse of power and influence during disputes with civilian individuals and entities largely goes unchecked, undermining the rule of law.　

　

Opacity While the Chinese public have limited contact with most of the military’s commercial operations, a nationwide network of military hospitals, which provide medical services to both military personnel and the civilian population, has attracted the most attention in terms of the abuses the new reform is aiming to curb.　

　

Given the various problems embedded in China’s healthcare sector, including inadequate regulation of medical advertising and widespread over-treatment and over-diagnosis by doctors, military hospitals, once viewed as more disciplined, professional and trustworthy, are now viewed almost as dimly as their civilian counterparts.　

　

As military hospitals are not subject to government oversight, regulators have tended to turn a blind eye to their operations. As a result, there has been a surge in cases involving individuals and companies setting up fake military hospitals. In 2009 alone, the military reported 100 websites run by private entities purporting to be military hospitals.　

　

In addition, having become as profit-driven as civilian hospitals, some smaller military hospitals resort to outsourcing their existing departments to private companies to maximize their profits.　

　

This issue in particular recently came to a head when a 21-yearold cancer patient died after receiving treatment in a medical center located within a Beijing military hospital operated by the People’s Armed Police Force (see “Diagnosis: Disastrous,” page 32). An official investigation of the hospital found it had outsourced the management of several departments, including its oncology center, to private companies with questionable credentials. The hospital was ordered to suspend its operations, with its two top officials removed from their posts.　

　

Prospects It remains unclear whether the current reform program will ban all military hospitals from providing medical services to the public. Despite the various problems exposed during investigations, many argue that the solution is effective regulation rather than a total ban. Many of the problems affecting military hospitals are equally widespread in the civilian healthcare sector, and stem from the same root causes.　

　

Moreover, many military hospitals employ leading specialists and can often provide better medical services in certain fields.　

　

According to the CMC decree, paid services provided by the military which are conducted in the spirit of social responsibility will be merged as part of a parallel civilian-military integration scheme.　

　

Current efforts to rein in the military’s commercial activities are not the first such attempt to bring the PLA’s for-profit operations under control. In 1998, the CMC tried to regulate paid services by requiring would-be providers to obtain a special permit from their regional command center. Similar efforts were made in 2005, 2006 and 2008, and none of them proved effective.　

　

With a grander vision this time around, it is believed that the new reforms may effectively end several decades of profiteering by the PLA. Although China’s ambitious military reform program was only announced last November, investigations into the military’s commercial activities have been underway for several years.　

　

Since the central leadership expanded its anti-graft drive into the military, dozens of senior officers have fallen under investigation, with many allegations of corruption stemming from their involvement in commercial activities.　

　

For example, during the investigation into Gu Junshan, the PLA’s former deputy logistics chief and one of the highest-ranking officers to fall during the anti-graft drive, his department was found to have engaged in real estate development on a massive scale. Gu was removed from his post in 2012 and was handed down a suspended death sentence last August.　

　

As the central leadership now views the military’s participation in economic activities a major and sometimes embarrassing distraction from the new stated objective of building a modern, combat-ready fighting force, the PLA’s dabbling in the market may soon come to an end.