other approaches to civil military integration docx

— par of ts assessment ofthe potential for integrating the civil and silty industrial bases, the Office of Technology Assessment con- ‘dered how the People's Republic of China PRC and Ja

Japanese Arms

Fecommended Ctition: US Congress, Office of Technology Assessment, Other

“Approaches to Chi Miltary Integration: Tae Chinese and Japanese Arms Inui, [BPASS-143 (Washington,DC: U.S Goverment Pating Oi, March 1995)

‘entre ep

—

par of ts assessment ofthe potential for integrating the civil and

silty industrial bases, the Office of Technology Assessment con-

‘dered how the People's Republic of China (PRC) and Japan tvo

‘Asan sts with sizable defense industries, have socceded in

‘scheving significant (CMI involves the sharing of ied costs by promoting the us of common levels fev military integration (CMI)

technologies, proceses, labor, equipment, materi and/or facile CMI can

‘ot only lower costs bot in some cases, it can also expedite introduction of

‘advanced commercial prodae and proceses othe defense sector

“The pape is divided ino two secons, one onthe PRC and one on Japan

Each section describes the structure and management of he respective defense

ndastial base andthe compare it wth is U.S counterpart The paper then

setts the degree to which estos from the PRC and Japanese cates can be

‘applied othe US defense ecology and industrial base (DTI)

"Although the poll and security snations ofthe PRC ad Japan, as well

ther CMI objectives diffe from those ofthe United States, ever interest

{ng observation canbe made The Japanese, for example, wit a iit de-

{ene market and an Amencansecunty gsranee, emphasize dual use design

as well asthe commercial aspects of many defense developments Dual-ase

<esign and bogh quay ar enhanced m some instances by Iapanese personne!

polices that combine design and manufacturing personne into prot BoUps

that understand the ents design, developmen, and manufacturing process

"The PRC s experience sppeantohave les application tothe United Stes

‘because its defene technology i ar less sophisticated and large segments of

the Chinese economy, and almost all ofthe Chinese DTIB, remain unde state

control Stl the PRC's CMI effet of interest ints potential impact on eo-

‘omic modernization ofthe PRC andthe potetl fr technology transfer into

the frre PRC defense sti

“Thị repr responds toa request fom the House Armed Services Commit-

tee to investigate the potential for deriving lessons fom foreign sates to fur

‘her American efforts at increasing integration inthe American DTTB As with,

AllOTA studies, the content ofthis background paper is solely te responsibil

fy ofthe Office of Technology Assessment

Reviewers

(OTHER APPROACHES TO CIVIL-MILITARY INTEGRATION:

‘THE CHINESE AND JAPANESE ARMS INDUSTRIES

“open Economic Insite Oice of he Secetmry of Defense Nomos Cop

TRSC Defense Imeligence Agency Pleasant Hil, OR

Adlington, VA Washington, DC

Frank Taparro Paul H.8 Godwin nathan Pollack fice ofthe Secretary of Defense

Washington, DC Sama Monica, CA

James Prystup

‘The Heritage Foundation Washingion, DC

Project Staff

Internationa Securit and Space

Secretary

"medest ndionel seoul and economic wel ein have lng

tented ons ecologial ad nda prowess Out the

foutdeade ong Cals Wa, he nao’ defense technology indus base (DTI) became led from the cramer

base Tat lan mised he cost of defence goods and series, =

Aces the Departnent of Defense's acceso commercial tecaolops

‘it petal defense applica, má mu đffeh Fis to expot he rests of te nations extensive defense science and oi coranerli

tecncogy investment “The elegain of defense ad comercial ecology and indy

(often termed ivi miliary integration “CMD is advocated as meats

topresee the US defense capably inthe face of budget eduction

‘Under CM, cominoneshnologies, processes aor equipment male

alanis awed o oe both defess and commercial neds ‘Tus background paper examines how the People's Republics of

‘Cina a apa, two counties with sable dfs inde, have succeded in achieving slgnifcnt level of CMI

itis a sopplemen 1 fl po Assetng the Potent for Chl

Miliary Iregration, leased in Serer 1994, tat assesses the po- teal forget Chin he United Sates ereis ndimiemen

ingstps Desi sevel previous inaves to promot integration, mich of

túc US DHNB remains hlsted Concerns ove posible cots nd ik

‘oimodiing goverment acquisonoimpement CMI have indeed

Change The eport Assn he Potential for Chi MlitoryItgrax

‘on consider res road policy rear—policesonctese comme

Ducaces and practices, pols ofnceae integrated proces, and

polis improve operations int poton of the DTIB ely toe

Sain ‘O1m ound ta sone chong za reer CML baal sectors andprodact

Ses ar more reabl to imegrato than oes, sn indeed, nepn- Son area occuningin any of be eran ecologies most ae

tablet CMI Increasing CMI wl depend in pat onthe prot, re

es ander involved Prine contactors efoming sens inertion

tr les alent products and prcestes wh commercial

counterparts tn ar prode of components and steonnets, Ôn theo hand series appearparcul amenable tocol pu

chases

Preface

vi

‘There ae clear benefits to increasing CMI OTA's analysis indicated significant cost savings resulting from ineteased use of commercial items and integrating R&D, production, and muintenance processes

‘Even greater savings might come from changes in miliary systems de- sign Funer, CMI may improve defense access tonew technology inthe future

‘There are, however, obstacles to further CMI One major obstacle is the sheer complexity involved, Inmost instances, the baiers to CMTare sufficiently intertwined to demand a comprehensive (and complex) et

of policies if projected beneftsare to actrue Efforts to promote iniegra- tion therefore cary costs and risks as well one ofthe most discussed risks i that commercial goods and services may fail in military opera- tions Increased CM may also result in greater dependence on foreign goods and services Changes in oversight might result im increased Instances of fraud and abuse Alternatives exis to deal with such risks, but effos to increase CMI rust carefully balance expected benefits 10 the DTIB and the economy with potential pitfalls resulting from those

‘Assessing the Potential for Civ-Miltary Integration outlines three strategies for consideration A Readjustment Sintegy involves the least, risk but may generate the fewest benefits I seeks to increase CMI mod- catly while retaining many of the current procedures for oversight of de- fense expenditures It includes increasing commercial purchases for de- fenge needs The Federal Acquisition Streamlining Act of 1994 (FASA) signed in October 1994, provides the legislative basis for implementing

‘much ofthe commercial purchase portion of Readjustment Strategy A Reform Strategy, building on a Readjustment Strategy, seeks to foster (CMI more actively; changing rules to promote the integration of both R&D and production of defense and commercial products Finally, aRe- strocturing Strategy that incorporates the two earlier strategies might

‘ain the maximum potential CMI benefits, but would demand major

‘changes in future miitary acquisition policy, system design and force structure This suategy would present correspondingly greater risks

‘Both the main report and this background paper found tha successful implementation of CMI requires a long-tenm commitment t involves

‘careful design and planning of systems, components, and subcompon- ents, and extends to all ters and throughout the planning nd production

‘process While the potential benefits are significant, they wil ake ime

tw accrue Patience anda steady effort are paramount requirements for successful CMI,

‘Copies ofthe fllrepon, Assessing che Potential for Civil- Miltary In tegration, ae available from the USS Goverament Printing Office for

‘$13.00 (200 pp, SIN 052-003-01394-1) Call GPO at (202) 512-1800 For congressional requests, call OTA’s Congressional and Publi Af {airs Office at (202) 224-9251

C ontents

Other Approaches to Civit Military

Integration: The Chinese and

Japanese Ams Industries, 1

‘The People’s Republic of China 8

Other Approaches to Civil-Military Integration:

The Chinese and Japanese Arms

he end ofthe Cold War has not necessarily heralded the

‘end of prospects fo conflict forthe United Stats, asthe

‘Gulf War showed Its generally recognized that a strong

‘American defense-industrial base shouldbe preserved as

insurance against potential future conflicts There is, however,

also a desire to gain a technological and industrial “peace divi-

‘den through the redirection of resource from defense needs to

the civilian economy These somewhat conflicting objectives

confront not onl the United Stats, but also other counties Use-

ful lessons might, therefore, be lamed from examining other

‘countries’ approaches to defense procurement, particularly the

‘degre to which their defense and commercial technology andin-

dustrial bases are integrated

‘In 1994, the Office of Technology Assessment (OTA) issued

its assessment report, Assessing the Potential for Civil-Miltary

Integration: Technologies, Processes, and Practices.! An earlier

‘OTA background paper examined the French defense industry?

This background paper addresses the People's Republic of

(China (PRO) and Japan, which are of interest for several reasons

First, they bothhave extensive defense-industial bass tha allow

‘them to support their militares with predominantly domestically

Produced weapons (although in both eases, many of these weap-

Tr Cnpes One Ty Asem Ainge Potential or

Coatinoy ter Teaming, Pree, and Pres TAISEN

(using DC US Conn ining Otc Sumber 18

2S Coness Oot Techy Asesinas nsrcing De

nay: The rca pores, OTA BPISC 90 acing U's Gates

—

Industries

21 Other Approaches to Cii- itary integration

‘ons are based on foreign designs) Second, both

sates" defense and commercial-industrial bases

are somewhat integrated Tati, in both states,

least some defense items are produced with the

‘same methods, sources, equipment, and personnel

‘used to produce certain civil items: (See box A)

‘Because civiF-miltary integration (CMI) has been

suggested as one way to achieve the disparate ob-

Jectives of preserving a defense-industrial base

‘hile gaining @ peace dividend, some have sug>

{gested the PRC's and Japan's approaches may of-

{fer useful lesson fo the United States

‘Secretary of Defense Wiliam Pery, fr exam-

ple.has shown great interest in the Chinese con-

‘version effor ands effect onthe national techno-

lOgieaLindusưial base by initiating several

iscussions with the Chinese onthe subject} In-

eed, the Chinese have been pursing a form of

conversion and imepration since Deng Xisoping’s

ascension tothe top leadership in the late 1970s

‘Although this effort has been motivated by factors

Considerably different from those at play in the

United States, the Chinese effor may provide

some insights into both the benefits and pitfalls of

the conversion and integration processes

‘The Japanese, meanvihile, have created an ad-

vanced economy, eluding technological and eco-

nomic leadership in several technological sectors,

‘with litle emphasis on military production In

eed, the United States has sought to acquire com-

mercial Japanese technology since at east 1980,

‘The relatively small Japanese military (both in

terms of absolute size and relative tothe Japanese

population) enjoys the support of a fairly compre-

hensive defense-industial bas Tokyo is, there

fore, believed by some analysts to have success-

fully integrated its commercial technology and

‘industrial base (CTTB) and its defense technology

and industrial base (DTTB) (se figure 1)

‘The proportions of defense and commercial in ustis inthe Chinese, Japanese, and American economies differ These differences efcctseveral circumstances Each country began the post-

‘World War Il era witha different level of overall technological sophistication within is economy,

as well as widely disparate economie and human resources, As of 1950, fr example, the Chinese

‘were the poorest ofthe three countries 2s wells the least sophisticated Japan had a tained work force but was sill recovering from the devastation

of World War I, and the United States had the

‘wealthiest economy and the most available re- sources, both human and technological In the postwar period, Beijing, Tokyo, and Washington each placed a different degree of emphasis onthe development of military-industial power, rela: tive to its commercial base Each state's decisions about economic ad technological resources have yielded different results

‘The PRC's top priority ntl the 1980s, was de- veloping its military capabilities Commercial de- velopment was slighted as the best available Chi- nese resources were directed toward the development of the county's defense industries

‘With the rise of Deng Xiaoping, however, the Chi- nese have shifed thei focus toward amore broad- beed Industiaidevelopment program Part of this efforthas involved directing much of the Chi- ese DTIB to produce commercial products

‘On the other hand, the Japanese inthe post-

‘World War period have focused primarily on de- veloping commercial technologies and industries,

‘This hasbeen due to several factors The Japanese have pursued a more pacifist foreign and defense policy, codified in their Constitution This has been posible, inturm, because of te American se

‘curity umbrella that allowed the Japanese to de-

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‘The Chinese and Japanese Arms Industries 13

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441 Other Approaches o Civi-itary Integration

‘ote more resources to commercial development

without endangering Japanese national security

‘The constrained siz ofthe Japanese Self Defense

Forees (SDF), coupled with a decision n0t 10 ex-

port arms, has also limited sles opportunities for

‘he Japanese DTIB Therefore, slthough the Japa

nese have a ITIB that produces a wide variety of

products, it is neither a substantial portion of the

Japanese national tectmological-industial base

(felative tots CTIB) northe primary focus of Jap-

anese technological development

‘The United States followed a thứ path be-

tween these 1wo extremes Over the course ofthe

Cold War, extensive U.S security considerations

required a large, robust DTTB Domestic political

considerations and security doctrine emphasized

technological sophistication over sheer mass and

Jed tothe development of advanced, and expea-

sive, weapons Commercial interes and the

‘American political structure, meanwhile, ensured

that the defense sector would not dominate the

economy AS a result, although the American

DTIB is ahead of the CTIB in some areas of

technology the opposite is true in other areas A

further consequence was that portions ofthe DTIB

became segregate from the CTI (see box B)

“This background paper focuses on integration

inthe PRC and Japan It begin by outlining the

Chinese and Japanese defense procurement s9$-

tems I then assesses the extent to which they are

affected by the same obstacles that shaped the’

‘American system, particularly those factors that

Jed to segregation ofthe American DTTB ftom the

CCTIB: acquisition laws and requirements, mil-

tary specifications, militarily unique technolo-

es, and emphasis oo military performance The

extent of integration a each evel of production —

sector frm, and facility is then considered The

‘The Chinese and Japanese Arms Industies 15

paper concludes by assessing the relevance ofthe (Chinese and Japanese experiences to the Ameri- can CMI effort

‘THE PEOPLE'S REPUBLIC OF CHINA

‘A fundamental aspect of the Chinese People's Liberation Army's (PLA) ideology is that “the

‘Ammy and the People are one.” The PLA hs, therefore, long been integrated into the general de velopment of the Chinese economy PLA construction troop for example, were fesponsi- ble for developing much of the Chinese tran poration infrastructure i the frst decades of the People’s Republic.® Similarly, most Chinese am-

‘phibious forces have been integral to Chinese iv

‘rine trade on a day-to-day basis “Typical em- ployment ofthe [miliary] ships includes haulage

‘of cement for civilian constriction project, im- Ported foodstuffs from one region to anotber and balk cargoes not easily handled by ober haulage

‘Such integration, however, did aot initially ex- tend to the Chinese DTIB At the time of the {founding ofthe PRC, the Chinese had only amini- mal defens-industial base This was doe in pat, 1o the predominantly agrarian nature ofthe Chí: nese economy in 1949, coupled with the devasta- tion of both World War I and the subsequent Ci- nese Civil War The PLA was primarily equipped

‘with weapons captred from either the Imperial Japanese Amy or the Nationalist Army

‘With the signing ofthe Sino-Soviet Treaty in

1950, the Soviet Union became the primary arms supplier of the Chinese military Soviet aid in- chided not only the provision of complete weap-

‘ns, but also involved the uansfer of Soviet-de- signed arms factories, among them those for

“aireraft naval vessels, clectonic equipment, and

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61 Other Approaches to Civibiltary Integration

‘As tne OTA oper Asseaig tne Potent lor Cv itary iograton:Techraloges, Process, ont Pracoes incest, the Aenean defense Ie-ndogy ard ndusna base (O71) and commer! technciogy 4 indus base (CTI exit ssc epiegaton Tat ster are cea so the exten 9 whic corrrc têchhoogla,roeeetes, 4i equp tt, mala, ando aces canbe

‘ad 1 et Bos celense and conercai reeds,

‘Sever factors have le oho cegregatoro he American DTI om te CIB, Te fatrs ha are

‘rest reerani io ms background pape ave GScusSeS SON

‘Aequation Laws, Regulations, and Cure lo ĐK decaderef he Co My an scxioten cunue ae in he Amancan colnse precuarent ester marked by specal accounting tiep and regulators, Many of hese née ar eutons are he reute of pat soutien abvene and scan (Te resting net of res an requatons has separate ie DTIB Yer: the CIB by imposing

‘ccioral poring buen on any verre ieee in providing delenee posits serves It ore cates, hesorportng querer: hoa echded corards lor coals (e, tetmcal dala

‘gh al are cera to ars compete acvanage tuary Spectieatons and Standard npusut of sarcerdzaton ater vaio logs! dieu ties exionced in Wid War and to ener operat ard untorm ality of compen and _sysers fom vere soucos, he Deparror f Defoe (000) creatod a petra ol aay speci catens ana standards The ren 2ytom of itary specications and tandrcs alowed he AM

‘an DTI o supper global ceplojed mika, erating in envenmentsrangeg from he Art 10

te vopes However he sytem evestialy came to dicate metodo pratuctan as wel as po marco standarée, however, 36 «grew rave Preauratzed over the subseque 40 years SQhicant

‘vergence betveen mitary and conmara spscicatons arc starcaréscevleped, partculany ae

‘corer! qually Como! and prosicion processes evhed, whic led 0 segegaton of ie OTIS

‘rom be CT

‘itary Unique Technologies some cass, egragatons Cvs oe may uncer ot

‘agin chro ters ae niRBly Ư-qu hơn tr £ nọ crtmoral denird lo 6ctroer 'eehe because he echroegysclasiod wih weapons of mass Gearon, or because Pe ee- vant sysems arc scree have mo conmerci ane, 35 van Tar expCSNes, esis, ac

"mod hing veces nay cases hare he al product may De mia nul, Rawev er parti wth acranced weapen sys, attough he fal product may not have a comme

‘aa, is components an subeions ag peductonlchrcioges and ProCaEs9s might Rave COM merc appicatons Moyen, he couse cl pecuct anc process evluten,chraogies et were once italy wngue may become negra

[Emphasis on Miltary Perfomance Arercan mitry equpert has tend to orphasze high parorance in partcus, thas sought gan tha greatest posstiepareance magn Not en's | the aceltenalperlermance rat seessany soughmsormeroal poduets (eg commer cepnee have lite need eran aterburer oe imposes an 4i ost Tis adsiona coe was fon corsdeed acceptable duneg be Cold War because he Unted Stal sought gà 21g a0xe+ tage trough superior quality rer han vreugh supe qarty is uncle the degre fo which at vwlrønee tre m the poekCo Vy errenrert

Sou US congue Oteac Toco nara Asean he PoC tay grt: cmap

st Cran ty equa, cung it ces

đen Sen den

land armaments The Soviets also tained

lange numbers of Chinese engineers, designers,

and other members ofthe intellectual infrastruc

ture (including those involved in the Chinese nu-

‘lear program) Asa result, the Chinese defense

industrial base was organized and managed along

lines similar to those of the Soviet DTIB

In the wake ofthe Sino-Soviet split the early

1960s, the Chinese were forced to rely on theit

‘wm efforts Chinese leaders decided to develop 8

‘wholly indigenous arms industry to ensure that

they would never agin be as dependent or 38 vul-

nerable as they felt they had been during the

heyday ofthe Sino Soviet relationship This dec

jon was strengthened by concems over Soviet

and U.S military intentions

‘Thus the Chinese began a major expansion of

the DTTB inthe mid-1960s This effort was over-

seen by a newly expanded group of eight Minis-

iesof Machine Industry (MMA), which were re-

sponsible forthe development of heavy industry

‘The Chinese and Japanese Arms industries 17

{all sectors Of the group, only one was responsi- ble for civilian economic development; the rest were devoted to development for national (and primarily military) purposes of such sectors as cleetonies, aerospace, shipbuilding, nuclear

‘weapons, and energy During this period, Chinese

‘defense production i believed tohave conttued

at least 10 percent of overall national industrial

‘production (by volume)?

Chinese efforts during the 19605 included the

‘construction of “hundreds—possibly thou- sands—of small, medium and large-scale (de- fense) industrial projects in every region of the

‘county, including the remote interior"? Such dispersion, however, coupled with the limited (Chinese technological, financial, and wained-per- sonnel base, meant thatthe available resources were not necessarily exploited efficiently Instead, (Chinese weapon systems, particularly relatively sophisticated ones, were often only available in very limited quantities Indeed, “the total ouput

‘of the more complicated pieces fof equipment)

‘canbe traced toa single industrial complex and in some cases a single factor"!

Furthermore, the DTIB was not very sophisi- cated For example, although the Chinese devel-

‘oped a substantial machine-ool industry, it was primarily weighted toward the low- and medium-

‘grade end, rather than toward the precision tools

‘needed for production of sophisticated items, Whether militar or civil The level of sophstica- tion did not improve significantly during the 1960s and 1970

‘The lack of sophistication in the technological, financial, and trained-personnel base was exacer-

‘ated further by the isolation ofthe Chinese DT

‘rom its CTIB This isolation was due in par, to

{81 Other Approaches to CiviL Military Integration

the secrecy associated with the Chinese arms in-

dustry, which restricted information flow and

technological developments within the DTIB and

‘pt the DTIB separate from the larger commer-

cial economy During the 1960s and 1970s, the

‘Chinese didnot express significant interest in de

veloping a consumer economy Indeed, the polii-

cal chace of the Cultural Revolution during the

late 1960s and early 1970s futher strengthened

the isolation ofthe military-industrial ase (ome

of which was deliberately insulated by the PLA,

and te highest echelons of the Chinese Commu

nist Party from rampaging Red Guards) From the

‘Sino-Soviet split to the end of the Cultural Revo

lation, the PRC's CTIB and DTIB were alo iso

lated from global technological developments,

ue to Beijing's isolated stance and deliberate pur-

suit of auaky

“That isolation was not necessarily considered a

problem atthe time, however In the fist place,

fiven the pervasive Soviet influence, the Chinese

DTIB resembled the Soviets’, Practicing “vertical

integration, each plant was composed of as

‘many departments a5 the whole manufacturing

process required"? The Chinese DTIB was,

‘therefore in many ways autonomous, depending

‘on neither the CTIB nor the general economy to

function

"The demands on the DTIB were limited The

PLA at this time was focused on the Maoist doc-

twine of “People’s Was." which was the result of

lesions leared from the War of Resistance

‘against Japan (1937-1945) It emphasized the

reparation of masses of fot soldiers and militia

(Which China had in abundance) to engage in pro-

Tonged guerilla warfare in China's interior The

focus was on basic, infantry-oriented equipment,

Which the Chinese DTIB was wel-suited to pro- Vide Indeed, the doctrine essentially made a vi:

‘ue ofthe relatively primitive stat of the Chinese

DTIB “People’s War" as a doctrine, therefore,

‘provided both customers for the DTIB's products

and a rationale for their continued production,

"Rp Stanton ct foo 4

cues oyun 106 eed on mans ones ———

“People's War” also emphaeized the coninua- tion of war even inthe wake of Soviet (or Ameri- an) nclear strikes This view of prolonged war- {are, coupled with the need to support and sustain {forces even if Chinese industrial centers were = cupied or devastated, exploited the verically inte-

‘rated nature of Chinese defense production faci- lites by ensuring that production did not depend

‘n provision of pars, components, or other sup- plies ftom facilities that might be destroyed or

‘otherwise isolated, Much of the Chinese DTIB vas deliberately located in the (relatively) inac- cessble Chinese imterior This deployment, de- spite the absence of transportation Tinks, was

‘deemed a defensive measure, enabling the militia

to always have access to atleast basic weapons

‘even ina protracted war Such view, again, also made a virtue ofa preexisting condition because Sophisticated weapons presumably would be dif- ficult to produce, much less maintain in the ab- sence ofan intact logistical and suppor structure

‘After the death of Mao, however, and in the wake of the subsequent power strgele that brought Deng Xiaoping to power Chinese policy- making hewed toaless ideological line At the na- tional level, this was marked by Deng's reiteration

‘ofthe “Four Modernizations to modernize agri-

culture, industry, seience and technology, and na

tional defense in that order The Chinese econo

‘my would no longer be autarkic, but would

instead establish links wit the ouside world to

‘ain access to global technological and economic

evelopments Only through such efforts could

the Chinese avoid becoming completely ime

‘vant inte political, economic, and technological

realms

‘As part of this national modemization effort,

resources were shifted from military to commer

cial economic development through bot conver-

sion and outright diversions away fom the mili-

‘ary !3 To make this shift palatable tothe PLA, the

ational authorities essentially proposed a long

term bargain The strengthening of the national

‘economy and the technological hase bythe short-

term transfer of funds, resources, and personnel

from the DTIB to the CTIB would ulimately

benefit defense by establishing a more sophi

cated national technological, industrial, and

scientific base from which to develop future de-

fense eapabilis

‘The PLA embraced the sift The poor perfor-

mance of the PLA in the 1979 “pedagogical war”

‘with Vietnam had demonstrated the primitive nà:

ture of the Chinese military's doetrne and equi

ment The subsequent organizational rstractr-

ng resulted ina reduction of the ole of ideology

in the PLA’s thinking This triumph of “exper”

ilar thinkers (Le, military professionals) over

the more ideological, or “red,” elements in turn,

‘brought tothe fore PLA officers who were inter

ested in gaining access 10 more sophisticated

‘weapons and in developing a doctrine with more

‘To acquire more sophisticated wespons, the

PLA recognized that national economic and tech-

‘The Chinese and Japanese Arms Industries 19

‘ological development was necessary Essental-

lạ, the PLA was prepared to tolerate short-erm

‘ain, including lower budgets and reductions in

‘numbers of forces and dedicated industrial assets, fon the premise that it would eventually recoup those losses through improved equipment in fi ture years

‘This combination of changes including the short-term deemphasis on military production and

‘modernization impli a radical alteration ofthe (Chinese approach toward not only military aqui sition and procurement, but the relative impor-

‘ance ofthe Chinese DTIB and CTIB Rather than single-mindedly pursuing an improved DTIB to the exclusion of the CTIB, the Chinese would

‘seekto develop their ovral technological sphis: tication, with an emphasis onthe CTT, inorder Uuldmately to improve the DTIB's capabilites

‘Such an approach, though, presented two enor- mous problems, as Chinese defense planners themselves recognized The fist was how to mod- cemize an industry tht for two decades had pro-

‘dace few new weapons but that hadrelie nse

‘on designs provided by the former Soviet Union in the 1950s, designs that themselves dated from

‘World War The second was how to cut orcancel

‘existing production lines and retain the work fee, and sil generate arms-export order in of-

er to allow some production plants to remain

‘open inthe event of hotties

As the Chinese defense budget subsequently

‘shrank it became imperative to both the Chinese

‘goverment in general and the PLA leadership in pariular thatthe resources available to them be

‘used more efficiently One ofthe first signs ofthis effort involved the replacement in the late 19705

‘of the leadership of the MMIs, upto then com posed of senior military personnel, with civilian Administrators This was followed by the etab-

101 Otter Approaches to ChíHitay nlegrden

lishment of a commission to “tighten central su:

pervision ofthe machine-buildng industries and

te coordinate their production.""® tn 1983, in an

apparent move to “erase special eatment ofthe

military inthe allotment of scarce resource.” the

various Chinese organizations and committees

charged with oversight of defense production

‘were merged into a single boy, the Commission

{for Science, Technology and indusiryforNational

Defense (COSTIND).1” Concomitant with this,

the Chinese military was cut by tome million

‘people, from 4 million to 3 milion

Inthe early 1980s, Beijing also bogen to con-

‘vert many ofthe available defense-oriented plats

into commercially oriented ones Industries that

‘ere not producing citical hardware or that were

unable to atract export markets were targeted for

‘conversion to civilian production This effort was,

‘Aided by the release, inthe course of economic ib-

‘eralization, of massive, pent-up demand for vari-

‘ous consumer (and late, lightindustrial) goods,

‘This massive demand ensure that at less an ini-

tial market existed for many ofthe commercial

goods produced by the DTTB during this tansi-

“The conversion of redundant defenseindus-

tral plans was fuer facilitated by the Chinese

‘government's promulgation of several guidelines

aimed at furthering integration ofthe civilian and

military economies These included the mandate

that “civilian goods manufsctured by their de

fens industry must use production technologies

similar to military products, and raust be goods

‘which are in shor supply and have market poten-

tial" This ensured thatthe manufactur of eom-

mercial goods would involve minimal changes to

‘the curent plant (requiring in tum, minimal capi-

tal and technological investments I also meant that those goods that were produced would be goods that were desired (Le a matket existed for tem), To further assist the shift roward civilian

‘production by military industy, the China Indus- tial and Commercial Bank set aside money for loans aimed atwansferring military technology to civilian purposes This sift soon began to beat fruit Between 1978 and 1983, civilian production

‘on military lines ose 90 percent untifitamounted

to nearly 20 percent of the defense industry's tal

‘output (by volume)2° By the early 1990s, civilian production had isen to over 70 percentof Chinese

<efense-industil production (by volume)

| PLA Procurement

‘The current Chinese military procurementprocess

is oriented toward two specific goals: improving the PLA’s combat capabilities and using the de fence base to generate income Although the Chỉ: nese defense budget has risen by over 10 percent

‘annually forthe past several years (see figure 1), Chinese resources for military modemizationre- main badly constrained Much of the increased spending has gone toward salaries (a substantiat Culay in military sill numbering over 3 mil- lion), ratber than acquisitions Furthermore, the heated stat of the Chinese economy has meant a high inflaon rate, further minimizing the real ef- fect of defense-budget increases Consequently, the primary focus ofthe Chinese military has gen- enally involved upgrading available equipment, rather than purchasing new or additonal tems Overall PLA equipment holdings have im- proved only slowly The slow pace of improve

‘mentsisexacerbated by the need forhargeurreney

6 te: he Cc Amy Arana, MA: Hara Unie Pe 97 91

because most Chinese equipment upgrades have

required foreign asistnce The upgrade ofthe

ASS airrat for example, centers onthe addition

‘of French inertial guidance and attack systems, in-

cluding a heads-up display and iaserrange-fnd-

ex? Similarly, the new Lahu-class destroyers

have extensive foreign equipment, including Amer~

ican gas turbines (for dash power) and French sur-

face-o-irmisiles(1o remedy the dearth ofairde-

‘fense within the Chinese surface navy)

‘The Chinese goal of using the defense base to

‘eneate income applies not only tothe PLA a &

‘whole (through such means as ams exports), but

Also to individual factories, units, and commands

(hich usually involve commercial production of

some sot) These groups are further motivated to

‘generate income by the bureaucratic competition

‘within the Chinese procurement syster,Allof the

‘major players ofthe Chinese procurement process

sponsor ther own firms, which in some cases now

Ihave campeting product lines (iscussed below),

"The PRC's current procurement stucture com

prises several players (figure 2) The important

(nes are the PLA, the MMB (the Ministries of

‘Machine-Building, formerly the MMs), and the

‘Committee on Science, Technology and Industry

{or National Defense (COSTIND) Each player is

notonly involved in procurement forthe PLA asa

‘whole, but also heads up commercial oganiza-

‘ions aimed at generating income, especialy hard

currency

‘The PLA is the most important player of all,

‘oth due to the prominent role of the military in

CChinese politics and because the PLA is charged

‘with developing requirements for new equipment

thereby setting the agenda to some extent The

PLA answers tothe Cenral Miltary Commission

(CMC) The most important ofthe tree elements

Within the PLA s the General Stat Depaniment’s

The Chinese and Japanese Ams Industries 111

Equipment Department (GSDVED) The GSDED

‘draws up operational parameters for PLA equip-

‘ment acquisitions and coordinates demands from the te servioes The PLA’s General Logistics Department (GLD) is responsible forlogiticsand quartermaster duties, primarily food and uni- orm The third element, the Genera Poliiesl Department, his no direct influence on PLA 3s procurement

Both the GSD/ED and the GLD control their

‘ow private corporations, which use the defense factories under their jurisdiction to produce not

‘only weapons forthe PLA, bu also goods for ex- Por, including weapons and commercial items

“The OSD/ED conels Poly Teclnologies lạc 4

‘major corporation a least loosely afiated with the China International Trade and Iavestment Corp (CTTIC), one ofthe first corporations estab- Tished under Deng Xiaoping’ reforms and still

‘one of the largest and most well-connected The

‘GLD conus China Xinxing Comp., whieh num bers among its products food, clothing, and

‘onstruction materials 24

‘Aluhough tis the PLA that ses requirements, it isthe MMBs that fulfil them, The six “defense- industrial ministries" answer tothe State Counc: the Ministry of Nuclear Indust, the Minis of Aviation Indus, the Ministry of Electonics Ia-

‘dustry, the China State Shipbuilding Corporation, the Ministry of Space (Astronautics) Industry, and the Ministry of Ordnance Industry Each ofthese,

‘ntarm, coniros at ast one corporation Thus, for

‘example, China North Induties Corp (NORIN- (CO)isaffilate with the Ministry of Ordnance In- ast, while the Great Wall Corp and China Pre- cision Machinery Impor/Export Corp (CPMIEC) are associated withthe Ministryof Space Indus

‘The ministries and their subordinate corporations

sn ine O01 within Nena Upgring Chis ig) SARC nk Bg Beg 45

199 le Pon eh Serve pr rater PRS) 3.05 (0 12,1983) 938

Phew Sige orb PLAN” ne Dec Me 88, 18,192

2 ing Cons“ Chey See Fa Hư coon Rese SA Fe 692

121 Other Approaches to CivkMitary Integration

“own” China's DIB, excepfor the potion thats

under the control ofthe PLA and COSTIND

nthe pas, the GSD/ED and the MMBs have

often felled 1 see eye to eye In paicular, the

GSDIED's officers were not necessarily con-

cemed with budgets because production costs

lowed military users to set requirements without

Jhavng to worry about budgetary stresses 25

GSDED officers were also often unfaniiar

‘with he production process tthe same time, the MMB often did not necessarily understand op- rational requirements As a result, the MMBs paid lite gio to either poteatial combat needs

‘or maintenance requirements Instead, equipment was produced according to MMB capabilites,

te than 10 a plan for greater sophistication (with its ideological implications) This was most

‘evident with aircraft production, The Ministry of 25.1 Alem, Espen: A Compe Amy” Dnmane ope Pape #5, Comer: Eom A

se anc of ms Recon 1 en YF Ue ats Tý

“he Chineseand dapanese Ams lndusies 118

‘SOURCE Dotan gece ge 180

‘Aviation produced thousands of combat aircraft,

‘mast of which were obsolescent, if not obsolete,

‘ther than atempt to develop beter designs

With the commercilization of the Chinese

economy over the past 15 years however, the Chi-

‘ese procurement process has changed somewhat

‘The PLA now has greater responsibility for the

‘budgetary aspects of acquisition, and the PLAS

requests for more sophisticated arms must now be

‘often subordinated military production to com:

25, Gap, “Ci Mey na Cm" Asn ay 299897

141 Other Approaches to CvkMlitary Integration

mercial requirements COSTIND's role is to

‘mediate between the PLA and the MMBs

‘COSTIND combines research and develop-

ment (R&D) functions, In some ways, it re-

Ssembles the Director of Defense Researchand En

sincering (DDRA&E) office within the Office of

the Seeretary of Defense inthe United States Its,

however, granted a much wider purview: COS-

TTIND is responsible forthe specfiation, assess

ment, and application ofall advanced technolo-

ses Within the Chinese military and DTIB The

political power of COSTIND, moreover, is far

‘reat than that of DDR&E Several of COS-

‘TIND's memberssiton both he State Council nd

the CMC

Like both of the other players, COSTIND also

controls its own corporations These include Chi-

na Xinshidai Corp and Xiaofeng Technology and

Equipment Corp The former is primarily ori-

‘ented toward advanced technologies generally,

‘wheres the latter ie more narowly focused, with

special interests in computers, testing equipment,

and robotics

11 Comparison of the PRC with the United

States

“The Chinese DTIB differ in several impontantre-

pects from its American counerpat Initially,

sStaning in 1949, the Chinese DTIB—indeed, the

entire Chinese economy —was state-run The Chi-

nese economy was aso heavily militarized For

‘decades, the DTIB had prioity fr receiving the

highest-quality raw materials, mained personne,

and advanced technology Although the Chinese

‘economy has ebanged drastically since the advent

‘of Deng Xisoping and the introduction of eco-

‘nomic reform and liberalization measures, signifi-

cant portion, particulary the heavy-industral

sectors, remain centrally planned Such differ-

ences clearly limit the relevance ofthe Chinese

experience forthe United States

In the past decade, however, the Chinese have striven to Tibealize their economy and to increase its sophistication, Ths has involved the acquisi- tion of more sophisticated technology from abroad Atte sametime, the Chinese have sought tomabe greater use oftheir current work force and available industrial plat As a poor county, the PRC seeks to maximize its use of available labor and resources Thus, there isa great emphasis on transferring DTIB resources to the CTIB (hence the Chinese emphasis on conversion) Those ef- fonts, paniculary in the areas of conversion and increasing the use of the same production ines for both civilian and military items, may offer some

‘ef comparisons with the American case Acquisition Laws and Procedures One of the most important obstacles to integrating civil and military procurement in the United States involves acquisition lav.2? The myriad re-

‘quirements for reporting various costs have dis- couraged integration by imposing addtional ex- enses on firms that seek to produce goods forthe military Even highly successful commercial firms are, therefor, frequently reluctant to under- take military production or fear of incuring these coats,

‘One aspect ofthe acqustion-Iaw problem is technical data rights The Departmen of Defense (DOD) frequently demands extensive rights 10 technical data to ensue that a given system can continue to be produced even ifthe original con- tracing corporation goes out of business Thus, DOD may request not ony data about the system itself, but also information on the manufacturing rocesses, which the company may well have de-

‘veloped oni ovm, often at significant expense

"The Chinese suffer from fewer such problems Inthe past, this may ave been due to sate ownes- Ship of the bulk of the means of production, In-

‘deed, within the Chinese DTIB, the Site con

US Congest Tcslgy een Aig te etl fr Chis nero: Teche Poe and

—————

‘tolled and supplied all ofthe relevant industrial

elements As long asthe DTIB was ahead ofthe

‘CTIB, therefore, echnical data rights were hardly

4 problem because the goverment possessed

‘mot technical data rights fom the outset and was

under no pressure to share them with the CTIB

Furthermore the Chinese DTIB was shrouded

in secrecy Thos, there was ony a limited flow, if

any, of technical data rights tothe CTIB Because

the Chinese emphasized the miliary sectors over

‘hei commercial sectors, technical data especial-

ly for relatively advanced processes, rested in the

DT

\Mittary Specifications and Standards

In the PRC, athough operational parameters ae

set by the PLA, the standards involved in actual

production have been, and stil are, set by the

'MMBs This is due in part, othe different back

‘rounds of PLA officers and MMB officials The

later are far more versed in engineering, whereas

the former have generally been capable only of

setting out operational requirements without nec-

cessarily understanding the industrial demands in-

volved, Thus, production standards have been the

responsibility of the producers, rather than the

vien,

Chinese manufieturers set fuitly high stan-

‘ards for the manufacture oftheir weapon systems

‘within the capabilities ofthe Chinese DTIB As

‘was re for theis Soviet counterparts, quality has

‘generally been higher on military than on com-

‘mercial production lines The difference hasbeen

doe, in pan, to the Chinese DTIB receiving the

‘best raw materials and facies and the best-

‘mained labor force In addition, the priority ac-

corded the DTIB by politica authorities for mate-

‘al and poliieal support may have obvited

somewhat the need for extensive military spcifi-

cation The goverument expected that only the

highest-quality tems would be provided for mili-

‘The Chinese and Japanese Arms ndusties 115

tary production lines and that only the highest-

‘quality products would be made Questions have been raised about the quality of (Chinese military items, however There have been repors, for example, that Chinese aircraft manufacturers’ quality control has tended to be uneven, Entire Chinese aircraft types were re- called to ther factories in 1975 Inthe 1980s, Chỉ ese combatairrat were reported to have serious problems that involved cootainaton of thei hy- Araulic systems? In the wake of joint ventues

‘with the United States and Europe in the area of civilian aircraft (particularly the MD-80 and (MD.90 a1 Shanghai Aircraft Industies Corp (GAIC)), though, the general eve of Chinese air- craft workmanship has apparently risen Indeed the certification by the U.S, Federal Aviation A+ ministation of Chinese-manufactured compo- nents for MeDonnel-Douglasaizcraf,ineluding fuselages and nose coves, forsale in the United States would seem to suggest that the Chinese

‘work force at SAIC is now capable of meeting

‘Wertem commercial standards, Because Wesiem

‘commercial standards are more stringent than pre- vious Chinese specifications, the overall evel of Chinese quality coniro, at least at this facility,

‘would appear to have improved

‘A the same time, Chinese combat sireraft ae

‘ow reported to have a muchsmoother surface, or skin, than before This suggests that there is flow of persoanel and expertise from civilian to military production lines, atleast in situations

‘where the former had become more advanced than the ater Such flow would amount to “spin-on”

of (relatively) more advanced techniques and ca- abilities from the commercial to the military side

The Chinese modernization program curently focuses on the acquisition of more-advancedfor- ign weapons technology such ste Su-27fight-

ce Right now, these efforts do not involve any 3h Lam ad All, Dee Reform Chi Te PLA hr Fo” Prin fanmail Ny te 18 lene P Gabi, Nao Dtse Urey, Mase DC, salma Mach 198

161 Other Approaches to Civi-Mitary Integration

(Chinese manufacturing nor have the most recent

acquisitions yet led to either production of re

‘erse-engineered equipment or purchase of pro-

action facilies, Mastering the production of

such equipment, by ether method, will undoub

ely take several years Because current Chinese

cffors are aimed at producing much mare sophis-

‘cated equipment, with higher tolerances, than

the country had previously manufactured, it i

Wkly that better quality control wil be necessary

requirements exceed current Chinese standard,

new specifications, essentially military specifica

tions and military Standards, may be necessary

Mittal Unique Technologies:

Another obstacle to U.S civil-miltary integration

involves militarily unique technologies, which

necessarily limit the degree of commonality be-

tween commercial and military goods and ser-

vices Although militarily unique technologies

ssually have no direct civilian applications inthe

United States (e.g ballistic misiles andelectron-

fe warfare programming), in the PRC miliary

technologies have tended tobe rendered “unique”

because certain resources have been in limited

‘supply Matis, the PLA had priority forreceiving

islikely for example thatthe Chinese air-defense

network has a more advanced Sct of air-taffic-

control capabilites than does the Chinese civilian

airtraffie nt.® Similarly until te ibertizaion

rogram commenced, one-half to two-thirds, if

‘not more, of all Chinese-produced electronics

‘were dedicated to military tse2!

The decision to promote defense industrial

participation in the commercial market, however,

‘would suggest that those items and qualities once

reserved forthe PLA, such as high-quality steel and beter-tined workers, may now be seeping into the CTIB Even now, however, the MMBs have sole control over many areas of Chinese technology that were once primarily military

‘Thus, the means of producing communications

‘equipment remain concentrated inthe hands of the DTIB, although the products are being dispersed into the CTIB at large The aval of Western ele-

‘communications corporations in China may alter that situation further in the coming decade, al-

‘though Chinese demands for co-production sug- gest thal the MMBs may retain a large degree of

‘contratover any technologies and processes trans ferred from the West

Emphasis on Miltary Performance Since the beginning ofthe Cold War, the United

‘States has placed a greater emphasis on rity

‘roduet performance than on cost, whereas inthe

‘commercial sector, quality and performance were balanced against the likely costs incurred, The

‘emphasis on high performance not only raised costs, but in some eases, minimized the com-

‘monty between functionally similar military

‘and commercial goods

Inthe PRC, significant effor doesnot seem t»

‘have been made to acquire or develop state-of the-

a weapons technologies This is do, in pat, 0 the relatively primitive state ofthe Chinese DTIB and, in pat, to political and bureaucratic pressor ex,panienlaly within the MMBs, Asa result, de spite the Chinese DTIB's favored status compared

‘with the Chinese CTIB's, for high-quality raw rateials and tools, Chinese defense products have generally not been significantly more ad- vanced than products ofthe Chinese CTTB as 8

‘whole, panicularly in such areas as electronics and communications According to one Chinese assessment, "Inthe realm of firepower and contol

“chines aon ti sed income cl ne Chine lan ape a Tyee ag

‘es LR) een A oes eae wily Tp | aamens Deemer 53

ˆlB Shehugh ep co 'oonee$ n9

systems, the Chinese fighters are lagging some 15

yeas behind advanced foreign levels" The

‘ectroncs inthe mos sophisticated domestically

produced fighter aircraft, the JS, are compara-

ble to American 19702level technology Al-

though the DTIB has tended to have priority for

receiving higher-quality items (e.g higher-quali-

'y machine tools) the quantities available have

been so limited that they have a litle effect on

the overall quality of the DTIB, much less the

cm

‘The situation has been exacerbated by the

LA's own lack of intrest in technologically ad-

vanced weapon systems Only relatively recently

has the PLA leadership demanded acess thigh

tech weaponry and advanced capabilities for its

onnuclear forces These demands were then rap-

Jdly preempted by the Four Moderizations As 2

results only in the past four year thatthe PLA

‘as had both the interest in and the wherewithal to

obtain more sophisticated weapon systems These

have, in tum, primarily involved acquiring for-

ign technology Thus, the Chinese DTTB'sstale-

ofthe-ar weapon systems still lag behind Rus-

sia's and even further bebind the Wests

It Integration of Levels of Production

In ight ofthe circumstances enumerated above,

whats the degre of integration between the Chi

nese DTIB and CTIB? As noved earlier the PLA

"he played an important role in the economic de-

‘velopment ofthe PRC Conversely the PLA also

relies on the civilian infrastructure The Chinese

siltary for example, evidently cootines to se

the national communications network, inclading

the telephone system, microwave adi tlex and

smulilex wireless 28 The PLA's Tibetan gatison

‘is supported by China Southwest Airines, which

‘The Chinese and Japanese Ams Industies 117

Jas ferred rotating formations of troopsinandout ofthe region Thus, ata minimum, it appears thatthe Chinese military and popular economies

ae closely linked

‘With economic liberalization, however, the additonal impetus of making money has arisen, pushing ll the ministries, corporations, and sob- diaries into seeking and exploiting commercial

‘opportunities Consequently, the output of civil Jan goods made on military production lines has risen sharply since economic liberalization began inthe late 1970s and early 1980s, Indeed, accord- ing to some estimates, “profits generated in 1982

by more than 20,000 miltary-run companies [alone] totaled around 20 billion yuan (renmin- bi} with just sx billion yuan given to the central military authorities." Theresulthas been

4 form of integration at all thre levels (sector, firm, and facility see box A) The Chinese version

of itegration, however, does not necesstrlycor- respond with that inthe United States

Sector Level

‘tthe sectorlevel, mostindustra sectors areinte- ated, insofar as they are involved in both mil- tary and commercial R&D, production, and op- rations and maintenance (O&M) The Chinese have emphasized the exploitation oftheir defense RAD facilites and resources in pursuit of overall national economic growth One government ef- fort aimed at facilitating this shifts the Torch Pro- gram, which promotes the shift of sientists and engineers from tational research institutes and project to those with greater commeriatpoten- tale

‘The PLA itself s pressuring such centrally d- rected programs to promote RED in a more com

‘mercial dizetion n paicular, given the semi

chang Ynggin."DtLank Che's Ac Devon eed ing Bing Os 1019, PRS 08 prereset

*%p,stanbuphop ck ono

‘Metin Mote indy ars afte Tê lề tp

Snag Boks” ants Defend 19,196 3S

2, ale, “Sac, Tel sn his elec ur Bean iene Reve, ay 192 9.8

181 Other Approaches to CkÏ-MHiiarylnhagralon

(6nomnous nature of many PLA unis, there is an

almost grass-oots quality 10 some of the PLA’s

RAD projects, which tend toemphasize commer

cially profitable ventures, Ths, the Liberation

‘Army Daily reported on an “All-Armay Enterprise

Scientific and Technological Research Achieve-

‘ments Fair” in Beijing At the fair, over 2.000

projets and experiments, few of which were for

military customers, were displayed 3”

Inthe eavy-indosy sectors, itis reported that

68.8 percent ofthe output from Ministry of Ord-

nance Industy facilites and 80 percent of ship-

building and epair activities are now fornonmil

tary use In Chinese shipbuilding, integration of

the mltary and commercial sides is quite expic-

‘ic the China State Shipbuilding Corp owns all

(Chinese shipyards and shipbuilding and marine-

equipment fims.®? Thus, shipyards thar once

‘built warships ae now curing theirexpenise and

facilities tothe constuction of freighters and oh

vessels fr commercial purposes Similarly,

{nthe automotive secor, NORINCO, the largest

(Chinese arms corporation, which produces much

ofthe PLA'sheavy equipmentincluding tanks and

self-propelled guns, is also responsible for some

‘50 percent of Chinese motoreyele production and

30 percent of all minivans.“ Infact, hree-quar-

ters of all minivans now appareily come from

military sources <2

Tne area of O&M the Chinese also appear to

have achieved some degree of integration, Once

‘equipments procured, its upkeep becomes the re- sponsibility of the PLA’s GLD Although the GLD controls afew depot tevel maintenance faci- lites, primarily for heavy vehicles, there is no analogue in the PRC tothe extensive depot sw: ture that provides O&M support in the US Instead, maintenance is primarily the province of

‘the “owning” formation or PLA unit Extensive repair operations, particulasly for aircraft and na val vessels, apparently involve the manufacturers (in te case of shipbuilding, the manufacturers

‘control the primary shipbuilding and repair facil de),

“Although the Chinese appear to have succeed- edin nlegrding tnan oftheir sectors, it also ap- pear that ew of the lessons they have leared ae teansferable tothe United States Chinese effons atthe sector level exploit what ae, at best, limited technologies and capabilities within the Chinese science-and-technology infrastructure The Chỉ: nese themselves recognize this Ina ecent aticle

in Niandai Binggi (Modern Weaponry) assessing the newest domestically produced fighter plane, the author notes that “China's manufacturing technology was exceedingly backward: their Hock f relevant technology was obviously inade-

‘quate, and this hada dreetimpact on model devel-

‘opment."® The Chinese consider the attainment

of intemational standards of sophistication in such areas as aerospace as a triumph in and oft sel Thelevelsof military and commercialtech-

nological sophistication in the PRC, forthe most

part, are below the global average In only a few

area ae the Chinese even maintaining party

‘The limited applicability of the Chinese situs-

tion tothe American case is made moreso by the

very different nature of Chinese economic orga-

nization Even after a decade of economic reform

and liberalization, the state continues to own and

‘manage the “commanding beghts"of the Chinese

‘economy, paticolarly heavy industry The MMBS

even now effectively exercise control over their

respective sectors (eg shipbuilding, see! mak-

ing, and electronics) a situation exploited by their

subsidiaries Fach sector is, therefore, integrated,

butonly because the government controls vital

{yall production, bh commerial and military, in

that sector Integration under such circumstances

‘is more akin to consolidation of the means of pro-

<dction and diversification of product than tothe

sharing of product and process echnologies that is

‘ypical of Wester efforts The Chinese approach

‘o integration, involving the participation of the

felevant ministries and their attendant corpora-

tions, i, therefore, probably unique to command

economies and of limited relevance to capitalist

Finally, the Chinese did not necessarily set out

to imegrate their CTIB and DTIB Instead, in

‘many cases, they ae seeking o develop capital

economic relations A report from Shaanxi Prov-

ince, for example, argues thatthe infastrcture

{or “seience, technology and industry for nations)

defense” within Shaanxi should be devoted 10

helping fill the “Shaanxi people's wishes to get

rich." Indeed, the acle goes so far as to suggest

that the military industry should be eiminated in

favor of national production of “high-technology

products and export-oriented management"*

‘The profits thus derived, presumably, would be al-

“The Chinese and Japanese Arms Industries 118

located first to Shaan and only then o the rest of the nation, Similarly, factories in Guizhou Prov- ince appear geared toward provincial rather than

‘national markets

Firm Level

‘tthe frm level, the Chines also appear to have become “inegried,” or atleast diversified The Shanghai Airrat Industry Corp, for example, sellseverything from automobile jacks to pressur- ined tanks to refrigerators Discussions with COSTIND officials about thei subordinate in-

‘sts revealed a productline that included ships and cigarette-manufacturing machines at many

‘corporations Similarly, much of the Chinese

‘hemical industry's pumps and seals are made by

‘the Chinese Space Industry Corp because itis c-

‘ustomed to dealing with highly comosive chemi-

‘cals By 1989, only 10 percentof defense firmsre-

‘mained commited solely to defense production:

16 percent produced only commercial products, and the remaining 74percent produced both com mercial and military products

‘As with sector level integration, however, Chi- nese examples of fi-level integration may net

‘becomparaletothoseinthe West Inparicula.if

‘only firms that ae actally profitable are consid-

‘ered sucessful examples of frmlevelintegr- tion, tere appear to have been moe failures than successes Th efficient allocation ofthe available technological and human esoures, however, ap

‘ears o be only one ofthe PRC" criteria for suc-

‘cessful integration

“Another imporant criterion forthe PRC ap-

‘pears toe the preservation of obs and, toa lesser

‘degree of instil infrastructure, wherever pos- sible Ths is very differen from Westem integra- tion efforts, which almost inevitably involve plant closings and increased unemployment high