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China’s Military Quits Business

December 14, 1998

BEIJING (AP) _ China’s armed forces completed the handover of their vast commercial holdings to civilian control Monday, state media reported _ a reform meant to curb corruption and help modernize the military.

Starting Tuesday, the businesses will be handled by task forces, the office overseeing the transfer said in a report carried by the Xinhua news agency.

The announcement came a day ahead of the deadline set by the Communist Party, but left unanswered the crucial question of compensation. The report provided no figures on the number of enterprises or amount of assets handed over.

The 2.9-million member People’s Liberation Army runs about 15,000 businesses that as of a few years ago covered a third of the military’s operating expenses. Many lose money, but the enterprises include profitable operators of mobile phone services and pharmaceutical makers.

While the government is expected to boost the defense budget, senior army officers want military spending to match a fixed percentage of China’s gross domestic product, Western and Chinese observers say.

Chinese President Jiang Zemin ordered the divestment this summer. The campaign was later expanded to include government agencies and the judiciary, which have until the end of the year to cut their business ties.

The move was seen as necessary to stop corrosive corruption, help rid the economy of bureaucratic interference and speed the professionalization of the military.

In the next phase, some businesses will be closed and others merged while the better-performing ones will remain intact.

Update hourly