China Defense Industry - Four Modernizations
1976-1982 - Post-Cultural Revolution
With the end of the Cultural Revolution the defense industry gradually resumed normal operations. The GODI became a part of the Army in September 1977, and a commission of science, technology, and equipment of the Central Military Commission [CMC] headed by Zhang Aiping was established in November. In 1982 the Commission of Science for National Defense, the GODI, and the Commission of Science, Technology, and Equipment of the CMC were merged into the State Commission of Science, Technology, and Industry for National Defense headed by Chen Bin. Its incumbent director is Lieutenant General Cao Gangchuan.
Beginning in 1978, Chinese leaders set out to transform the defense industries, which had a huge excess capacity and were criticized for having a "golden rice bowl" (rich but always begging for more). To utilize this excess capacity better and to break down the barriers between military and civilian industry, the machinebuilding ministries were reorganized, and civilians were appointed to manage them. The General Machine-Building Bureau 8 was upgraded to a ministry, headed by Jiao Ruoyu, in July 1979. And in 1981, the MMB's 7 and 8 combined into a unit, which was called MMB 7. One of the first indications of the move toward greater emphasis on more efficient use of resouces was the replacement begining in the late 1970s of the leadership of the MMBs, previously composed of senior military personnel, with civilian administrators.
1982-1997 - Deng Xiaoping
In January 1982, Deng Xiaoping promulgated the 16-character principle of "combining military and civilian strength, integrating wartime and peacetime needs, giving priority to military items, and maintaining the army by producing civilian goods." With reform proceeding , the military industrial system underwent a major change. With the approval of the State Council and the CMC, the GODI and the MMB's 3, 4, 5, 6, and 8 set up import-export companies integrating industry with trade, and subsequently MMB 2 and 7 established similar arrangements.
- MMB 2 - China Nuclear Energy Industry Corporation
- MMB 3 - China National Aero-Technology Import and Export Corporation
- MMB 4 - China National Electronics-Technology Import and Export Corporation
- MMB 5 - China North Industries Group [NORINCO]
- MMB 6 - China Shipbuilding Trading Corporation
- MMB 7 - China Great Wall Industry Corporation
- MMB 8 - China National Precision Machinery Import and Export Corporation
The New Times Company set up by the GODI had overall responsibility for the overall plan for import and export of military technology and equipment. Subsequently COSTIND established the China Yanshan science and technology corporation, and the China Xinxing Corporation was established by the PLA General Logistics Department. In 1984 these corporations began promoting Chinese weapons, actively seeking technology transfer and coproduction agreements with Western defense companies at international defense exhibitions.
A major problem with the defense industry was that production enterprises and scientific research units were organized into separate systems, with few linkages between the two. Defense industrial units were the first ones subject to administrative reform. In 1982, under the "Decision on the Scheme for Carrying Out Institutional Reform of Ministries and Commissions Under the State Council" adopted by the 23th session of the Fifth NPC Standing Committee, the MMB 6 was officially reorganized into a China state shipbuilding corporation, the MMB's 2, 3, 4, 5, and 7 were retained, but the six scientific research institutes under the MMB 3 and the 20 scientific research institutes under the MMB 5 were disbanded. The MMB's 2, 3, 5, and 7 also formed subsidiary corporations, forming the existing military industry management system. Ministeral-level units relating to the defense industry were changed into corporations (the original machine-building industry departments [MBID] 2, 3, 5, 6, and 7 under the State Council became corporations). The civilianized, renamed ministries and their responsibilities consisted of the:
- MMB 2 = Ministry of Nuclear Industry -- nuclear weapons;
- MMB 3 = Ministry of Aviation Industry / Aeronautics -- aircraft;
- MMB 4 = Ministry of Electronics Industry -- electronics;
- MMB 5 = Ministry of Ordnance Industry -- munitions and armaments;
- MMB 6 = China State Shipbuilding Corporation -- naval construction.
- MMB 7 = Ministry of Space (Astronautics) Industry -- ballistic missiles and space systems;
And in 1983, in an effort to remove the special treatment of the military in the allocation of scarce resources the various Chinese organizations and committees charged with oversight of defense production were consolidated under the Commission for Science, Technology and Industry for National Defense (COSTIND).
In November 1984 the government decided to transfer some military facilities to civilian control or joint militarycivilian use. These facilities included airfields, ports, docks, railroads, depots and warehouses, and recreational areas. The devolution of these facilities to civilian control helped to alleviate problems that plagued the civilian economy.
In 1986 the Ministry of Machine Building, which produced civilian heavy machinery and industrial equipment, and the Ministry of Ordnance Industry were consolidated into the new State Machine-Building Industry Commission as a way to strengthen the unified management of the national machine-building and weapons enterprises. Further changes in defense industry structure occurred in 1986 and 1987, when inland defense enterprises were either relocated closer to transportation links or cities, closed down, or transferred to local civilian control and production.
In 1987 China adopted a new contractual system for weapons research, development, and production. It was not clear from available information how this contract system would affect the role of the NDSTIC as the coordinating body for defense science and industry. Previously, the NDSTIC controlled procurement funding, reviewed proposals for weapons requirements funneled through the General Staff Department's Equipment Subdepartment, and coordinated with defense industries to produce the needed equipment. Under the new system, the state divided defense research and development funds into three categories: military equipment research, basic and applied sciences research, and unidentified technological services. The first type of appropriation went to military arms and services, which signed contracts with research institutes or enterprises to develop and manufacture the required weapons. The contract system involved the PLA, which had been removed to a large extent from such activities, in the development and manufacture of the weapons it would use. The second category of funds was devoted to basic research and applied science to help modernize the defense industry. The third category went to technological services necessary for research programs. This reform was another measure designed to integrate military and civilian industry by placing the military production of defense industries within the framework of the planned-commodity economy. The new system further sought to provide the military with better equipment at a minimum cost, to force the defense industry to upgrade weapons designs and improve production, to improve the management of weapons research and development through state application of economic levers, to promote cooperation between research institutes and factories, and to increase the decision-making powers of the enterprises.
By 1987 the National Defense Science, Technology, and Industry Commission [NDSTIC] was the coordinating body for military research and development and industrial production. The NDSTIC reported to the party Central Military Commission's National Defense Industries Committee and the State Council's Leading Group for Science and Technology. The NDSTIC supervised weapons research and development, coordinated military production of defense industries, and controlled funding for weapons procurement. The establishment of the NDSTIC was a reform measure designed to break down the barriers between civilian and military research and development and industry. Military science and industry previously had been secretive, segregated, and privileged sectors, having material, financial, and personnel resources superior to those available to the civilian sector. The creation of the NDSTIC was one measure by which Chinese leaders hoped to facilitate the transfer of technology between the military and civilian sectors. The NDSTIC, in particular through its trading arm, China Xinshidai Corporation, coordinated procurement of foreign technology for military purposes.
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