When the Chinese Communist party leadership gathered in Beijing for its quinquennial congress last October, the media spotlight was firmly on President Xi Jinping securing a precedent-shattering third term as China’s unchallenged leader.
Overlooked by many at the time was the rise of a new group of political leaders in the top echelons of power whose background diverges from the usual careers in provincial government or Communist party administration. Instead, they all have deep experience in China’s military-industrial complex.
Their swift advancement is part of Xi’s efforts to reinvigorate China’s long-running project of “military-civil fusion”, a policy that seeks to harness new technologies from the private sector for the benefit of the country’s rapidly modernising military.
Wu Guoguang, who worked as an adviser to the former Chinese premier Zhao Ziyang and is now with the Asia Society, a US think-tank, identifies five of 13 new members of the party’s elite 24-member politburo appointed last year as representing “a new generation within the CCP leadership”.
They include new vice-premiers Zhang Guoqing, once a chief executive of a weapons maker, and Liu Guozhong, who trained as an ordnance engineer. The nuclear engineer Li Ganjie now oversees senior party appointments as the head of the powerful central organisation department. There is also the aerospace technology expert Ma Xingrui, tapped to lead the party in the turbulent Xinjiang region, and rocket scientist Yuan Jiajun, who will do the same in the important south-western megacity of Chongqing.
Their “unprecedented” promotion, Wu wrote in a recent essay, highlighted Xi’s belief that China’s military-industrial sector was an area where party-state control and private sector activities could be successfully combined.
More than a third of the Communist party’s 205-member Central Committee now have a background in science, technology, engineering and mathematics, according to a report by MacroPolo, the think-tank of the Paulson Institute in Chicago. That is a 35 per cent increase from the previous committee appointed five years before.
Across municipal, provincial and national government in China there are scores of others who have likewise advanced from educational and professional backgrounds in the sciences and engineering to leadership roles in defence-linked state-owned enterprises, before being selected for important political positions.
“Xi has high hopes of integrating technological innovation and market elements, primarily to advance China’s economic and military power and thereby, in Xi’s words, make China central on the world stage,” says Wu.
“The rapid rise of these military-industrial engineers in Chinese politics is spectacular, even in comparison with the general trend of a rising class of technocrats in the post-Mao era,” he adds.
The implications could be profound. China’s potential adversaries in the west, already alarmed about the expansion of Chinese military capabilities, fear that the pace and breadth of military technology breakthroughs will step up a gear.
They will have noted Xi’s appearance, in March this year, in front of leaders of the People’s Liberation Army in Beijing. Dressed in a dark green Mao suit, he reminded them of the need to build China’s self-reliance and urged them to speed up “collaborative innovation in science and technology with a focus on independent and original innovation”.
Within China, some experts see long-term risks as Xi reshapes policy towards an increased focus on security and away from economic growth, noting that a similar strategy was the ruin of the Soviet Union.
Others believe he is taking steps to reduce the chances of future opposition to his rule, given that many of the new appointees lack an entrenched power base within the party.
But Greg Levesque, co-founder of US military technology-focused consultancy Strider, says the combination of Xi’s personal policy oversight, increased spending and the latest senior party and government appointments reflects a “significant shift” in the use of military-civil-fusion to address China’s security concerns.
“These are individuals who understand the defence industry nexus between the universities and the key state laboratories, the defence state-owned enterprises and the emerging tech companies,” he says. “I still don’t think people have woken up to it.”
Slow progress
China should be uniquely positioned to pursue a policy of integrating private sector technology and innovation with the military. It has immense control over its private enterprises, while its massive state-owned enterprises and universities, also under state control, conduct large amounts of defence-focused research and development.
Many foreign observers assume it is easy for Beijing to direct people, be they in the public or private sector, to share cutting-edge research and new technologies with the military regardless of intellectual property rights.
But Taiwanese researchers Arthur Ding and Tristan Tang assert that, despite its recent advances, China’s defence industry remains “poorly operated” and has “largely failed to reform”.
Elsa Kania, a senior fellow at the Center for New American Security (CNAS), a US think-tank, considers Xi’s elevation of the civil-military policy to a “national strategy” in recent years is not a sign of success, but a reflection of the leadership’s concern over slow progress in reducing regulatory, cultural and institutional barriers between China’s military and the country’s private enterprises.
For decades, China’s military has been led by state-owned enterprises and has been slow to adapt to private sector forces. According to a person close to the state-owned China Aerospace Science and Technology Corporation, defence sector SOEs are struggling to strike a balance between making money and supporting policy goals.
“All of a sudden, military-aerospace researchers with little understanding of how markets function must learn to do business,” says the person, who spoke on the condition of anonymity for safety reasons. “We’ve made some progress. But most of my colleagues have still kept the SOE mentality, which was to complete a project regardless of the costs.”
In the private sector, some companies and entrepreneurs have tended to be apprehensive about co-operation with the military. Lawyers have noted conflicting laws and regulations governing access to military projects and procurement by private sector companies and there are serious legal risks in areas like confidentiality, product standards and ownership rights.
The person close to China Aerospace Science and Technology Corporation says the military has ultimately shown that it “doesn’t trust private groups”, which has narrowed the scope of what the private sector can offer. “You can’t expect a Chinese private firm to come up with something like SpaceX,” he says, referring to Elon Musk’s commercial rocket company which partners with Nasa, the US space agency.
The impetus for reform in Beijing has been further sharpened by the recent hardening of attitudes in capitals such as Tokyo, Seoul, Canberra and most of all Washington. The Biden administration has imposed unilateral export controls barring US companies from selling high-end semiconductor chips and key equipment for manufacturing them and lobbied its allies to follow suit.
The US government is unambiguous over what it sees as the malign underpinnings of China’s military-civil fusion policy. The policy’s goal, the state department says in a public fact sheet, is to enable China to develop the most “cutting edge” military in the world. The Communist party is implementing this strategy not just through domestic research and development but “also by acquiring and diverting the world’s cutting-edge technologies — including through theft”.
Technology transfer
A chief complaint from the US defence community is that Beijing is increasingly using Chinese companies to obtain overseas technologies and expertise, by hook or by crook, that can later be used by the military.
One example cited by defence experts is the Kuang-Chi Group. Before it was placed under sanctions by the US Bureau of Industry and Security in late 2020, the Shenzhen-based company, led by US-educated executives and with partners in the US, Israel, Canada, Europe and Singapore, had invested hundreds of millions of dollars developing products with potential military applications.
“Kuang-Chi is yet another example of PRC transfer of critical technology and knowhow from the US to China,” stated a 2020 report, commissioned by the US-China Economic and Security Review Commission.
Levesque, of Strider, points out that since late 2017, Xi has increasingly taken direct personal leadership of the military-civil fusion policy via a high-level working group, which he chairs.
There is now a “top-down directive” in place to expand the policy into “all domains of competition” with the US, broadening the scope from not just core weapons technologies but also to cyber, finance, space and maritime sectors, Levesque says.
Political support has been backed up by funding. Estimates by CNAS suggest that between 2015 and 2019 at least 35 new funds were established with about $68.5bn earmarked to be distributed to firms involved with military-civil-fusion projects.
By 2018 at least 38 demonstration bases showcasing military-civil fusion projects were set up across China, while according to data from the central military commission cited by the consultancy Qianji, the number of institutions licensed to carry out military-focused research and development or produce military equipment expanded from fewer than 3,800 in 2017 to more than 22,400 in 2019.
In the past three years, spending in China has become harder to track, researchers say, but that does not mean it has stopped. At a trade show targeting the military-civil fusion sector held last month and attended by hundreds of private sector companies, participants were upbeat at the prospects for the industry.
The Financial Times is not disclosing the location of the event or the names of attendees for security reasons, but promotional videos advertised products that could “break the western monopoly” on defence technologies. One person present describes the military-civil fusion policy as a “boon” for local groups as China substitutes components from overseas for products with new local suppliers.
New China-made products on display included military vehicles, computer servers and intelligence gathering software. “Our technology is already better than western rivals,” another attendee enthuses.
As their technology improves, Chinese defence companies are also drawing up plans to ramp up weapons exports. Inner Mongolia First Machinery Group, one of China’s biggest tank producers, is scoping new markets in Asia, Africa and the Middle East, a person close to the group says.
“We are able to pick up the slack [in weapons exports] left by Russia and Ukraine . . . in the meantime, the US and Europe are so preoccupied with the war they are not paying attention to the needs of certain developing country clients,” the person said.
Economic implications
Experts say Beijing’s heightened focus on national security is easy to understand given the rising military tensions between the US and China, but there are differing views over how Xi is balancing security against other domestic concerns.
According to Keyu Jin, a professor at the London School of Economics and author of The New China Playbook, Beijing believes that domestic Chinese development of a “vast majority” of technology will also help to fuel economic growth.
“The bottom line is that the party’s legitimacy still rests with economic opportunities,” she says.
However, Zhang Ming and Lu Xianfeng, scholars at the Chinese Academy of Social Sciences, wrote in December that Beijing must also avoid “repeating the mistakes of the Soviet Union” and ensure that the development of the national defence industry did not drag on economic growth.
They urged Beijing to learn from the US by “moderately liberalising” the defence sector, allowing greater competition between the state-owned and private enterprises, and improving access of military-focused companies to capital markets.
Alfred Chan, a biographer of the Chinese president and emeritus professor at Huron University College in Canada, says the pivot to security is a result of Beijing’s world view.
“During the Trump administration there was an emphasis on America first, a kind of neo-mercantilism . . . that also continues under the Biden administration,” he says. “Many of China’s policies over the past six years are really a reaction to that.”
In a Chinese research brief published in 2021 — spotted by US experts Peter Singer and Alex Stone — high-ranking PLA researchers predicted that the western technology restrictions were poised to become more surgical and effective and said that China must respond with “more targeted countermeasures”.
Chan adds that building up China’s science and technology expertise has been a significant goal throughout the country’s decades of reform. But the series of appointments made at last year’s party congress did reflect a “new emphasis on making China a technological powerhouse so that it would no longer be subjected to the dangers of embargo”.
“Self-reliance and relative independence and all those things are really responses to a fairly hostile external environment,” he says.
Others believe that the foreign policy concerns are subordinate to Xi’s internal party political manoeuvring, which they say lies at the heart of all of his personnel decisions.
Victor Shih, an associate professor of Chinese political economy at the University of California San Diego, believes the appointment of cadres from China’s military-industrial complex to key leadership positions might not be “purely” based on advancing the military-civil fusion policy.
Such leaders, Shih says, tend to have narrower factional networks within the party because they have worked in single companies or industries for much of their careers rather than working their way up the party ladder. When they emerge as senior provincial officials and become politburo members, they haven’t had the kind of experience that would typically give senior politicians in China very deep networks, he adds. “They present less of a threat to Xi Jinping’s power base.”
Their elevation could well turbocharge their own careers; the MacroPolo researchers wrote that provincial technocrats “are on a fast-track for promotions in 2027 or earlier” if they can achieve their objectives. “The key metric that matters is no longer GDP growth but ‘nanometres’, or securing technologies.”
Whatever the motivations for them and for Xi, there is widespread agreement that the most tangible result will be that China becomes a more potent military power.
Ding and Tang, the Taiwanese academics, note in a recent report for the Jamestown Foundation that if the new round of military-civil fusion succeeds, China’s defence technology development “will undoubtedly become far more efficient, which will pose a much greater military challenge than before to China’s neighbours and the US”.