China Analysis: The reform of China’s defence economy

ECFR Alumni · Director, Asia and China Programme
Senior Policy Fellow
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China’s growing defence budget is a symbol for China’s military rise. However, little is known about the state of China’s defence sector. Beijing is not only developing its own military-industrial complex, the country is also struggling with the reform of its defence sector.

The latest issue of China Analysis – The reform of China's defence economy – shows that China’s defence sector is changing: New management reforms are being introduced, there are serious attempts to improve civil-military integration and there are debates about how the defence sector can become more innovative.

  • The modernisation of Chinese defence companies is continuing but the financing of companies remains a challenge. The “marketisation” of defence companies created problems in terms of ownership and the ability to raise capital.
  • China’s lack of “innovation capacity”: China’s defence sector lacks innovation which is seen as a major challenge for the development of China’s military capabilities. In order to tackle the problem Chinese experts debate whether more market competition would improve the quality of the Chinese defence sector.
  • Modernising the People’s Liberation Army (PLA) is one of the key priorities of the Chinese government. New “informatisation technologies” are being implemented in order to improve information sharing, data-mining and interoperability.

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