Good for defense and economy

The Decision on Major Issues Concerning Comprehensively Deepening Reforms, issued by the Third Plenum of the 18th Communist Party of China Central Committee, lays special emphasis on "boosting coordinated development of military and civilian industries".

The document says China will strengthen the defense industry, perfect the collaborative innovative system of defense science and technologies, reform defense production management and armament procurement system, and encourage private enterprises to invest in scientific research, and production and repair sectors of the defense industry.

This shows that coordinated development of the military and civilian industries has not only entered a new stage, but also has become an important part of China's economic development and national security strategies, as well as an essential means to achieving national prosperity.

At the core of coordinated development of the military and civilian industries is the reasonable distribution of national resources between the defense and non-defense industries. Coordinated development of the military and civilian industries becomes inevitable when a country's technological strength and market economy reach a comparatively high level of development. Between defense and non-defense needs, the one that is more important and urgent will get more resources.

The coordinated development of the military and civilian industries can promote economic construction. In fact, given the limited resources China has, the coordinated development of military and civilian industries is the best way to derive maximum benefit from economic and defense constructions.

There are two key factors in the coordinated development of military and civilian industries. First, China should encourage defense enterprises to develop civilian industries and top civilian industries to enter sensitive defense sectors such as scientific research and weapons' production. Second, defense enterprises should carry out further shareholding reform, and mergers and acquisitions to promote the development of military and civilian dual-use technologies in order to help two-way technology transformation.

China's defense industry is gradually forming a cluster of new armament scientific research and production enterprises. These enterprises are leading companies in military and related industries, and are gradually joining the advanced ranks of their peers worldwide. So China should establish a dynamic management system, and an access and exit mechanism for this emerging cluster.