Trade with China has long been a contentious issue. Particularly controversial has been commerce with businesses run by the People's Liberation Army (PLA). Many critics of Beijing propose banning trade with PLA enterprises. Martin Dannenfelser of the Washington-based Family Research Council testified before Congress: "If we can't, at the very least, regulate our dealings with the oppressors' Army, how is anything we say going to be taken seriously in Beijing?"
At the same time, advocates of maintaining a cordial relationship with China view the PLA business empire as a barrier to Beijing's complete integration with the international economy. Negotiation over China's entry into the World Trade Organization, for instance, has been hung up in part over the continuing role of non-market enterprises like the PLA firms.
Now Chinese President Jiang Zemin has ordered the PLA to divest its commercial operations. This has brought a collective sigh of relief across the political spectrum. Human rights activists and free market advocates alike cheered his order.
But the applause is premature. True, the Chinese military's business role creates cause for concern. Analysts estimate the PLA makes $3 billion to $5 billion (it publicly admits to $1 billion) annually in profits.
The extensive network of PLA firms inhibits China's move to a true market economy. Moreover, the military is thought to be involved in slave labor. For these reasons, the disappearance of PLA companies would be a benefit. But there is a more important point. China, with the world's largest population, is likely eventually to develop the globe's biggest economy, almost inevitably becoming a major military power.
This won't necessarily threaten the West. Last fall at the Communist Party Congress President Jiang announced a PLA manpower cut of 500,000. Adjusted for inflation, military spending has been growing only slowly. The PLA's acquisition of new weapons has been counterbalanced by the elimination of large numbers of antiquated weapons.
Most important, China has not demonstrated the will to use a more effective force. Beijing's desire for a stronger military is not unreasonable. For a century China has been assaulted and dismembered by Western as well as Asian states. So far Beijing has been assertive, not aggressive; its ongoing, if at times halting, move toward a freer society may make it a responsible superpower.
Still, a more effective military could be used for ill. And today the PLA's commercial operations divert attention from force modernization. The PLA conglomerate consists of about 10,000 firms - such as audio-video enterprises, bowling alleys, discotheques, finance firms, and real estate companies, and produces aircraft, chemicals, clothing, computers, cosmetics, automobiles, and satellites.
The commercial empire takes military personnel far afield from military concerns. For instance, the PLA diverted production from weapons to export goods. Soldiers hawk cosmetics rather than train to, say, invade Taiwan. The military has been implicated in extensive smuggling, thought to cost the Beijing government $12 billion in customs revenue annually. Profit-seeking has enmeshed top officers in a web of corruption. All told, the PLA is less effective because of its business activities.
Beijing's goal, according to Gen. Fu Quanyou, head of the Army general staff department, is a "high-tech, modern" defense. Liu Xiaoming, a new minister in Beijing's embassy in Washington, says that "The President is firm. The PLA should be the PLA. It should concentrate on national defense."
Again, a more professional Chinese military doesn't mean war in Asia. Nevertheless, there is no reason to encourage Chinese military power. Of course, the US has only limited influence over Beijing's policies. But Jiang's decision to liquidate the PLA's business empire is likely to result in a more serious, combat- ready force. That is not necessarily in the interest of the West.
* Doug Bandow is a senior fellow at the Cato Institute.