Fang Xiliang unlocks a door, flicks on the lights and pulls dusty covers off a motley group of items. There are electric etching pens, steel frying-pan handles and clunky ultrasound monitors.
“This one was obsolete before we finished,” says Fang, pointing to a record player. He motions to a set of stereo headphones pinned to a board like a dead butterfly specimen. “That was too primitive. We stopped production after a few hundred sets.”
This is New Prosperity Instrument Factory’s product-display room, but a more apt name might be the “Museum of Failed State Industry.”
A military factory in Sichuan’s provincial capital, New Prosperity was once the exclusive supplier of compasses to air force transport planes. Today it’s trying to survive by heeding Deng Xiaoping’s command to make a yuan. Its grand plan: diversification.
Of dozens of attempts to diversify, however, only a few items-circuit boards, television tuners and a stove that burns sugar-cane waste-are still in production, and even these are in trouble.
New Prosperity, which once made missile-guidance systems, now can’t even make golf-club heads up to U.S. standards.
The 50,000 factories in China’s military-industrial complex have tried for the last decade to diversify into civilian products. About 65 percent of output is now civilian, analysts say. The target for 1999 is 80 percent.
Beijing hails this as a big step toward world peace, but is it really beating swords into plowshares? Plant managers say China hopes to sell consumer products for hard currency, with which to buy sophisticated technology for the country’s army.
“Military products remain our priority,” said Zheng Peiying, deputy general manager of the astronautics business department of the ministry of aerospace and astronautics industry.
Some Western military analysts doubt that there will be a peace dividend. “All factories must still maintain military production lines in case the order comes,” one said. “Their civilian products are in addition to their military products.”
With the People’s Liberation Army reeling from 1980s budget cuts, the National People’s Congress is expected to increase its share of the national budget this month.
The army currently receives 12 percent, about $6 billion. The official New China news agency, however, said the increase would be only enough to maintain rank-and-file living standards.
The end of the Iran-Iraq war depressed weapons orders, and with sharp competition in the international arms trade from the cash-starved former Soviet Union, China’s defense industry is under siege.
These days, when it comes to making money anything goes. Some military factories make coffee mugs, snake wine and lingerie. One has adapted the technology for making triggers to automatic garage-door openers. Others operate shooting ranges for civilians.
Xu Xin, former deputy chief of the general staff, worries that the focus on commerce will erode the army’s fighting spirit. “As the economy grows,” he said, “the expenditure on defense should increase accordingly.”
For the moment the threat of an arms buildup is only potential, and many factories are losing money. But some managers, such as Yang Baoshu, president of Chengdu Aircraft Industry Corp., which makes fighter planes, predict a profit within three years. Norinco, China’s largest arms conglomerate, already accounts for half the annual production of motorcycles and one-third of its mini-vans.
The change in China’s push to modernize its military-industrial complex already is affecting the balance of power in East Asia. The demise of the Soviet Union and the reduction of the U.S. military presence in Asia have created a rare opportunity for Beijing.
In the past year, it has bought 26 Russian Su-27 fighter planes to enhance its air power in the South China Sea.
Li Jianying, a Foreign Ministry spokesman, said that China has one of the lowest per-capita military budgets of any country and that its forces are entirely for peaceful purposes.
But few military factories are being dismantled. Some are merely mothballing production lines, and others, including New Prosperity, continue to produce military products on a reduced scale.
For Fang, New Prosperity’s administrative director, the game plan is simple. “We’ll produce civilian products, make money and then we’ll be able to pay our technicians more to develop military technology.”
