China speeds up military sector reform

By Wu Jiao (China Daily)
Updated: 2007-07-04 06:40

The government is mulling policies to speed up reform of its secretive military sectors, yet maintain national security, a senior defense official said.

The new policies will cover market entry, investment, taxation, and land acquisition, Vice-Minister of the Commission of Science, Technology and Industry for National Defense Sun Qin said on Monday.

China pledged to open up its military industries to private investors - both domestic and foreign - last month.

Weapons' manufacturers will be allowed to raise money through initial public offerings at home and abroad, according to a guideline jointly issued by the commission, the State-owned Assets Supervision and Administration Commission and the National Development and Reform Commission.

The degree of openness to private capital would depend on the importance of the weapons a company produced, Sun said.

A few "key military enterprises with national strategic security concerns and core State secrets" will remain solely in State hands, Sun said.

The State will remain the majority shareholder in "key military enterprises producing weapons".

"The country will amend existing policies which restrict the entry of non-state capital into the military sector, and widen the community of enterprises eligible to receive certificates for scientific research and production of military products," Sun said.

He said investment and tax preferences would be maintained for those "qualified" reformed firms.

The government has set a goal of completing reform of the "qualified" weapons' manufacturers "within the next few years" in a move to modernize the Chinese mainland's military hardware and upgrade its capabilities and technology, according to the guideline.

Sun said reformed firms will be put under close supervision to maintain "national security and social stability".

The reforms will adhere to relevant rules issued by the State-owned Assets Supervision and Administration Commission. The commission oversees the reform of State-owned companies.

Shareholders and intermediary agents participating in the reform will have to adhere to relevant secrecy requirements.

The country reserves the final right to control some reformed firms "during unusual times" to ensure national security, and the production of weapons.

(China Daily 07/04/2007 page3)

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