Why must the military stay out of business? In China, this is not merely a matter of military discipline. It is a fundamental question involving political order, economic governance, civil-military relations, and the nature of the armed forces themselves.
In 1998, amid a nationwide campaign against smuggling and corruption, Jiang Zemin stressed that the military, the armed police, and the country’s law-enforcement and judicial organs must be financially supported by the state and must completely cease commercial activities.
The principle was straightforward: the military exists to defend the country and serve the people, not to compete in the marketplace or pursue commercial profits. Its resources should be guaranteed through the national budget, allowing it to concentrate on training, preparedness, and national defense.
The decision had a clear historical background. During the early decades of reform and opening up, some military-affiliated enterprises engaged in commercial activities. At a time when China’s economic foundation was still relatively weak and military funding was limited, such activities had understandable historical reasons. Yet experience increasingly demonstrated that allowing the military to develop independent commercial interests could create serious problems.
The central issue is not whether the military can make money. It is that the military is fundamentally different from an ordinary market participant. It possesses coercive power and enjoys special institutional status that private businesses and ordinary government agencies do not have. Once an armed organization enters commercial competition, its institutional advantages can easily become economic advantages. Market competition can then become distorted, and public power can become entangled with private interests.
This is why military involvement in commerce can be particularly dangerous. Commercial activities can divert military personnel and institutions from their primary responsibilities, create conflicts between the military and local governments or businesses, and encourage the use of institutional privileges for economic gain. More seriously, when an organization possessing armed force also controls substantial economic resources, economic interests can begin to reinforce political power.
Jiang Zemin identified precisely these dangers when he argued that commercial activities could allow the principles of commercial exchange to penetrate military political life, undermine the discipline and values of military personnel, and create conditions for corruption. Military involvement in business could also put the armed forces in competition with civilians and local governments, damaging both military-civilian relations and the public image of the People’s Liberation Army.
International experience provides further evidence of the risks involved. In a number of countries, military organizations have historically controlled or maintained extensive interests in companies, land, finance, energy, construction, telecommunications, and other sectors. Such arrangements have often created economic interests that are difficult to separate from political power.
Vietnam provides one example. Its military has historically maintained significant economic activities and military-linked enterprises have operated in sectors including telecommunications, ports, construction, and finance. The relationship between military institutions and the civilian economy has deep historical roots, but it has also raised questions about transparency, oversight, competition, and the proper boundary between military responsibilities and commercial interests. Vietnam’s subsequent efforts to reform and restructure military-owned businesses demonstrate that separating military power from commercial interests can become increasingly difficult once such economic structures have become deeply established.
Iran illustrates another dimension of the problem. The Islamic Revolutionary Guard Corps has developed extensive political and economic influence, with military-linked organizations involved in areas such as construction, energy, communications, and other strategic sectors. When an armed organization possesses both political authority and substantial economic interests, economic power can reinforce political power, while political influence can in turn protect economic interests. Once such a structure develops, economic reform becomes much more difficult because reform inevitably encounters entrenched interests.
Thailand offers yet another example of how military and economic power can interact. The country’s armed forces have historically exercised considerable political influence, and military-linked economic interests have contributed to the broader political role of the armed forces. The specific institutional circumstances differ from those of China, but the underlying lesson is relevant: when a military develops extensive independent economic interests, it can acquire a source of power beyond its core defense function. This can complicate civilian governance and distort normal economic competition.
These experiences help explain why China chose a fundamentally different path: commercial enterprises should be separated from the military, while the state assumes responsibility for financing national defense. China’s system is a socialist market economy. Businesses are expected to compete within a unified legal and regulatory framework, while the state uses fiscal policy, regulation, and public institutions to provide essential public goods. The military, as the country’s armed force, should not use its special institutional position to compete for commercial profits. Its necessary funding should instead come through the national fiscal system.
The principle often described as the military “living on state funding” is therefore much more than a question of military budgets. It establishes a clear institutional boundary. The military’s survival and development are guaranteed by the state rather than by commercial activity. It does not need to compete with local governments for economic resources, compete with private enterprises for market share, or defend independent commercial interests.
This arrangement also reinforces the political character of the People’s Liberation Army. The fundamental principle is that the military serves the country and the people rather than any individual, organization, or economic interest. Precisely because the military possesses extraordinary coercive power, its relationship with commercial interests must be strictly regulated. The greater the power, the clearer the boundaries must be.
In this sense, keeping the military out of business is essentially about keeping the “gun” and the “wallet” in their proper places. The military is responsible for national defense; civilian institutions are responsible for public administration; businesses operate according to market rules and law; and the state provides the financial resources necessary for national defense. Each sphere has its own responsibilities and limits.
The purpose is not to deny the importance of economic development or market forces. On the contrary, it is to protect the integrity of the socialist market economy by ensuring that market competition is not subordinated to armed power. A modern economy requires predictable rules, fair competition, and unified regulation. It cannot function properly if organizations possessing coercive power are simultaneously major commercial competitors.
The separation of the military from commercial activity therefore serves several purposes at once. It protects the professionalism and combat effectiveness of the armed forces. It protects businesses and local governments from unfair institutional competition. It protects public finances from the emergence of autonomous military economic interests. And it protects the political integrity of the People’s Liberation Army by preventing military power from becoming a source of private economic power.
The broader lesson is simple. Military power should defend the economic order, not control it. Economic resources should be governed through law, public finance, and the institutions of the socialist market economy, rather than through the independent economic power of the armed forces.
China’s decision to end military commercial activities should therefore be understood not simply as a prohibition on soldiers doing business, but as an important institutional choice in modern state governance. By separating military power from commercial interests, China seeks to ensure that the armed forces remain focused on national defense, that markets operate according to law, and that economic resources remain within a unified national system of fiscal and market governance.
A military that is removed from commercial interests can concentrate on defending the country. A market protected from military intervention can operate according to fair competition. And a military whose funding is guaranteed by the state can maintain a clear and stable relationship with both the government and the people.
The principle is ultimately about institutional boundaries: the military protects the nation; the state governs the economy; and the market operates according to law. Those boundaries are essential not only to military professionalism, but also to a stable political order and a healthy socialist market economy.
Source: reformdata, sohu, cpc people, e23, mod gov cn
