China’s state-owned enterprises have begun setting up in-house reserve military units, a legacy of the Mao Zedong era, in a sign of authorities’ increasing concern about social and political instability amid the country’s economic slowdown, according to analysts.
A Financial Times analysis of company announcements and state media reports over 2023 shows that dozens of Chinese SOEs have established new People’s Armed Forces departments in recent months.
The departments were historically groups affiliated with the People’s Liberation Army’s recruitment efforts at the county and village level under Mao. Today, they typically conduct civil defence activities and contribute to military recruitment, promotion and training.
Experts warned against viewing the rise of corporate PAFD units as a sign of preparations for military mobilisation against a foreign adversary. Instead, they said, it probably reflected adherence to President Xi Jinping’s strengthened focus on security and concerns about the risk of social instability as China’s economy grows at its slowest pace in decades.
“The activation of these PAFD units is a symptom of the leadership’s concern about the domestic social stability situation,” said Timothy Heath, senior international defence researcher at the Rand Corporation think-tank. “Because it’s happening in so many places all at once, this is almost certainly being directed from the top down.”
He added that PAFDs could play an important role in maintaining domestic security, acting as a liaison between companies, society and security forces, while promoting patriotism and monitoring compliance with Chinese Communist party directives.
China’s economy has failed to return to robust growth following the end of pandemic controls in early 2023 as it has grappled with a protracted slowdown in the property sector, weaker consumer spending and a slump in export revenue. It has struggled to find new drivers after years of a debt-fuelled real estate investment boom.
Beijing also faces greater geopolitical challenges in fraying ties with the US, Xi’s backing of Vladimir Putin and Russia’s invasion of Ukraine and China’s increasingly military assertiveness around Taiwan and in the South China Sea.
Chinese dairy giant Yili Group, a private company, established a PAFD late last year, making it the first such unit at a non-SOE in Inner Mongolia, where the company has its headquarters. In January, state-backed media said Yili, which owns several milk companies in New Zealand, was building up a defence force that “serves in peacetime, responds in emergencies and fights in wartime”.
James Char, a China expert at the S Rajaratnam School of International Studies in Singapore, attributed resurgence of interest in PAFDs to the “CCP party-state stressing ‘security’ over ‘development’”, which he dated at least to Xi’s second term, which began 2017.
The Yili Group announcement, he said, could be seen as following that trend.
Shanghai Municipal Investment Group, a local government investment group, also established a PAFD in September, while Mengniu, Yili’s main state-backed dairy rival in Inner Mongolia, set up a department last May.
According to an announcement by the Horinger county government in Inner Mongolia, a local military official noted that Mengniu’s PAFD must adhere to the party’s leadership over the armed forces, enhance emergency response capabilities, improve the economic and social benefits of enterprises and “hone the ability to win battles”.
Among other groups that announced PAFDs in local government and state media last year were Wuhan Urban Construction Investment & Development Group, PowerChina Equipment Group and Wuhan Metro, as well as Huizhou Water and Huizhou Transport Investment Group in Guangdong province and Haian Urban Construction Development Investment Group in China’s eastern Jiangsu province.
The establishment of new PAFDs in Chinese state-backed businesses also comes amid a new phase of domestic-focused defence reforms.
Since the end of 2022, defence mobilisation offices have gradually replaced civil defence offices nationwide, expanding their responsibilities from civil air defence to national defence mobilisation, signalling a goal of strengthening the country’s security capabilities.
One PAFD member in China’s eastern Zhejiang province, who asked not to be named, said his unit was primarily focused on military training and recruitment activities, as well as occasionally presenting military-themed educational sessions to schools.
According to a statement carried by Xinhua, China’s state news agency, Wu Qian, a defence ministry spokesperson, said in October that establishing the PAFDs in state-owned enterprises was required to “fulfil national defence obligations and strengthen national defence construction”.
Rand’s Heath said the rise of the PAFDs was “definitely surprising” given the CCP leadership’s understanding that most Chinese citizens had little interest in Maoist doctrines and communism of China’s pre-reform era.
“This is an entity that was mainly associated with the mobilisation activity of the Mao years when the party was much more active in directing popular political activity,” he said. “Since Deng Xiaoping led the party more in the direction of pragmatic, market-friendly reforms, this type of activity has faded quite a bit.”
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