Fortifying China explores the titanic struggle to turn China into an aspiring world-class military technological power. The defense economy is leveraging the country's vibrant civilian economy and gaining access to foreign sources of technology and know-how. Drawing on extensive Chinese-language sources, Tai Ming Cheung explains that this transformation has two key dimensions. The defense economy is being reengineered to break down bureaucratic barriers and reduce the role of the state, fostering a more competitive and entrepreneurial culture to facilitate the rapid diffusion and absorption of technology and knowledge. At the same time, the civilian and defense economies are being integrated to form a dual-use technological and industrial base. In Cheung's view, the Chinese authorities believe this strategy will play a key role in supporting long-term defense modernization.For China's neighbors and the United States, understanding China's technological, industrial, and military capabilities is critical to the formulation of economic and security policies. Fortifying China provides crucial insight into the impact of China's dual-use technology strategy. Cheung's "systems of innovation" framework considers the structure, dynamics, and performance of the defense economy from a systems-level perspective.
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First published2009by Cornell University Press
Printed in the United States of America
Library of Congress CataloginginPublication Data
Cheung, Tai Ming, Fortifying China : the struggle to build a modern defense economy / Tai Ming Cheung. p. cm. Includes bibliographical references and index. ISBN978–0–8014–4692–4(cloth : alk. paper) 1. China—Defenses—Economic aspects.2. Defense industries— Technological innovations—China.3. Militaryindustrial complex— China.4. China—Economic policy—1976–2000.5. China—Economic policy—2001– I. Title
HC430.D4C4472008 338.4'735500951—dc22
2008022864
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Cloth printing
10987654321
This book is dedicated to Ai,
to my mother, Woo Sok Yin,
and to the memory of my late father
Preface and Acknowledgments Abbreviations
Contents
1the CivilMilitary Technological Divide in the. Bridging Information Age Integrating the Civilian and Defense Economies2 China’s Enduring Quest for Wealth and Military Power5 The National Innovation Systems Framework9 Examining the Defense Economy through the NIS Prism13 Understanding How Defense Technological Innovation Takes Place16
2. Innovation and Stagnation during the Maoist Era The Building of the Conventional and Strategic Weapons Bases23 The Defense Economy’s Relationship with the Maoist NIS25 The Setup of the Conventional and Strategic Weapons Systems26 The Floundering of the Conventional Defense Industrial System31 Barriers to Conventional Weapons Innovation36 The Flourishing of the Strategic Weapons System40 The Consolidation of the Defense Economy in the Late1970s48
3. The Eclipse of the Defense Economy under Deng Xiaoping The Defense Economy and Its Relationship with the NIS in the1980s53 Defense Conversion60 The Impact of Conversion on the Defense Economy73
[vii]
ix xiii
1
22
52
Successes and Drawbacks of Conversion74 The Struggle to Overhaul the Legacy Defense Industrial Base 75 Key Activities of the System88 The State of the Defense Economy by the Late1990s98
Contents
4Revival of the Defense Economy in the. The Twentyfirst Century Setting the Stage for Bold Reforms102 The Relationship between the Defense and National Innovation Systems105 Reform and Consolidation Begin111 Key Activities of the Rejuvenated Defense Innovation System146 The Prospects for Catching Up and Leapfrogging170
5a DualUse Economy. Building From Defense Conversion to Dual Use and SpinOn177 Defining theYujun YuminDualUse Economy183 Chinese Approaches to CivilMilitary Integration and SpinOn197 Building Linkages between the Civilian and Defense Economies202 Harnessing Civilian High Technology Companies for Military Purposes215 The Geographical Landscape of Dual Use and CMI223 The Chinese Approach in Comparative Perspective227
6the Chinese Defense Economy Catch Up?. Can The TechnoNationalist Underpinning of the CatchUp Approach237 The Debate over China’s Military Technological Catching Up242 The Developmental Models for Catching Up245 Conditions for Technological Catching Up and the Case of the Space Industry247 Policy Challenges for the United States258
Chinese Terms Historical Official Exchange Rates between the Renminbi and U.S. Dollar,1955–2008Select ChineseLanguage Bibliography Index
[viii]
101
176
235
263
265 267 273
Preface and Acknowledgments
An everpresent danger of writing about contemporary developments in a country changing as fast as China is that your topic can disappear or become irrelevant before you finish. In the midst of my first scholarly examination of the Chinese military’s involvement in commercial activities during the 1990s, the Chinese authorities abruptly ordered the army to divest from its moneymaking operations. That book consequently turned from the impe rious rise of the Chinese military business empire into a historical study of its entrepreneurial pursuits and ignominious demise. This time, I sought to avoid having events overtake me again. An abid ing interest in the political economy of security led me to focus on the nexus between economic development, technological innovation, and de fense modernization in China—which concerns the place of the defense economy in the country’s economic, technological, and military transfor mation. This topic undoubtedly has staying power, but it was not so obvi ous at the beginning of this century because the Chinese defense industry was floundering from decades of neglect and isolation. Over the course of this decade, though, the Chinese defense economy has risen from its sickbed and appears to be returning to good health. This book charts its painful recovery and examines how the defense economy is positioning itself at the heart of the country’s longterm revitalization and its quest to become a world power. “Defense economy” refers primarily to the defense technology and indus trial base: the combination of people, organizations, institutional rules, tech nological expertise, and production capacity that provide defenserelated