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China's military makes clothes, shoes, machinery

SHANGHAI: One of the biggest business subsidiaries of China's military employs 140,000 people making clothes, shoes, textiles and machines and has assets exceeding $1.2 billion, officials said on Tuesday.

The Xinxing (New Prosperity) Group, owned by the Logistics Department of the People's Liberation Army, produces goods needed by the army and sells the rest to the public.

It has about 50 large and medium-size factories, nearly all of them inland, as well as subsidiary companies, with a total workforce of 140,000 people, an official of the company said by telephone from Beijing.

The Xinxing Group, set up in 1989, was one result of the policy of Deng Xiaoping to reduce China's military from four to three million men, leaving dozens of factories without clients and forcing them to shift to production of civilian goods.

Asked about the value of its production in 1995, the official said that the figure was a secret but that the group had total assets exceeding 10 billion yuan ($1.2 billion).

The output of its factories includes clothes, electronics, medicines, petrochemicals, steel, shoes, textiles, industrial machines and vehicles. The head of the group is a senior officer from the PLA's Logistics Department but the rest of the staff are civilians, the official said.

A typical Xinxing plant is the 3516 Factory in Shanghai, which makes shoes, plastic and rubber products. In 1995, it produced two million pairs of shoes, up from 1.8 million pairs in 1994, factory chief Jin Dahong said in an interview.

The factory started making goods for the non-military market in 1984 and now produces more than 90 percent of its shoes for it, with most sales to inland cities in China, he said.

"Before, there was a plan and we were ordered what to produce but now we have to sell goods on our own," he said. "Before, we were like a pig who relied on feed it was given to it. Now, we are like a chicken who has to find food on its own."

Jin's is one of the few Xinxing plants in coastal areas of China. In the 1950s and 1960s, Mao Tse-tung ordered most military factories moved inland to take them out of range of possible attack by Soviet or U.S. forces.

Competition in the market is very fierce, with supply of shoes in China exceeding supply, Jin said.

"We face regular armies -- foreign-invested shoe factories -- and guerrilla armies -- rural shoe factories," he said, adding that the former have advanced technology and preferential tax and other policies and the latter very low labour costs.

"We have no choice but to raise the quality of our products and make new designs," he said.

The firm exported shoes in the 1980s to the United States, Hong Kong, west Europe and Africa but found that prices and profits were higher in the domestic market, he said.

The factory operates under its own management, paying workers bonuses according to their output, he said. The average worker's income in 1995 was 10,960 yuan, slightly higher than the Shanghai average of 9,242 yuan.-Reuter