The army that makes money.

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Author: Unknown

China

Dateline: FROM OUR BEIJING CORRESPONDENT

WHEN business travellers and tourists settle their hefty bills in the marbled elegance of the lobby of Beijing's Palace Hotel, they might be surprised to know that they are paying into the coffers of the People's Liberation Army. The western managers of the hotel prefer not to mention that the army which opened fire on unarmed demonstrators in nearby Tiananmen Square in June 1989 is the Chinese partner in this joint venture.

In fact the five-star Palace is just one of the capital's many hotels part-owned by the army and other branches of the security forces. In Guangzhou, the Cathay Hotel is partly owned by Norinco, a shadowy arms-dealing outfit which is one of the more successful parts of the Chinese defence industry.

The army's foray into the hotel trade might be thought to be taking the slogan ``Serve the People'' to extremes. The bourgeois luxury on offer in most of the establishments is at odds with an army that is most comfortable with the conservative wing of China's Communist Party.

In 1984, the senior leader, Deng Xiaoping, decreed that China's bloated military was to be streamlined and made cost-effective. He removed 1m men from the payroll of 4m, and told the army that central government could no longer foot the whole defence bill; the military would have to devise ways of making money towards its keep.

Since then, swords have been turned into ploughshares and a wide variety of other products for sale in the civilian marketplace. Factories which in the past were devoted to military production have been churning out pianos, refrigerators, television sets, washing machines and passenger aircraft.

In 1989 military units produced civilian products worth almost 20 billion yuan ($4 billion); in the same year the central government budgeted 25 billion yuan for defence expenditure. Following the army's support for the leadership at the time of the Tiananmen protests in 1989, its budget has been increased and the army has been making money from weapons exports. But civilian production still accounts for a large part of the army's income.

The army produces 60% of the country's motor cycles. Just outside Beijing, it runs a shooting range where foreign tourists of a violent turn of mind can try out anything from a pistol up to a rocket launcher, the price rising accordingly.

Some factories have moved from the mountains of western China, where they were badly placed for exporting their products. At least 400 army-run plants have set up sales offices in Shenzhen, the special economic zone near Hong Kong, in an attempt to market goods abroad. In 1990 China earned about $140m from exports of civilian goods made by defence enterprises.

The bad side is that many goods are of poor quality. Army-run factories can be just as inefficient as the rest of state industry. Adjusting to a market economy is not easy. Stocks of televisions, refrigerators and other consumer goods have built up around the country, and are making the military no more money than if the factories were still turning out hand grenades.

Even the hotel business is not doing as well as it did in the mid-1980s, when the tourists were pouring in, with their wallets full of hard currency. Some hotels are facing hard times, though not the Palace and other establishments that cater mainly for businessmen and visiting government people. For people deciding whether to visit China for its scenery, the memory of Tiananmen is going to be slow to fade.