China’s flagship policy to get the private sector to support its military ambitions has long given foreign governments like the U.S. the chills. Now, though, Chinese companies seem to be getting shy about promoting it.
The idea behind military-civil fusion (MCF) was to get companies working with Chinese armed forces on advanced technologies. In recent years, though, mentions of the phrase “military-civil fusion” have become rarer in major Chinese policy documents.
Moreover, a review by The Wire China shows that listed companies have taken to obscuring the name of a key state-run investment fund that focuses on firms that produce so-called dual-use technologies — products that have both military and non-military applications.
FADING OUT
The phrase “military-civil fusion” first entered Chinese leaders’ vocabulary in 2007, when then-President Hu Jintao urged the country to “take a path of military-civilian fusion with Chinese characteristics.” The concept had previously been referred to by other labels, such as “civil-military integration.” By the time the 13th Five-Year Plan was unveiled in 2016, military-civil fusion was mentioned no fewer than 10 times throughout.
But more recently, the Chinese government has downplayed the military-civil fusion policy. By the time the 14th Five-Year Plan was published, covering the years from 2021 to 2025, the phrase was nowhere to be found.
Some argue that was a sign of Beijing taking international pressure on board.
“We [the United States] made an explicit policy choice to start talking about it [MCF] a lot more, and you saw that in the latter half of the Trump administration. The Chinese reacted to that,” says Liza Tobin, who served as director for China in the National Security Council from 2019 to 2021. “We made it radioactive, and in their discourse, they went into retreat.”
While many other countries also harness private industry to advance military technologies, analysts say China’s one-party political system makes military-civil fusion more concerning.
“The difference in the U.S. is [that] it’s a voluntary system. There’s informed consent. The private sector can opt out,” says Tobin. “Sometimes foreign companies that are operating in China see their inventions and their innovations and their technology and expertise being used without getting their informed consent, because this is a Leninist system where the party is above the law.”
CORPORATE COYNESS
As U.S.-China relations have deteriorated in recent years, Washington has sanctioned companies that openly contribute to China’s military modernization. In November 2020, the Trump administration identified 31 companies as contributors to MCF, and prohibited Americans from buying shares in those companies. Among the targeted companies was video surveillance equipment manufacturer Hikvision, which serves both civilian and military customers.
The National Military-Civilian Fusion Industry Investment Fund was established in 2018 and its largest shareholders are recorded as the Chinese Ministry of Finance, the state-owned China Electronics Technology Group (CETC) and the state-owned Aviation Industry Corporation of China (AVIC). It has invested in more than 150 listed and private companies since its inception, according to the data analytics platform WireScreen, with 99 of those being active investments.
If the U.S. has made it so clear that MCF per se is a problem, then why not just obfuscate? And they [China] do that all the time — setting up new subsidiaries to evade export controls and the like.
Liza Tobin, who served as director for China in the National Security Council from 2019 to 2021
At least 18 listed companies who are investees of the National Military-Civilian Fusion Industry Investment Fund have obscured the name of the fund in their recent shareholder reports, according to documents reviewed by The Wire. The fund includes the characters for “military-civil fusion” in its Chinese name, but The Wire found that these 18 companies have either deleted those characters when listing the fund among their investors, or replaced the characters with asterisks, so that the fund would instead be called the “National Industry Investment Fund.”
The modified name of the investment fund does not correspond to any corporate entity in China, according to WireScreen, and China’s market regulator, the State Administration for Market Regulation (SAMR), would ordinarily not allow a corporate entity with no business registration to be listed in official shareholder information.
Tobin says the name change is likely part of an obfuscation strategy to make MCF companies harder to detect for the U.S. government.
“If the U.S. has made it so clear that MCF per se is a problem, then why not just obfuscate?” says Tobin. “And they [China] do that all the time — setting up new subsidiaries to evade export controls and the like.”
Check out the graphic below to learn more about some of the listed companies that have started obscuring the name of the military-civil fusion investment fund:
Aaron Mc Nicholas is a staff writer at The Wire based in Washington DC. He was previously based in Hong Kong, where he worked at Bloomberg and at Storyful, a news agency dedicated to verifying newsworthy social media content. He earned a Master of Arts in Asian Studies at Georgetown University and a Bachelor of Arts in Journalism from Dublin City University in Ireland.
