The PLA at Home and Abroad - Strategic Studies Institute - U.S. Army

not available even to civilian enterprises engaged in
defense production. 58 Another problem is pricing reform.
Prices for many military products, which form
the basis for bidding, are drafted by the military, but
with production and R&D separated in accounting
ledgers, prices often do not include the costs of R&D. 59
Civilian enterprises naturally have to incorporate such
costs in doing business.
Other issues such as continuing asymmetry of information
continue to exist. The process of publicizing
various forms of competitive bidding remains incomplete.
Another complaint often heard is the lack of a
platform for communicating to civilian enterprises
the needs of the military; and vice versa, improving
the military’s understanding of available technologies
and products in the civilian sector. The case of Wuhan-based
Pangu Tech Co. is instructive: it developed
a technology for heavy vehicle shock absorption—
highly useful to the military—but was unknown until
a low level technician discovered it in a publication. 60
The result of these tangible and intangible barriers
has led to the vivid image of civilian enterprise activity
in the defense industry as “gnawing on bones.” 61
The real meat is still mainly reserved for the defense
enterprises. In 2005 and 2009, the CMC and GAD published
several more regulations to “deepen procurement
reform.” 62 However, without evidence of more
contracts going to the nondefense sector, procurement
reform will remain inconsequential as a tool to bring
greater competition in the defense industry.
Shareholding Reform.
Probably the far more dramatic policy transformation
efforts have been the exposure of the defense
industry to shareholding reform. The central gov-
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