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

In reality, however, numerous limitations remain.
First, although weakened in terms of oversight of
corporation assets, SASTIND maintains the review
of national security status of defense assets and as a
conservative body could hold back the opening up
of large portions of the industry. 89 In addition to secrecy
issues, there are further difficulties to opening
up many institutes. Core R&D/production facilities
under the group corporations were never formed into
subsidiary companies but have always been categorized
as “shi-ye dan-wei” (事业单位), making approval
for their stock listing a far more complicated process. 90
An estimated 20 percent of the defense industry’s
facilities are involved in core defense R&D/production—not
an insignificant amount. According to one
study of the space sector, roughly 60 percent of institutes
are engaged in both civilian and noncore military
production, thus potentially opening them up to
diversified investment and ownership by nondefense
state-owned entities. 91 Yet, the defense industry is
consolidating by maintaining a controlling share in
the majority of assets placed on the market, making
the prospects for organizational and management reforms
limited. In the small percentage of assets where
nonstate and foreign private investments are allowed,
special approval is required for shareholding that exceeds
5 percent, entailing a fairly stringent barrier for
minority ownership. Moreover, CEOs and other key
leaders of the defense group corporations are certified
by SASAC only after SASTIND and the Organization
Department of CCP Central Committee decide on candidates.
92
Other barriers exist that prevent the defense industry
from listing new assets on the stock market. They
must meet basic criteria for profitability and market
501