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

China Academy of Engineering Physics and its subsidiaries
(with a great deal of high level expertise but
lacking in smaller scale industry and commercial application)
undercut its ability to diversify.
One example of the new approach described above
is the “Xi’an National Civilian Aerospace Industry
Base.” 108 The Shaanxi government the China Aerospace
Science and Technology Corporation (CASC)
are working together (up to 30 billion yuan in funding)
to create a self-sustaining industry cluster. 109 CASC
has long been heavily engaged in military conversion,
but this project is a far more dramatic consolidation of
its assets that will focus on dual-use activity, particularly
in the business of small satellite development,
productions, and applications. It is expected to generate
30 billion yuan in revenue and will entail mergers
and acquisitions by a range of investors, both state
and nonstate. This could be the start of an even greater
consolidation of CASC at other levels (large satellites,
for instance). With such a concentration of resources,
the plan is to create a self-sustaining industrial chain,
which will then further attract talent, enterprises, and
the necessary capital to thrive independently.
A second model is the spontaneous development
of CMI activity that arises as a result of strong civilian
industrial capacity and defense demand. These
regions do not exhibit a high degree of technology
diffusion between civilian and military sectors; rather
the civil-military relationship is dominated by a sharing
of industrial and manufacturing capacity. While
local governments may actively solicit such dual-use
opportunities—which are often lucrative—they occur
more organically and are sustained through natural
comparative advantage of the civilian or nonstate
sector. A typical example of this model is occurring
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