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China's Army Under Fire

Can Jiang push the PLA to give up its complex web of businesses?

For a Chinese military chauffeur, it was all in a day's drive. After all, there was a traffic jam and his boss wanted to impress the American guests in the back of his big black Lexus. So the chauffeur turned on his siren and flashing red light and swung onto a crowded sidewalk in the southern Chinese city of Guangzhou. The driver barked through the car's loudspeakers at pedestrians, scattering them in his path. Then the sedan zipped ahead of the congested traffic. For the American executive in the car, who was considering a business venture with a People's Liberation Army-linked company, it was a powerful testament to the might of the Chinese military and the carte blanche that its official license plates provide. "I was impressed," says the executive.

But the PLA's delight in running roughshod over the country since the military plunged into business more than a decade ago no longer impresses China's leaders. In late July, President Jiang Zemin ordered the PLA to get out of business. So far, Beijing hasn't spelled out a precise strategy for forcing the military to divest itself of a mind-numbingly complex web of thousands of commercial interests that span pharmaceuticals, autos, and telecommunications. But many analysts believe the campaign is for real. "This is the most serious effort ever to rein in the PLA's activities," says Tai Ming Cheung, a senior director at Kroll Associates (Asia) Ltd. and a longtime PLA watcher.