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China’s military told to give up business empire

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President Jiang Zemin has ordered China's military to relinquish its sprawling, multibillion-dollar commercial empire, saying it is the only way to combat an epidemic of smuggling, which the army dominates.

Jiang, appearing somber in a pea-green Mao suit as he addressed an extraordinary meeting of top military commanders on Tuesday, called on the armed forces to regain their "purity" to regain public confidence and to safeguard the nation's long-term stability.Yet business, and smuggling, are so entrenched in the army that truly separating it from its commerce could take years.

The announcement, coming so unexpectedly, offered scant clues about whether Jiang has the political will or the support from military leaders to genuinely carry out such an ambitious undertaking.

Most remarkable, perhaps, was his indirect admission of the degree of lawlessness that exists in the army, which has been off-limits for criticism.

"The army and armed police forces must earnestly carry out checks on all kinds of commercial companies set up by subsidiary units, and without exception from today must not engage in their operation," Jiang said in his speech, reported by China Central Television on Wednesday night.

In the broadcast, dozens of military leaders were shown earnestly taking notes. As chairman of the Communist Party's Central Military Commission, Jiang is China's commander in chief. Yet the army wields wide power, and it is unlikely that Jiang would make such a bold pronouncement without the support of top generals.

Military-run companies are so widespread that people have dubbed the army PLA Inc. Beijing's swanky Palace Hotel, a favorite of top-dollar tourists, is owned by the PLA's General Logistics Department. Its 999 Enterprise Group makes a popular gastric pain remedy.

The smuggling campaign appeared to give Jiang and his supporters in the PLA a politically convenient excuse to modernize the force and make its 2.9 million members more professional. "Who can argue that you shouldn't stop smuggling?" Gill said.

Smuggling - everything from oil to luxury cars and cigarettes - to evade high taxes has frustrated government efforts to set up capitalist-style free markets. Xinhua, citing an official from the General Administration of Customs, estimated that the illegal trade costs the government and enterprises as much as $12 billion a year in lost revenues.

Jiang and his allies may find it difficult, however, to separate the military from its enterprises. PLA morale is already sagging as bankrupt military businesses lay off employees, many of them officers' wives.

A decision last fall to cut 500,000 members from the military over three years, however, may smooth the transformation.