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China’s newly released 15th Five-Year Plan (2026–2030) proposal, unveiled after the Fourth Party Plenum in October 2025, not only marks Beijing’s quest to achieve the People’s Liberation Army’s  goal of building a so-called world-class military by 2049. As the last major planning cycle before the 2035 benchmark for “basically achieving full modernization,” the plan also reaffirms General Secretary Xi Jinping’s core priorities: operational efficiency, technological self-reliance, and the Chinese Communist Party’s absolute command.

Yet the release of this aspirational document coincided with several highly political events. Following a series of high-profile dismissals, days before the Plenum, Beijing abruptly purged nine senior military leaders, including Central Military Commission Vice Chairman He Weidong, signaling the instability at the core of China’s defense establishment. Officially framed as anti-corruption measures, the timing of these purges instead underscores the institutional problems that could complicate Xi’s modernization agenda.

While it remains too early to know how the next phase of reform will unfold, this moment offers a critical opportunity to assess the foundations laid over the past decade. The People’s Liberation Army’s reform prospects are far more complex than the public rhetoric and official projections of Beijing’s leadership would suggest. China’s military modernization and the high-profile purges accompanying it reflect not only tangible progress but also the deeper contradictions Xi has yet to resolve within his party-state system that incentivizes political patronage at the expense of bureaucratic professionalization and meritocratic governance.

To understand these tensions and how they might affect future reforms, it is necessary to examine the progress and current state of the two major priorities of the proposed Five-Year Plan: procurement reform and military-civil fusion. Despite visible achievements in advanced weaponry and organizational streamlining, reform remains limited by entrenched problems in the party-state system. Taken together, the dominance of opaque state-owned conglomerates, the persistent divide between military and civilian actors, and the absence of effective oversight expose the stubborn inertia of a system where political control continues to outweigh operational competence.

Procurement Reform and Military-Civil Fusion: A Decade of Effort

The significance of procurement reform and military-civil fusion should be understood within the broader context of the Chinese leader’s military modernization agenda. Immediately following the 15th Five-Year Plan proposal, Central Military Commission Vice Chairman Zhang Youxia outlined the People’s Liberation Army’s strategic priorities in a People’s Daily op-ed. Modernization was the dominant theme in both documents, which converge on two core tasks for the next phase of reform.

The first is modernizing military governance. Zhang specifically called for sweeping institutional and regulatory changes to improve efficiency and curb corruption. This involved an unusual emphasis on developing a more refined and disciplined procurement system — one that strengthens oversight, enforces fiscal discipline, and enhances transparency. This includes tighter budget controls, more rigorous acquisition mechanisms, and stronger supervisory mechanisms to root out the persistent corruption in major projects, a problem underscored by the high-profile purges.

The second task is deepening military-civil fusion which, as a part of “national strategic integration,”  seeks to link China’s economic and technological base directly to national defense. The Party envisions an integrated system that accelerates the development of strategic capabilities in emerging technologies. The goal is to merge “new quality productive forces” with “new-type combat capabilities,” blurring the line between civilian innovation and military power.

While Chinese state leaders since Deng Xiaoping have long sought to align military and civilian interests, Xi’s approach is distinguished by its unprecedented political centralization and a whole-of-government mobilization, emphasizing concrete actions over rhetoric to drive sustained institutional transformation. The reform blueprint was codified in the 2016 Opinions on the Integrated Development of Economic and Defense Construction and the subsequent Five-Year Plans, aiming to establish a party-directed, state-controlled, and market-oriented model.

These policies resulted in a major procurement overhaul. In 2016, the opaque and corruption-prone General Armaments Department — long responsible for research, development, and procurement — was dismantled. Its functions were redistributed across newly established organizations, most notably the Equipment Development Department and the Logistics Support Department, both operating under a more centralized management structure, while allowing the individual services to carry out acquisition programs. Meanwhile, the Science and Technology Commission was elevated to report directly to the Central Military Commission, granting it expanded authority to steer defense science policy and advance military-civil fusion.

These institutional changes were accompanied by a series of reforms in procurement process designed to boost efficiency, strengthen oversight, and deepen civilian participation in the defense sector. Key steps to this end included introducing official online procurement platforms to broaden competitive bidding, implementing pricing regulations for civilian contractors to standardize acquisition processes, and publishing military equipment catalogs to signal research and development needs and promote dual-use innovations. The People’s Liberation Army also moved to professionalize its military representative officer system,  the corps responsible for supervising civilian defense research and manufacturing, to  improve efficiency and reduce bureaucratic redundancy. Meanwhile, the government established more than 30 industrial demonstration bases by 2022, offering tax incentives, subsidies, and infrastructure support to encourage civilian firms to enter the defense supply chain.

These reforms have yielded visible results, particularly in research and development. The integration of civilian universities, private firms, and research institutes has enhanced the continuity of long-term dual-use technology development programs in AI, quantum science, aerospace, and cyberspace. The fruits of these efforts — including hypersonic glide vehicles; unmanned swarm systems; and sophisticated AI-enabled command, control, communications, computers, intelligence, surveillance, and reconnaissance — underscore the tangible dividends of Beijing’s approach.

Enduring Structural Problems and Contradictions Hindering Reform

Yet, these visible gains mask deeper, unresolved challenges. While the difficulties facing military procurement and military-civil fusion are not unique to China’s defense industrial base, the problems are stubbornly persistent there because they are fundamentally entrenched in the institutional fabric of the broader party-state system. These limitations manifest in three distinct but related areas.

First, China’s defense industrial base remains overwhelmingly dominated by 10 state-owned conglomerates, including giants like Aviation Industry Corporation of China and China Electronics Technology Group Corporation. These firms enjoy privileged access to state financing and political backing, effectively crowding out private competitors and stifling the innovation the reforms are supposed to cultivate. As Tai Min Cheung observes, defense state-owned enterprises “represent the Party’s institutional backbone but its economic bottleneck.”

Although Beijing has studied foreign models, including the U.S. defense industrial ecosystem, to foster competition and reduce inefficiencies, its implementation has been piecemeal and China’s defense sector remains firmly anchored to its state-owned giants across every critical domain. Furthermore, their executives hold powerful vice-ministerial ranks within the party-state hierarchy, giving them substantial influence over procurement authorities, often resulting in contracts with vague technical specifications, weak performance benchmarks, and flexible delivery timelines — all of which reduce accountability.

The costs of state-owned enterprises’ dominance are evident for their consistent underperformance in terms of efficiency and profitability. A 2024 Center for Strategic and International Studies study  found that Chinese state-owned enterprises among the world’s largest 500 corporations posted a return on total assets of just 1.2 percent, compared to 3.2 percent for Chinese private firms. Meanwhile, the expectation that they lead China’s effort toward technological self-reliance forces them to reduce reliance on foreign technologies while maintaining sectoral dominance. This contradiction has contributed to persistent delays and underperformance,  illustrated by the slow progress in improving turbofan engines for the J-20 stealth fighter. As China’s economic growth slows, the inefficiencies of its state-owned defense conglomerates are becoming increasingly unsustainable.

Second, despite years of party leadership rhetoric about “fusion,” the civil–military divide remains deeply entrenched as the country still lacks the institutional foundations for transparent, efficient, and mutually beneficial cooperation between the military and the private sector. Except for a few non-state-owned  giants like Huawei and ZTE, private participation remains limited due to entry barriers, including complex licensing, strict secrecy rules, and weak intellectual property protection.

By 2019, only about 2,000 civilian firms were approved as defense suppliers — a tiny share of China’s industrial base. Although the number has grown since, many so-called private firms in sensitive sectors like defense are, in practice, subsidiaries of state-owned conglomerates, blurring ownership and creating security risks. This structural issue was highlighted in 2024, when China Far East International Tendering Co. — marketed as a civilian contractor but in actuality a subsidiary of China Electronics Technology Group Corporation — was implicated in a major leak of classified information, while serving as a procurement agent for a unit of  the former People’s Liberation Army Strategic Support Force.

These systemic flaws have consistently fueled collusion and corruption scandals across both the military and its industrial partners. China North Industries Group Corporation, the army’s primary equipment supplier, has seen multiple senior leaders removed since 2021, forcing the company into “emergency management mode” and ironically, its temporary stabilization appears to have paved the way for its chairman to replace the disappeared Zhou Xinmin as head of the Aviation Corporation of China.

Most recently, the 2023–2024 purges of senior generals in the Equipment Development Department and the Rocket Force exposed entrenched corruption networks spanning research, development, and procurement. High-profile figures, including former Equipment Development Department director Li Shangfu (a Central Military Commission member) and the Rocket Force’s commander and political commissar, were dismissed alongside senior state-owned enterprises’ executives.

These overlapping military–industrial scandals confirm what Elsa B. Kania and Lorand Laskai describe as “the enduring opacity of China’s defense governance,” where anti-corruption campaigns serve more as political tools than solutions to systemic dysfunctions. Unsurprisingly, the 2020 Global Defense Integrity Index ranked China’s procurement score at 24, placing it in the “critical risk” category, well below the Asia-Pacific average of 48, which falls within the “moderate risk”’ range.

Third, China’s oversight mechanisms remain too weak and opaque to enforce meaningful accountability. Even after the 2016 reforms created new supervisory structures under the Central Military Commission, service-specific equipment departments still struggle to monitor procurement effectively without independent legislative oversight. Despite new guidelines and anti-corruption initiatives led by procurement and acquisition authorities, the Central Military Commission continues to flag cases of officials skirting guidelines. Transparency remains limited across the procurement cycle — especially for major weapons contracts — and almost no information is publicly released on contract implementation. While three-year development cycles are normally set for key projects and two-year cycles for general projects, procurement timelines themselves are unpublished. The core problem, in short, is not the absence of rules but the absence of external checks strong enough to enforce them.

These oversight shortcomings reflect deeper capacity gaps. As part of the 2016 reforms, the individual services subordinated their Military Representative Offices under service equipment departments to oversee contract management, production, and after-sales support in the civilian sector. However, chronic shortages of personnel and technical expertise hampered their ability to fulfill their expanded mandates, leading to high workload and rapid turnover.

To cope, the military began shifting the system toward civilianization. By 2022, uniformed military contract civilians comprised roughly 80 percent of representatives, which are now the majority across several key equipment development and procurement programs. While this shift eased pressure on active-duty officers, it introduced new risks. Many recruits come directly from the private sector and lack proper understanding of military protocols and security procedures. Even state media has called out this problem, saying that civilian representatives require  significant “retraining”  in “military and political foundations” to carry out effective oversight. These weaknesses are especially acute in representatives serving in private firms because their host organizations lack the influence of state-owned enterprises and a full understanding of military-related regulations and coordination processes.

The challenges in these three areas reveal a deeper paradox: the party’s controlling approach generates the very inefficiencies it aims to eliminate. Xi’s anti-corruption and loyalty campaigns consolidate political authority but stifle the risk-taking and professional autonomy essential for building a modern, innovative military. As Cheung notes, the “promise and peril” of China’s military modernization lie in this contradiction, an effort to fuse innovation with obedience that may ultimately achieve neither.

Moreover, China now faces growing external constraints on one of military-civil fusion’s most successful accomplishments: acquiring foreign technology. For decades, much of China’s advanced weaponry depended on single-source or foreign-supplied systems — primarily from Russia — which limited the quality and pace of modernization. Xi’s reforms sought to diversify these external inputs through technology transfers, joint ventures, and, at times, illicit procurement.

But the strategic environment has shifted dramatically. The United States, Japan, the Netherlands, Germany, and the United Kingdom have all tightened export controls, expanded investment screening, and increased scrutiny of academic and commercial partnerships linked to the People’s Liberation Army. Since 2020, numerous military-civil fusion entities have been sanctioned or blacklisted under the Department of Defense’s Section 1237 authority, sharply restricting their access to dual-use and frontier technologies. These mounting external pressures could further expose the unresolved weaknesses of its defense industrial base.

Looking Ahead: What to Watch in the Next Phase of Reform

Since Beijing prioritizes strategic mobilization and systemic resilience over free-market efficiency, bureaucratic redundancies may serve as deliberate tools designed to ensure party control and rapid coordination during crises. However, frictions between maintaining rigid control and achieving operational efficiency will intensify as China’s economic growth slows. As the fiscal resources that previously cushioned structural inefficiencies dwindle, Beijing faces a mounting challenge of affording the high cost of those mechanisms it deems essential for its defense policy. This economic stagnation may eventually force a destabilizing choice between ideological grip and the material requirements of those priorities.

Looking ahead, the new policy planning cycle will test whether Beijing can deliver genuine reform or simply repackage existing hierarchies in new bureaucratic language. Three developments merit close attention.

First, the evolution of legal frameworks is critical. While Zhang underscored the need to address planning shortfalls and the outsized influence of state-owned enterprises, it remains unclear how far Beijing will enact enforceable rules and allocate the resources necessary to hold contractors accountable, especially given that the draft Military-Civil Fusion Development Law has circulated since 2018 but remains unpublished. Meaningful reform would require loosening the party’s administrative grip, an unlikely move under Xi’s tightening political control.

Second, the scope of private-sector participation remains a hurdle. While injecting genuine competition would spur innovation, this challenges the dominance of state conglomerates that Xi regards as the “pillars of the national economy.” Without shifting procurement practices from political patronage to performance-based contracting, the military’s modernization drive will remain more bureaucratic than market-driven.

Finally, Beijing should navigate intensifying external constraints. While these pressures have already compelled China to adapt through diversified sourcing, gray-zone procurement, and indigenous innovation — yielding notable successes in areas like AI, semiconductors, and biotechnology — such strategies may face diminishing returns when sanctions and export controls tighten. A pure self-reliance approach risks high inefficiency and costly duplication without international collaboration. Ultimately, the success of the 15th Five-Year Plan hinges on Beijing’s ability to balance strategic insulation with the global integration necessary for sustained modernization.

Jessica C. Liao is an associate professor of Asian Studies in the Department of National Security and Strategy at the U.S. Army War College. Previously, she was an associate professor of political science at the School of Public and International Affairs at North Carolina State University. She also served as the 2020-2021 Wilson China Fellow. In 2022, she served as an economic development specialist at the U.S. Embassy in Beijing, where she focused on China’s external engagement with Belt and Road Initiative countries.

Joshua Arostegui is the chair of China Studies and research director of the China Landpower Studies Center at the U.S. Army War College Strategic Studies Institute. His primary research topics include Chinese strategic landpower, People’s Liberation Army joint operations, and Indo-Pacific security affairs. He previously served as a senior intelligence analyst at the U.S. Army’s National Ground Intelligence Center.

Disclaimer: The authors’ views expressed here are personal and do not reflect the official policy or position of the Department of the Army or any U.S. government entity.

Image: China News Service via Wikimedia Commons