Downsizing the PLA, Part 2: Military Discharge and Resettlement Policy, Past and Present

Note that this is Part 2 of a two-part series on the PLA’s planned personnel cuts. Part 1 can be found here.

Part 1 of this series examined the mechanisms for downsizing the PLA by 300,000 personnel, including two-year enlistees, noncommissioned officers (NCOs), and officers before they meet their mandatory retirement age. The article described what benefits each officer and enlisted member is entitled to based on their grade and years of service. Part 2 assesses the PLA’s ability to carry out the force reduction from 2.3 to 2.0 million (about 11 percent of total PLA strength) by the end of 2017. Can national level or local governments and state-owned enterprises (SOEs) find jobs for all the downsized personnel entitled to an equivalent civilian government or SOE position? Has the central government allocated enough resources to pay legally mandated benefits and pensions? Most importantly, will sending a large percentage of downsized personnel back to their home provinces have a negative impact on social stability?

Current conditions in China exacerbate the challenges of executing the force reduction. After decades of rapid growth, China’s economy is slowing to a “new normal” of 6–7 percent growth (The World Bank, August 11). The government is embarking on “structural reforms” to reduce overcapacity in the steel and coal sectors, potentially shedding millions of jobs, many in the economically depressed Northeastern rust belt (Xinhua, July 11). These circumstances will complicate efforts to implement the current and any future PLA force reductions, and the contours of the actual downsizing could aggravate tensions between local governments and the PLA. However, the troop reduction is unlikely to generate a “perfect storm” of social instability that could immediately threaten Communist Party rule.

Does China Have Enough Resettlement Capacity?

According to the 2001 Provisional Measures for Resettling Transferred Officers [军队转业干部安置暂行办法] and 2011 revisions to the Enlisted Personnel Resettlement Regulations [退役士兵安置条例], discharged NCOs with more than 12 years of service, division-leader grade officers with less than 30 years of service, and battalion-leader grade officers or lower with less than 20 years of service are entitled to civilian jobs with equivalent pay and benefits. [1] The process of finding jobs for personnel that leave the PLA before their mandatory retirement age based on their grade is broadly referred to as resettlement [安置]. Can local governments and SOEs find positions for all these personnel? [2] Officer resettlement statistics from past years suggest that officer resettlement this year will be difficult but not unprecedented. A 2013 Caixin article noted that from 2008 to 2012, the number of resettled officers that transferred to civilian positions in all of China numbered anywhere from 39,000–56,000 during years when the PLA was not carrying out announced downsizing. A Beijing Daily article reported that 77.5 percent of the 40,000 officers resettling in 2014 chose to transfer to civilian positions (Caixin, April 27, 2013; Beijing Daily, September 4, 2015). With officers making up at least half of the 300,000-man reduction, at least 150,000 officers will leave the PLA in the 24-month period from January 2016 to December 2017 (China Youth Daily, June 13). Assuming that percentage holds and none of the 150,000 downsized officers choose full retirement, local governments could expect 116,350 downsized officers to transfer to civilian government or SOE jobs, or about 58,125 officers per year. [3] These figures are roughly consistent with a recent government announcement that the 58,000 PLA and People’s Armed Police (PAP) officers would be resettled in 2016 (PLA Daily, September 1). These are daunting figures for local governments, but not necessarily unworkable ones.

The above calculations do not fully capture the scale and logistical difficulty of downsizing and resettlement. The statistics above represent the reduction in billets required for the PLA to reach its desired end strength of 2 million. The PLA will likely reduce by more than 300,000 personnel to account for new enlisted and officer intake, further straining the PLA bureaucracy charged with reviewing civilian transfer applications and coordinating resettlement. The resettlement burden could increase substantially should the PLA reduce more than the stated 150,000 officers. The figures above do not account for the approximately 150,000 downsized enlisted personnel; resettlement statistics for eligible senior NCOs are scarce, and without more detailed information, the scale of the NCO resettlement problem remains extremely difficult to estimate.

On the whole, finding civilian government and SOE jobs for the numbers of downsized officers and senior NCOs will present a significant but likely manageable challenge for Chinese authorities. This will prove more difficult in localities already undergoing economic distress, and resettling NCOs could amplify these difficulties, although the lack of resettlement statistics for NCOs makes it difficult to draw conclusions on the severity of the problem. The information available on officer resettlement shows that the amount of officers that must be given civilian government jobs does not appear to be dramatically higher than the historical figures from recent years, suggesting that resettlement capacity will be strained but not overwhelmed over the course of the downsizing.

What Might Troop Reduction Cost?

The same laws that govern PLA personnel discharge options also specify one-time separation allowances and on-going full or partial pensions for retirees, officers and NCOs who undertake to find their own jobs outside the military, and personnel disabled as a result of their service. The Ministry of Civil Affairs is responsible for providing local governments the resources to make these payments. During the March 2016 National People’s Congress, the government pledged to spend nearly 40 billion RMB ($6 billion) on personnel discharge expenses, including vocational education subsidies for enlisted men and resettling disabled enlisted men and retiring military personnel, representing a 12.7 percent increase over last year (PLA Daily, March 9). Some commentators have argued that the announced expenditure is insufficient—Retired PLA General and military commentator Wang Hongguang (王洪光) estimated that a sum of at least 60 billion RMB ($9 billion USD) would be required for downsized officers alone, even if most of the officers elected to participate in independent job selection (Global Times, March 7). Back-of-the-envelope calculations suggest that the troop reduction will incur a hefty bill, and that Beijing may not have allocated sufficient funds to the effort.

The individual-level costs of downsizing are potentially enormous. The PLA and the central government must account for the costs of both pension payments and one-time buyouts, all based on rank, duty-grade, and time in service of the downsized personnel. One-time buyouts alone could amount to hundreds of thousands of RMB per soldier per year. Though current official information on the exact pay of PLA officers is scarce, one Global Times article reported that an Army second lieutenant [少尉] (platoon leader grade) is paid roughly 3,000 RMB ($450) a month, while a lieutenant colonel [中校] (regiment leader grade) is paid approximately 5,000–6,000 RMB ($750–900) a month (Global Times, January 19, 2015). Based on this information and the regulations outlined in Part 1 of this article, one-time payments alone could range from 11,750 RMB ($1,760) for a conscript to over 216,000 RMB ($32,335) for an officer participating in independent job-search. These payments could be larger if more high-level NCOs and officers are downsized, possibly reaching 56,000 RMB ($8,340) per NCO and 440,000 RMB ($65,900) and up for lieutenant colonels and higher. Factoring in 80 percent, partial pensions for independent job-seekers and full pensions for retiring officers would further drive up the costs of the force reduction.

The aggregate costs of downsizing can accumulate rapidly. If 150,000 officers are downsized, with 77.5 percent choosing civilian transfer, and no retirements—Chinese authorities would have to resettle some 116,250 officers into civilian positions and dole out one-time job-search payments for 33,750 others. The one-time payments alone for such a downsizing would amount to nearly 9 billion RMB ($1.35 billion) at a minimum, and would increase to some 40 billion RMB ($6 billion) if only higher-level officers were downsized. [4] These rough calculations do not include payments for downsized NCOs and conscripts, partial pensions for eligible officers, pensions for retiring officers, compensation for disabled personnel, or the sundry benefits discharged PLA personnel are entitled to—all factors that will significantly inflate the total cost of the troop reduction.

Neither the low nor the high estimates represent realistic troop reduction scenarios, but they put the budget figures cited by the Chinese government and Wang Hongguang into context. The 40 billion RMB ($6 billion) expenditure announced by the Chinese government appears to impose some constraining financial parameters on PLA and civilian planners. Several factors could inflate the cost of the downsizing beyond the relatively conservative estimates explored here. Demobilizing more than 150,000 officers or a disproportionate number of higher-ranking officers could further raise costs. The number of disabled and retiring veterans included in the downsizing will likely increase costs both in the immediate and in the near future. The rough tabulations and considerations discussed here indicate that the government’s apparent largesse in veteran spending is not as generous as it initially appears.

Will the Troop Reduction Cause Social Instability?

The potential for the downsizing to create social instability is probably the single weightiest concern for the Chinese government. [5] Authorities have some reason for wariness: veterans complain that state-owned companies often renege on promised benefits and local officials embezzle funds meant for veterans. Lack of official response has even prompted a number of prominent public protests over the last year. In October, more than 1,000 veterans gathered outside the Ministry of Defense to call for the full payment of benefits. In July, 4,000 veterans assembled at the offices of the Central Military Commission (CMC) for the same reasons (The Wall Street Journal, April 26; New Tang News, July 18). [6]

The troop reduction will inevitably increase tensions between local governments and the central government and the PLA. Official media writings acknowledge these difficulties, noting that local governments will bear the heaviest burden of finding jobs for transferred officers and emphasizing the importance of alleviating this pressure (China Youth Daily, March 3). The requirement that downsized personnel return to their home provinces virtually ensures that the troop reduction will impact Chinese provinces unevenly, as local governments in economically depressed regions of China will be charged with finding jobs for discharged personnel. This could be harder if the PLA decides to cut large numbers of higher-ranking officers, who are entitled to scarce high-paying jobs.

Though the potential implications for social instability are serious, a number of factors could mitigate the problems of the ongoing troop reduction. Expertise gained from past troop reductions, general demographic characteristics of the downsizing, and the government’s active efforts to strengthen supervision of veterans’ affairs may help attenuate the difficulties of the current troop reduction effort.

First, the PLA and the Chinese government have extensive experience managing troop downsizing, with at least 11 large force reductions since 1949. Past reductions have been much larger and were accomplished in part by transferring personnel to the People’s Armed Police (PLA Daily, November 18, 2015; China Brief, March 24). Recent downsizing efforts were similar in size, scale, and method to the current downsizing. For instance, the 1997 troop reduction cut 500,000 troops over three years, and the most recent troop reduction in 2003 downsized 200,000 troops over two years (PLA Daily, November 18, 2015). Though historical experience is no guarantee that Chinese authorities will successfully navigate the ongoing downsizing, both the PLA and the relevant civil authorities have gained substantial insight into the possible problems associated with large troop reductions.

The demographics of the downsizing may also be less problematic than it initially appears. Though dissatisfied veterans might pose a political risk for China’s leaders, they may constitute a relatively small percentage of downsized personnel. Officers transferred to civilian jobs should be mollified by a position with equivalent pay and benefits, while retired officers can expect extensive benefits and a full pension. The biggest losers of the downsizing will be those officers that choose independent job-searching but subsequently have difficulty finding work on their own. Statistics from 2014, however, indicate that only 22.5 percent of the discharged officers choose independent job-search, amounting to an estimated 11,600 to 13,000 officers per year during the downsizing (Beijing Daily, September 4, 2015). This is no small figure, but authorities have already stepped up efforts to help these officers find employment by organizing conferences and teaching entrepreneurship skills (PLA Daily, August 9). The government also announced the “Four Relaxations” [四个放宽], loosening regulations on resettlement location, time in service for civilian transfer and independent job-search, and hardship posting eligibility in order to ease the burden of resettlement (PLA Daily, September 1).

The transfer of PLA personnel to state-owned enterprises (SOEs) may also prove less painful than speculated. Statistics from past years suggest that only 1.5 to 2 percent of eligible officers are placed into SOEs, totaling 1,162 officers per year for the current troop reduction. Past economic reforms split SOEs into public and commercial categories, with several “strategic” industries kept under strict government control that will face a strong mandate to find jobs for discharged PLA personnel (Beijing Daily, September 4, 2015; Ministry of Finance, December 30, 2015). Though the percentage of enlisted personnel transferred to SOEs is unknown, the government has reportedly made accommodation for enlisted personnel, announcing that 5 percent of jobs at SOEs would be reserved for downsized soldiers (Reference News, December 30, 2015).

On a broader level, the central government and the PLA have undertaken several steps meant to strengthen supervision of veterans’ affairs and eliminate corruption in the system. An October 2015 report indicated the PLA is considering establishing an independent body responsible for veterans’ affairs (China Daily, October 9, 2015). The PLA’s recent organizational reforms dismantled the four general departments that previously handled veterans’ affairs for themselves, and placed the newly formed Organ Affairs General Management Bureau [中央军委机关事务管理总局] in charge of veterans’ affairs under direct CMC supervision (PLA Daily, April 20). [7] Changes in military discharge policy covered in Part 1 of this article have expanded and codified benefits for discharged personnel, and current policy allows the central government to simply assign officers to jobs outside their home province if necessary (News of the Chinese Communist Party, January 19, 2001). Pronouncements from the highest levels of China’s leadership warn against contravention of discharge and resettlement policy (People’s Daily, December 28, 2015; Beijing Daily, July 15). Xi’s ongoing anti-corruption campaign continues to apprehend corrupt officials, and may have a deterrent effect on administrators that misappropriate veterans’ benefits.

Conclusion

The PLA and the relevant civilian agencies are aware of the potential negative impact on morale and social stability and have worked hard to anticipate and ameliorate problems from past force reductions. Expanding and increasing benefits to demobilized conscripts, providing more exit opportunities to NCOs in the form of education stipends, and clarifying the civilian transfer process for officers all represent calculated efforts by the Chinese government to soften the negative impact of force reductions on discharged personnel. These efforts are being put to the test by the latest round of troop downsizing.

The availability of better (or even basic) statistics would enable PLA and China watchers to study the effects of personnel reduction with much greater fidelity. Information on PLA officer pay scales, updated numbers of conscripts, NCOs, and officers in the force, percentage of officers that retire, records of resettlement of officers by province, and numbers of positions available for civilian transfer would shed more light on a topic Beijing has intentionally said little about. Further research on military housing policy and hukou regulations for downsized personnel would illuminate the geographic contours of the resettlement problem in better detail.

Nonetheless, an examination of Chinese discharge and resettlement processes yields important insights into the prospects for a successful PLA force reduction. Tensions will be most aggravated in the localities hit hardest by the economic downturn that face underfunded mandates to find jobs for discharged PLA personnel. Challenges such as increased costs are serious but solvable: the government would likely find the monetary resources needed to make military discharge and pension payments if serious threats to social stability emerge. Furthermore, recent veteran protests appear to be aimed at eliciting central government pressure to rectify local injustices and protect veterans’ rights, rather than directing dissatisfaction at the Communist Party and the central government (New Tang News, July 18). Even if social instability rises to a level that requires suppression, the Chinese internal security apparatus has amply demonstrated its ability to stifle any substantial disruption of social stability. The Party’s ability to control, co-opt, coerce, or otherwise suppress dissent is well-documented by past incidents and verified by the Party’s continued rule.

The biggest challenge will be finding civilian positions for discharged personnel in poorer parts of China. Failure on this front could exacerbate tensions between the PLA and local governments, and more importantly, between the PLA and a Communist Party obliged to care for its military. For the moment, this challenge does not seem to be a severe threat to Party rule. The above analysis suggests that the PLA and the Chinese government are well-positioned to mitigate the difficulties that might arise from the force reduction, in spite of a slowing economic growth rate and increased competition for private-sector jobs.

John Chen is a research intern at the National Defense University. The author would like to thank Dr. Phillip C. Saunders, Dr. Joel Wuthnow, David C. Logan, Dennis J. Blasko, and Ken Allen for their invaluable insights and generous assistance. The views expressed in this article are the author’s alone and do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

Note
1. See Figure 2 in Part 1 of this series for an overview of military discharge and resettlement policies.