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Keeping watch on overseas M&A by Chinese state companies

Greater awareness of role in military modernization plans critical

| China
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Military aircraft manufacturer Aviation Industry Corp. of China has been allowed to buy several U.S. companies despite Congressional concerns.   © Reuters

Beijing's military modernization policies are blurring boundaries between defense initiatives and the overseas commercial activities of Chinese state-owned enterprises. This presents new challenges for foreign policymakers evaluating the impact of Chinese investment in their countries. Foreign companies, unaware of China's military modernization plans and the role SOEs play in state defense initiatives, may be supporting the advancement of the country's military hardware, including fighter aircraft and naval ships.

Since taking the helm as China's paramount leader in 2012, President Xi Jinping has rolled out a national strategy known internally as military-civil fusion, or in Chinese, junmin ronghe. The strategy aims to meld the country's defense and civilian industrial bases to develop a technologically advanced, self-reliant and internationally relevant defense industrial complex.

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