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Why China is handing soldiers big payouts to retire quietly
By Bloomberg -

Xi Jinping meets with delegates during an inspection of the army’s headquarters on July 27. Photographer: Li Gang/Xinhua via Getty Images Xi Jinping meets with delegates during an inspection of the army’s headquarters on July 27. Photographer: Li Gang/Xinhua via Getty Images

Chinese President Xi Jinping is paying soldiers to leave the world’s largest army, and to do so quietly.
Military personnel have been getting generous buyouts to retire early, according to people with knowledge of the matter, a move that shows both the People’s Liberation Army’s importance to the ruling Communist Party and the hurdles facing Xi as he seeks to overhaul it.
Packages include severance payments worth tens of thousands of dollars and promises to keep paying some soldiers as much as 80 percent of their pre-retirement wages, said the people, who asked not to be identified because the plan hasn’t been publicly announced.
The buyouts are meant to speed Xi’s push to shed 300,000 troops from the 2.3 million-member military, the centerpiece of China’s biggest shake-up of the PLA since the early days of the Cold War. They also reduce the risk that demobilized troops end up disgruntled and on the streets, creating a new source of unrest at a time of slowing growth. Authorities have already ordered state-owned enterprises to hire former soldiers, in part to ensure “social harmony and stability.”
“Soldiers have a deterrent and destructive power once they unite to do something together, and they could cause some social stability issues easily,” said Yue Gang, a retired colonel who served in the PLA’s General Staff Department. “Soldiers are less adapted to society because they may not have the skills that the job market wants and not be familiar with workplace culture. And that’s why they need more support from the government.”
China’s defense ministry in Beijing didn’t respond to a faxed request on Friday for comment.
 Breakdown of changes to the People's Liberation Army
Softening the blow from job cuts has emerged as a key concern as the party shifts the economic focus from investment and manufacturing to innovation and services. The push threatens to exacerbate labor unrest amid China’s slowdown, with more than 1,450 worker actions recorded by Hong Kong-based activist group China Labor Bulletin in the first six months of the year, a 19 percent increase over last year.
How much the military buyouts will cost and what portion of the 300,000 demobilized troops are expected to qualify is unclear. The government plans to set aside as much as 100 billion yuan ($15 billion) to help resettle about 1.3 million coal workers and half a million steel workers.
Under the military plan, a senior colonel who agrees to do his own job-searching could be eligible for a one-time payment of about 1 million yuan, in addition to as much as 80 percent of his salary, according to the people with knowledge of the matter. Chinese media have reported that PLA officers earn between 4,000 yuan and 20,000 yuan a month.
While soldiers would have to serve at least 18 years to qualify for the four-fifths salary, the plan allows officers to factor in time spent at university, the people said. It also provides compensation for relocation. Ex-soldiers would be exempt from business and income taxes if they’re self-employed.
The buyout’s generosity underscores the special status of the PLA, which has been the ultimate guarantor of party rule since the country’s founding, crushing pro-democracy protests in Tiananmen Square in 1989. Those bonds make demonstrations or grievances involving former soldiers particularly sensitive to the government, and such issues are rarely discussed in public.
Xue Gangling, Dean of the China University of Political Science and Law, told a May 2013 seminar on military justice that protests involving ex-soldiers were among the country’s biggest potential risks to stability, Caixin magazine reported at the time. Xue said bureaucratic mismanagement contributed to an almost five-fold increase in such demonstrations annually between 2002 and 2004, rising to 140.
Mounting pressures
The troop cut is one of several pressures on the military as Xi transforms the PLA’s Soviet-inspired command structure and tries to make it a fighting force capable of projecting power further from China’s borders. He’s purged dozens of senior officers for corruption, securing a life sentence last month for former top general Guo Boxiong for accepting bribes.
Guo Boxiong in 2012.
The party’s People’s Daily newspaper said in a commentary Monday to mark the 89th anniversary of the PLA’s founding that the next round of military changes would "affect more troops with broader implications. It will challenge more vested interests and the reform process will be even more painful."
Xi, who also leads the party’s Central Military Commission, told a meeting in November that authorities must “provide special measures and favored policies to pro-actively help ex-soldiers settle down,” the official Xinhua News Agency reported. Local governments and Chinese companies have touted efforts to help mange any fallout from the restructuring.
Yizheng city, in the eastern province of Jiangsu, warned on its website last year that officials would be punished if ex-soldiers petitioned or demonstrated over grievances and caused “serious consequences and damage to social stability.” Chongqing said in February that about 90 percent of its more than 2,700 retired local soldiers were able to find jobs.
Didi Chuxing, China’s largest ride-hailing service, said the company had as of May trained 179,000 former soldiers to become drivers. The job pays as much as much as 10,000 yuan per month, said Zhang Bei, Didi’s head of policy research.