The plan would allow military research institutes to be incorporated into state-owned enterprises.The policies, being drafted by the Ministry of Finance and other agencies, could be released as soon as next month. The changes fit with the Communist Party’s pledge to give markets a bigger role in the allocation of resources. By weaning the weapons developers off state funding, China may also be able to cultivate more innovative defense companies that can fill the military’s technology gaps,

President Xi Jinping has made a modern, combat-ready military a priority. After the government announced a 12.2 percent rise in defense spending for this year, Premier Li Keqiang said last month that China will boost research on the development of new and high technology weapons. The Ministry of Industry and Information Technology said in December that China will promote the two-way transfer of military and civil technologies and overhaul the shareholding system of military enterprises.