On September 23, 1986, PRC's military attachés eye-witnessed a West-German live fire exercise. One can only imagine how they felt seeing one of the most lethal armies in the world in action. PLA was in a poor state back in the 1980s -- starting in 1978, Deng Xiaoping reduced PLA's budget to the minimum, PLA had to support its "modernization" effort by converting part of industries to civilian production and increasing arms export to anyone that was interested. The resulting corruption, abuse, and low troop morale was expected, but it was a gamble Deng was willing to take. For some, the inadequately funded military in the 1980s proved to be the right decision. China was broke after years of mismanagement and the limited resources available were rightly channeled into the civilian sector.
PLA's deteriorating situation was brought under control in 1991 when the official budget was increased to cover necessities in addition to funding new weapons and training requirements. The PLA was ordered to abandon much of its civilian business and to refocus on national defense in due course. (Tiananmen and the 1st Gulf War also helped PLA's case for a greater share of the national budget)