A little bit of truth, mixed with a lot of baloney.
Harbor Freight is owned by an American Citizen by the name of Eric Smidt, of Camarillo Ca. He is not chinese, or a front for the Chinese Army- he is an old fashioned capitalist, and just a couple of years ago, he spent $46 Million on a house in Beverly Hills. If the Chinese really owned Harbor Freight, they wouldnt have wasted all that money on frippery like that. He also gives away money to charities like the Childrens Hospital of Southern California, and what I presume is his alma mater, USC.
As for the ownership of Chinese companies- thats a bit murkier. There are indeed many companies in China that are owned by branches of the Peoples Army. But they are real businesses, and you damn well better make a profit, or they get shut down. The direct day to day control by the government is pretty tenous. In fact, there have been several cases where one arm of the Chinese Government will try to shut down an activity of another arm- its far from being a big, monolithic conspiracy over there.
The big shots in the army can easily have their own little fiefdoms, with factories controlled by one General, who reaps the lions shares of the profits. Corrupt, yes. Supporting the government- well, only slightly- a lot of the "profits" goes into new Mercedes 500's, Country house up by the Great Wall (I kid you not- its a big industry building second homes with a view of the Great Wall) and buying all kinds of luxury goods. China is the fastest growing market for all kinds of luxury goods- Ferrari sold over 150 cars there last year, its Rolls Royce's third largest market, and Gucci and Louis Vuitton are raking in the dough there.
Capitalism has landed hard, with both feet, in China. The government will still throw you in jail for complaining, or trying to change things, but making money, by owning a factory, is AOK with them. Just keep your mouth shut.
Harbor freight buys from hundreds of factories- and some are undoubtedly government owned. And lots are not. I just read an article by the editor of American Machinist magazine, who, while in Bejing for a trade show, shared a cab with an engineer whose company sells Harbor Freight $2 Million dollars a year worth of cheap blue hand power tools. And he was NOT in the army.