Teaching Comparative Government and Politics

Friday, August 25, 2017

Doing business in China (with the Party)

If a non-Chinese company wants to do business in China, it must have a Chinese partner. And it must have a Communist Party unit. And it must underwrite the costs of the Party unit. Must it also put Party members on its board of directors and give the Party power in making corporate decisions? (Corporate leaders are about as insistent on corporate independence or sovereignty as are Communist Party officials.)

Fears over China’s push to extend Communist Party’s reach inside foreign firms

Late last month, executives from more than a dozen top European companies in China met in Beijing to discuss their concerns about the growing role of the ruling Communist Party in the local operations of foreign firms…

President Xi Jinping’s efforts to strengthen the party’s role throughout Chinese society have reached the China operations of foreign companies, and executives at some of those entities don’t like the resulting demands they are facing.

The presence of party units has long been a fact of doing business in China…

One senior executive… said some companies were under “political pressure” to revise the terms of their joint ventures with state-owned partners to allow the party final say over business operations and investment decisions.

A major Chinese investor

He said the company’s joint venture partner was pushing to amend their agreement to include language mandating party personnel be “brought into the business management organisation”, that “party organisation overhead expenses shall be included in the company budget”, and that the posts of board chairman and party secretary be held by the same person…

The State Council Information Office, which doubles as the party spokesman’s office, said there was no interference by party organisations in the normal operating activity of joint venture or foreign-invested companies.

However, it added, “company party organisations generally carry out activities that revolve around operations management, can help companies promptly understand relevant national guiding principles and policies…

While plans to expand party organisations in foreign companies had been a quiet concern for several decades, only under Xi had “some real muscle” been put behind the goal, said Jude Blanchette, who studies the party at The Conference Board’s China Centre for Economics and Business in Beijing…

One country head at a major European manufacturer with a southern China joint venture said that late last year it allowed a party unit to meet on company premises – after hours.

The party unit asked for overtime pay to hold the meeting, which the company rebuffed…

A sales and marketing head in China for a major US consumer goods firm said its party cell had recently become more active, and had pushed for locating a new facility in a district where the local government was promoting investment, a move the company made.

Still, several executives with foreign companies in China said that the role of party units was benign and could help to resolve issues with officials…