China's government will take more control over private companies

Discussion in 'Asia' started by kazenatsu, Nov 1, 2020.

  1. kazenatsu

    kazenatsu Well-Known Member Past Donor

    May 15, 2017
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    This is technically a "Communist" country, after all. So private companies don't necessarily have the right not to have their internal decisions controlled by government.
    This does mark a potential huge turning point from China's free market liberalization.

    It seems China wants to have the economic advantages of a free market while at the same time retaining direct political control over the economy.
    Basically capitalism without the freedom.

    Chinese President Xi Jinping and the Communist Party's Central Committee have laid out a plan for a 'new era' in which the party has better control over private business in China.

    The statement seeks to improve CCP control over private enterprise and entrepreneurs through United Front Work "To better focus the wisdom and strengthen of the private businesspeople on the goal and mission to realize the great rejuvenation of the Chinese nation."

    According to the new provisions, private firms will need a certain amount of CCP registered employees, which is already a long-term practice in large private firms but not smaller ones.​

    Supposedly this is to help coordinate a country-wide economic response to any issues.

    For those who may not be aware, only about 1 in 10 persons in the population are members of the CCP. And it's not really an "individual choice". (Not just anyone can get membership, while at the same time others like teachers in public schools and those in government jobs feel coerced to join)

    On September 15, the General Office of the Central Committee of the Chinese Communist Party (CCP) issued the Opinion on Strengthening the United Front Work of the Private Economy in the New Era, calling on the nation's United Front Work Departments (UFWDs) to increase CCP ideological work and influence in the private sector. This document is translated here as part of the Freeman Chair in China Studies’ ongoing efforts to provide important documents setting out the CCP’s aims and ambitions.

    Of important note, the opinion calls for UFWDs to "guide" private enterprises to “improve their corporate governance structure and explore the establishment of a modern enterprise system with Chinese characteristics." Xi Jinping has used similar language to signal an increased Party role in state-owned enterprises (SOEs). At a 2016 work conference, he called for establishing a "modern state-owned enterprise system with Chinese characteristics" and explained that what was meant by "Chinese characteristics" was "integrating the Party’s leadership into all aspects of corporate governance" and "clarifying" its legal status within the corporate governance structure. Around this time, hundreds of Chinese SOEs amended their corporate charters to codify a role for the Party in corporate governance - a requirement subsequently made binding on all SOEs under a January 2020 CCP regulation.

    It now appears that the Party intends for similar representation within private enterprises. In a speech last month (translated here), Ye Qing, Vice Chairman of the All-China Federation of Industry and Commerce, called for building a "modern private enterprise system with Chinese characteristics." According to Ye, this would include giving a company’s internal Party group control over the human resources decisions of the enterprise and allowing it to carry out company audits, including monitoring internal behavior. Echoing Xi's views on SOEs, Ye also called for the Party to clarify its role in the corporate governance structure of private companies. The Party's overall aim appears to be to ensure that a wide range of businesses are under the influence of the CCP and willing to work with it to achieve national strategic objectives.

    China’s efforts to formalize CCP control of its commercial sector will have significant ramifications for international trade, forcing more liberal market economies to decide how much state intervention they are willing to tolerate in their trading partners. It will also call into question many of the existing rules and assumptions underlying the multilateral trading order. The fact that China has released this opinion at a time of heightened U.S. scrutiny over the government's links to Huawei and TikTok suggests that China feels confident enough in its system that it is now prepared to advance and defend it on the global stage. ​
  2. a better world

    a better world Well-Known Member

    May 8, 2016
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    Meanwhile in the West we see increasing calls for corporations to institute social responsibility clauses in their business models
    ...because the "freedom/sovereignty of the individual' model of economic development is becoming increasingly dysfunctional and materializing as crippling hyper-partisanship in the 'blind-leading-the-blind' democracies.

    Correct. Unregulated free markets in which corporations are directed by individual self interested greed ALONE are destroying capitalism, as we see in the US.

    A very necessary step forced on the Chinese government, BECAUSE of the anti-free trade policies of the US determined to maintain its global hegemony. The disgraceful banning of Huawei as a result of paranoid Western "intelligence" concerns has had its effect in China.

    Certainly "socialism with Chinese characteristics" has demonstrated world-leading development over the last 4 decades; while the US is descending into a hyper-partisan social dystopia.

    Excellent policy, adapting capitalism so that national social development with increasing living standards for all is achieved alongside successful private enterprise activity.

    Given its success during 4 decades of economic growth, China does indeed feel confident enough to defend its interests on the global stage. And why not? The West has much to learn:

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