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 Chinese Communist Party (CCP) in the local operations of foreign firms, according to three people with knowledge of the discussions.
Chinese President Xi Jinping’s (習近平) 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 do not like the resulting demands that they are facing.
The presence of party units has long been a fact of doing business in China, where party organizations exist in nearly 70 percent of about 1.86 million privately owned companies, the official China Daily reported last month.
Illustration: Constance Chou
Companies in China, including foreign firms, are required by law to establish a party organization, a rule that had long been regarded by many executives as more symbolic than anything to worry about.
One senior executive, whose company was represented at the meeting, 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.
He said that the company’s joint venture partner was pushing to amend their agreement to include language mandating that party personnel be “brought into the business management organization,” that “party organization overhead expenses shall be included in the company budget” and that board chairman and party secretary posts be held by the same person.
Changing joint venture agreement terms is the main concern, the executive said, adding that his company had thus far resisted.
“Once it is part of the governance, they have direct rights,” he said.
The Chinese State Council Information Office (SCIO), which doubles as the party spokesman’s office, said in a faxed statement that there is no interference by party organizations in the normal operating activity of joint venture or foreign-invested companies.
However, it added, “company party organizations generally carry out activities that revolve around operations management, can help companies promptly understand relevant national guiding principles and policies, coordinate all parties’ interests, resolve internal disputes, introduce and develop talent, guide the corporate culture and build harmonious labor relations.”
“They are widely welcomed within companies,” the SCIO said.
MAJOR DECISIONS
Of the 13 executives interviewed, all from different foreign companies, eight expressed concerns about increasing demands from the CCP or noted increased activity from party groups. They all spoke on the condition that they and their companies not be identified given the sensitivity of discussing relations with the party.
Just two of 20 major multinationals queried — Samsung Electronics Co Ltd and Nokia Co — confirmed having party units in their China operations. Most did not respond to questions on the subject.
Only German chemicals giant Bayer AG acknowledged participating in the meeting organized by the EU Chamber of Commerce in China, but declined to comment on what was discussed.
Carl Hayward, general manager and director of communications at the European Chamber’s Beijing chapter, acknowledged the meeting was held to “understand from our members if party structures are being formally introduced into the governance of joint ventures.”
“We have not noted any formal change of policy that reflects this. This is as we would expect since such a change would act as a deterrent to foreign investment in China,” he said.
‘REAL MUSCLE’
Under Xi, the party has sought to address the “weakening, watering down, hollowing out and marginalization” of party leadership at state enterprises, the People’s Daily wrote in June.
The paper cited an official with state-owned oil giant Sinopec Corp as saying the company had demanded all its foreign joint venture partners “specify the requirement for party-building work” in their articles of association.
While plans to expand party organizations in foreign companies have been a quiet concern for several decades, only under Xi has “some real muscle” been put behind the goal, said Jude Blanchette, who studies the CCP at The Conference Board’s China Center for Economics and Business in Beijing.
A significant number of major foreign companies operate in China through joint ventures with state enterprises. Foreign business groups have complained that their members are forced to allow Chinese partners access to their technology or risk losing market access.
Many Chinese state enterprises listed on the Hong Kong stock exchange have this year altered their articles of association to give an explicit role to internal party committees.
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.
However, then it also demanded the company hire more party members and even tried to weigh in on investment decisions.
“That’s when we said this is a no-go zone. We didn’t anticipate that they would discuss investment decisions,” the manager said.
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. A party member at a US-based Fortune 500 company in Shanghai said her firm’s unit was not involved in business matters and instead engaged in activities such as planting trees and sponsoring children.
“They will give you some tickets to see movies together. When the State Council has a meeting and there’s some news, they will send bullet points by e-mail,” she said.
Additional reporting by John Ruwitch, Adam Jourdan, David Stanway, Brenda Goh, Jiang Sijia, Matthew Miller and Chen Aizhu
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under