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Thu, Jan 27, 2005 - Page 12 News List

China increases party's role in state-run firms


In an apparent step backward from Western-style capitalist reforms, China has ordered a more active role for Communist Party officials in managing its state-controlled companies.

Although Chinese corporations increasingly are modernizing management and seeking to meet international standards as they invest and issue shares overseas, party officials still call the shots in many strategically important industries.

A slew of financial scandals and corruption cases has prompted authorities to announce even tighter controls: A document issued last weekend spells out the role party members inside big corporations should play in company management, including serving as board members and choosing key executives, state media reports said.

"The party's never really gotten out of business," says Bob Broadfoot of the Political and Economic Risk Consultancy in Hong Kong.

He noted that one sign of the party's determination to keep a strong say in management came last year, when the government ordered top executives at three major telecom operators -- China Mobile (Hong Kong) Ltd, China Unicom Ltd and China Telecom Corp to swap jobs.

"That was a party shake-up, not a simple industry shake-up," Broadfoot says.

The latest guidelines call for all state companies to have party committees and ensure their "normal activities," the official Xinhua News Agency reported.

The report said the key goals are "increasing China's integrated national strength and consolidating the party's ruling status."

In the past few years, the party has courted entrepreneurs, breaking from its traditionally negative attitude toward business to appoint scores of executives to legislative and advisory positions.

But recently efforts have turned to cleaning up corruption and dodgy dealings at 181 major companies under state control, with officials complaining that many corporate managers have been caught misusing power, embezzling assets or taking bribes.

It is unclear how boosting the party's sway over decision making will help ensure cleaner corporate management, given the rampant levels of corruption within the party itself.

A continual campaign against abuse of power and other forms of corruption appears to have made little headway in the absence of reforms to strengthen the party's accountability.

The newly issued guidelines allow the top party official inside a company to serve as chairman of the board of directors, if qualified. But they note that in principle the two positions should be filled by different people.

Party committees are also ordered to help protect workers' rights and ensure "democratic management," the rules say, without giving details.

China had 150,000 state enterprises by the end of 2003. Most are controlled by local or provincial governments, with only the largest and most strategically important falling under central government control.

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