A proposed change by the China Securities Regulatory Commission (CSRC) that would require listed companies to set up a Chinese Communist Party (CCP) unit is a step back to the era of the Cultural Revolution, a China-based Taiwanese business consultant has said.
The commission on Friday released guidelines aimed at improving corporate governance at publicly listed companies, including a requirement to establish a CCP unit inside a company to carry out party activities as a condition for a company seeking to list on a Chinese stock exchange.
The revised rules require listed companies to “beef up the work of party building and shoulder more social responsibilities, such as contributing to a better ecological system and helping the poor,” the commission said in the statement on its Web site, while seeking comment from the public.
Asked about the proposed rule changes, a Taiwanese business consultant based in Shanghai, who spoke on condition of anonymity, said that the commission already has regulations in place requiring large enterprises to set up a CCP unit companies.
Foxconn Technology Group (富士康科技集團), for example, has set up a CCP chapter, the consultant said.
However, the old rules did not require the establishment of a CCP unit as a condition for a company to be listed.
If the new rules are implemented, foreign companies that want to list on Chinese equity markets would have to set up and run a CCP organization in their companies, the consultant said.
The new provision “makes us feel like we are returning to the Chinese Cultural Revolution,” the consultant said.
The new rules might not scare away foreign investors, because of the huge benefits of listing their companies in China, the Taiwanese said.
However, some analysts said beefing up “party building” at listed companies, a reference to studying the party’s theories, conducting social activities in line with party doctrine and making rules along party lines, could be seen by some overseas investors and analysts as having the potential to causing conflicts with shareholders.
In addition, China is under pressure to boost corporate governance at listed firms as the inclusion of mainland stocks in the MSCI’s emerging markets benchmark on June 1 has put its stock market in the global limelight.
Additional reporting by Reuters
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