China's state influence creeping into business

China's capitalists are getting on board as the state has taken on a bigger role in picking winners and a harder line against those seen to be defying the party's aims.
China's capitalists are getting on board as the state has taken on a bigger role in picking winners and a harder line against those seen to be defying the party's aims. PHOTO: AFP

Foreign firms urged to invite party cells in, plan for govt to buy into tech, media

BEIJING • Chinese billionaires are boasting about their Marxist bona fides. The Communist Party is tightening its grip on state-owned companies. And foreign companies are being asked to invite party cells into their offices.

Under President Xi Jinping, the country's ruling party is muscling back into business, expanding its reach in private enterprise and even laying out a plan for the government to take stakes in high-profile tech and media companies.

With a stronger mandate after receiving a second term as head of the party last Wednesday, Mr Xi plans to deepen control in "all areas of endeavour in every part of the country", as he told leaders in a 31/2 hour speech last week.

Last month, the Chinese Communist Party (CCP) released a new document on entrepreneurship, calling in part to strengthen teaching of "socialist core values" to the new generation of entrepreneurs. It is a significant change for the CCP, which has long had a fraught relationship with the business world.

Since kicking off economic reforms in the late 1970s, Beijing has allowed private enterprises a free rein in many sectors, while slowly loosening its grip on the state-owned sector, which comprises "strategic" industries such as steel and telecommunications.

"Key technology used to be controlled by state-owned companies and the party focused on those companies," said Mr Mark Natkin, managing director at technology consultancy Marbridge Consulting. But "as private enterprise has grown stronger and become heavily woven into society, there is greater desire by the party to be involved".

China's capitalists are getting on board as the state has taken on a bigger role in picking winners and a harder line against those seen to be defying the party's aims.

Tencent, China's largest tech company, created an online game for the masses to applaud the nation's president, which has racked up 1.4 billion claps. The app's release followed a report in the Wall Street Journal that the Chinese state is looking to take a one per cent stake and gain a board seat at the company, along with other major internet companies.

The party has already moved to strengthen control at state-owned enterprises, with dozens of publicly traded companies in Hong Kong rewriting their business charters this year to formalise the shift.

The party has also expanded its presence in foreign firms. Of the over 100,000 foreign-funded companies in China, 70 per cent had set up party organisations by the end of last year, according to Mr Qi Yu, deputy head of the CCP's Organisation Department.

Analysts say these organisations within multinationals are increasingly active, with their activities varying from the mundane, like screening party videos, and communicating nationally mandated priorities.

This summer, the president of the European Union Chamber of Commerce in China, Mr Mats Harborn, told a meeting there have not yet been any demands to allow party cells to participate in business decisions. But, if that were to happen, he said, "it would be highly a concern for attracting foreign investment into China".

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on October 30, 2017, with the headline 'China's state influence creeping into business'. Print Edition | Subscribe