Business Freedom Diminishes as the CCP Expands Its Role in Companies

August 26, 2021 Updated: August 30, 2021

Commentary

Under Xi Jinping, the Chinese Communist Party (CCP) is increasing its control of the economy by establishing the Party units in state-owned enterprises, private companies, joint ventures, and foreign companies, both at home and abroad.

Through the cybersecurity law, the Party is able to gain access to all data, even data held by foreign companies. And through the infiltration of the Party members, the Chinese regime is able to place loyal eyes, ears, and hands in companies and research institutions around the world.

The 1993 company law required both foreign and domestic companies in China to establish CCP units. In the 2000s, former CCP leader Jiang Zemin called for the Party to represent the entrepreneurial class, who were once considered enemies of the people. More recently, CCP branches in private business have increased dramatically. Under Xi, it seems the country is moving to an old-style economic policy, where the CCP will play a larger role in companies.

When the CCP revised its charter in 2017, language was added, expanding its sphere of control: “Party, government, army, society, and education, east, west, south, and north, the Party leads on everything.”

The Party’s control of private companies means that a cell of three Party members must be employed by those companies, in order to form a Communist Party Unit. Many private companies are too small to comply, but as of 2021, about 48.3 percent of private companies and 92 percent of the China 500 companies host Party units. As of 2018, it became mandatory for all companies listed on the stock exchange to host a Party unit.

Originally, the role of Party units was to recruit new Party members, provide welfare assistance, and organize study and training sessions, as well as social gatherings. More recently, the Party unit’s mandate has been expanded to recruiting entrepreneurs into the Party. They also maintain databases with profiles of employees and managers to know who’s loyal. The Party unit must also educate entrepreneurs, ensuring that they don’t lose their socialist values. This includes instructing entrepreneurs to work and behave in such a way that pleases the Party. Private companies are also expected to recognize the leading role of the Party in their charter.

Large companies must hire a Party secretary and workers, allowing those Party representatives to have a significant influence on hirings and other decisions. Those rules apply to state-owned enterprises, private Chinese companies, listed companies, and foreign companies.

In order to increase its control over the private sector, the CCP acts through the United Front, a unit responsible for increasing the Party’s influence and control both within China and abroad. The United Front is building a database of private citizens, entrepreneurs, state employees, investors, and stakeholders. It seems that Xi favors the state sector, but will give priority to companies that assist in realizing the goals of the CCP, rewarding them with financial and policy resources.

It became mandatory for both private and state-owned firms to incorporate the Party into their charter in 2020. In that same year, the United Front published a paper, “Opinion on Strengthening the United Front Work of the Private Economy in the New Era,” which called for the United Front to help create “a modern state-owned enterprise system with Chinese characteristics,” echoing the words of Xi in a 2016 speech. The term “Chinese characteristics” meant incorporating the Party into the company’s management and decision-making, Xi explained.

Ye Qing, vice chairman of the All-China Federation of Industry and Commerce, then extended this call to private companies, encouraging the building of a modern private sector with Chinese characteristics. This meant allowing the Party to not only have control over hirings and firings, but also to carry out audits and to monitor internal behavior.

The CCP has determined that overseas Chinese projects would also have a Party cell, which should raise some concerns in other countries about foreign political influence. In China, joint ventures are expected to maintain a Party cell. The foreign partner to a joint venture must accept that the Party may be influencing or outright making decisions for the Chinese side.

China’s cybersecurity law requires all companies, including foreign companies, to turn over data to Chinese authorities. This raises real issues of data security and customer and employee privacy. For a wholly foreign-owned enterprise (WFOE) it seems strange to have to host and pay for a Party cell.

According to a list of 1.95 million Party members, leaked to the Inter-Parliamentary Alliance on China, companies and research institutions around the world, including Boeing, Qualcomm, and Pfizer, are riddled with CCP members who have sworn an oath to never betray the Party and are obligated to further the interests of the state and Party when called upon to do so.

Under Xi, business and social freedoms appear to be diminishing, as the CCP expands its sphere of control and plays an increasing role in companies, not only monitoring and controlling them, but also gathering data and actually making decisions about staffing and behavior.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Antonio Graceffo
Antonio Graceffo
Antonio Graceffo, Ph.D., has spent over 20 years in Asia. He is a graduate of Shanghai University of Sport and holds a China-MBA from Shanghai Jiaotong University. Antonio works as an economics professor and China economic analyst, writing for various international media. Some of his China books include "Beyond the Belt and Road: China’s Global Economic Expansion" and "A Short Course on the Chinese Economy."