German officials tone down Party building rhetoric
Overreaction fueled by exaggeration, misunderstanding: experts
By Chen Qingqing and M Jingjing
German officials and business leaders in China on Thursday toned down their earlier rhetoric alleging the Communist Part of China (CPC) of extending its inmpanies fluence in German companies and threatening that German companies would retreat at from the Chinese market, affter their rhetoric drew a wide spread backlash in China. The German ambassador to China and the German Chamn ber of Commerce in China (GCCC) have previously althrough leged that the CPC, through changes of rules, is asking wholly-owned German com panies as well as Chinese German joint ventures (JVs) to promote more Party members to management roles, which this has caused concern among some Gern man companies. Experts said on Thurs day that the German office cials and business leaders might have overacted to Party building practices in these companies ex aggerated the situation and misunderstood the process. They added that there is no compulsory rule that requires for, eign companies, include ing JVs, to have more Party members on their management team. In a statement sent to the Global Times on Thursday, German Am
to China Michael Clauss said: “We share the concerns expressed by the German Chamber of Commerce. Companies from different regions in China have complained about being pressured into supporting the establishment of Party cells within their companies.”
Clauss said that in some cases, Chinese JVs have even insisted on giving Party representatives a seat on the management board. It especially seems to be a problem for foreign-Chinese JVs in the manufacturing sector, where the foreign partner is the minority stakeholder, the ambassador said.
“Understandably, foreign investors are concerned that this will lead to interference by the Party in internal business operations, which might go against the companies’ own interests,” Clauss said.
That was a tone change from Clauss’ comments at a press briefing on November 17, where he said German companies were forced to modify the terms of their JVs in China in order to allow the Party branches to have greater influence in business operations, the South China Morning Post reported.
At that briefing, Clauss also said that such a move would raise conflict-of-interest issues and could force companies to consider leaving China.
Clauss’ comments were followed by a statement from the GCCC on Friday, in which the group warned that “should these attempts to influence foreigninvested companies continue, it cannot be ruled out that German companies might retreat from the Chinese market or reconsider investment strategies.”
The GCCC did not respond to a request for comment as of press time on Thursday.
In interview with the Global Times on Thursday, several foreign companies in China, including German ones, denied having received any request from the Chinese side about revising the terms of their JVs to allow CPC branches to play a larger voices in business management. For example, two German carmakers said they had not received any formal requirement on the issue.
Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, said that Clauss’ comments on JVs were misguided as cooperate management should be a matter for the partners in JVs to arrange via agreed procedures.
“Within some JVs, where the Chinese side holds the majority share, they have the right to make appointments to management and work it out with their partners, and other organizations shouldn’t interfere in the process,” Lu told the Global Times, adding that otherwise it would be a case of foreign officials interfering with the Chinese companies’ operations or their political process.
According to the Party constitution, a CPC cell should be established as long as there are three Party members within an entity, said Su Wei, a professor at the Party School of the Chongqing Municipal Committee.
But there is no compulsory rule stating that Party members should get involved in corporate decisions, Su told the Global Times.
Lu added that such CPC cells are only responsible for organizing and coordinating Party members and will not take part in corporate operations.
Such Party cells have proven beneficial to some foreign companies, a Party members are very often self-motivated and they truly value teamwork, Su noted.
German healthcare company Fresenius Kabi even resisted setting up a CPC cell in its whollyowned subsidiary in Nanchang, East China’s Jiangxi Province, but it has supported Party building since, the Xinhua News Agency reported in November.
The comments from German officials and business organizations drew strong criticism online in China. Some claimed that German companies could leave anytime they want and others mocked the unprofessionalism of such threats.
“They should really think before they speak. They should consider if the companies want to leave China at all because the last I heard was that German companies are eager to invest in China,” one observer, who preferred to remain unidentified, told the Global Times.
According to a report released by the GCCC on November 17, German companies in China evaluate the current economic situation more positively than in 2016, and they remain optimistic for the coming year.
Nearly two-thirds of German companies in China expect to achieve or exceed their business targets in the current year, with about 75 percent of the companies expecting their turnover to increase in 2018, the report said.