COMPANIES
Foreign firms have to learn the rules of doing business in China and should not ideologize corporate activities, as long as the development of branches of the Communist Party of China (CPC) does not interfere with their business management, experts said on Wednesday.
The comments came in response to a recent statement published by the German Chamber of Commerce in China on its website. The chamber claimed that they have received reports about attempts by the CPC to strengthen their influence in wholly Germanowned ventures in China.
“We do not believe that foreignowned companies should be required to promote the development of any political party within company structures,” noted the statement, which was published on November 24. And if the attempts continue to influence foreignowned firms, the companies are likely to consider retreating from the Chinese market, it said.
According to Article 19 of the Company Law of China, the establishment of CPC branches in a firm is permissible as long as at least three Party members decide to form a cell, the chamber noted. And this law applies to Chinese State-owned enterprises (SOEs), Chinese-foreign joint ventures (JVs), and wholly owned foreign enterprises.
The European Union Chamber of Commerce in China also released a similar statement on November 3, saying that there have been some cases in which SOE partners in JVs have proposed that the Party organization should be formalized within the governance structure of the JV, and that the articles of association of the JV should be revised to give the Party organization a governance and decision-making role.
“This development is of great concern to foreign JV partners as it significantly changes the governance of the JV and undermines the authority of the JV board,” the statement noted.
But it said it was not aware of any legal development that provides a basis for changing the corporate governance arrangements in JVs in this manner.
Foreign companies investing in China may have some misunderstanding concerning the development of Party branches, experts noted.
“When you are in Rome, do as the Romans do. Foreign investors should respect local rules and regulations in China,” Chen Fengying, an expert at the China Institutes of Contemporary International Relations, told the Global Times on Wednesday.
“It should be clear that corporate management and the Party organization are totally separate. Party branches are not labor unions,” she said.
When Chinese companies invest overseas, they should not meddle in the beliefs of their foreign staff members, Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Wednesday. “And foreign investors in China need not raise their eyebrows about the Party branches here,” he said.
As of the end of 2016, there were a total of 106,000 foreign-backed firms in China, within which 70 percent have set up Party cells, Qi Yu, deputy head of the Organization Department of the CPC Central Committee, told a press conference during the 19th CPC National Congress on October 19. The Party members have played active roles in helping with understanding of policies in China and solving labor disputes, Qi was quoted as saying in media reports.
Strengthened Party cells
“Some foreign investors in China see this matter with prejudice. We have not seen any cases showing that Party organizations within foreign companies have got involved in corporate governance or decision-making processes,” Zhuang Deshui, deputy director of the Research Center for Government Integrity-Building at Peking University, told the Global Times on Wednesday.
In line with China’s Company Law, the Party cells have always existed within companies, not only SOEs but also foreign firms, Zhuang said.
Strengthening Party building is a requirement in the revised constitution of the CPC, Chen said. “It’s a requirement for Party members, not for the foreign companies,” she said.
Some foreign firms may be treated differently in the country compared to decades ago, but “concerns over Party building should not become an excuse for them to make industrial transfers,” Zhuang noted, adding that the firms should not “ideologize business activities.”
From January to October, the total foreign investment in China increased by 1.9 percent year-on-year to 678.7 billion yuan ($102.8 billion), the Ministry of Commerce said on November 14.