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Party Manages Cadre

Along with shareholders and government administration, the third source of political control of Chinese listed firms is the Communist Party of China (CPC). The firm’s party committee, which is commonly staffed with hand-picked executives, channels state policy into corporate practice. The party committee has control over the board of directors (“the party supervises the cadre”), although the party committee does not have the power to decide on the appointment and dismissal of key personnel.

In 1995, the CCCPC institutionalized the leadership recruitment via the Interim Regulation on the Recruitment of Party Cadre and State Leadership (The Department of Organization of the CCCPC 1995). The worldview, “party manages cadre and government leaders” was listed as the top principle. This principle implies that leaders are responsible to the party only, not the public.

At the provincial level, Department of Supervision handles official businesses jointly with the provincial CPC Commission for Discipline Inspection to implement the system of one set of working mechanism and two organs, and performs two kinds of functions, i.e. the Party discipline inspection and governmental administrative supervision.

The main responsibilities are responsible for carrying out the decisions of the CPC Central Committee, CPC Central Commission for Discipline Inspection and the Provincial Party Committee on enhancing the Party work style and clean government building, implementing the supervision within the prescribed limit of Party constitution, maintaining the Party constitution and internal laws and regulations of the Party, inspecting the execution of the Party's routes, guidelines, policies and decisions.

China's Company Law (Article 17) provides that “the activities of the local branch units of the Chinese Communist Party (CCP) shall be carried out in accordance with the Constitution of the CCP,” which grants the local party committee the rights “to supervise party cadres and any other personnel.” The principle that the Party manages cadres, mainly refers to how the party committees at various levels adhere to and implement the cadre line and policies, select and employ cadres strictly in accordance with the principles of the Party.

The Party Constitution says that one important obligation of Party members is to play a "vanguard role" in production, work, study and social life. The CPC has boosted training to Party cadres and members since the concept of "pro-learning Party" was conceived at the 16th Party Congress held in 2002. The concept requires the CPC to keep pace with time through constant learning.

In the past, CPC members in non-state-owned companies were not willing to identify themselves as Party members. Now, Party members tend to identify themselves as a CPC members. The reason for the change is the central leadership's emphasis on Party governance in companies and the Party members' exemplary and significant role in the work.

The education given to Communist cadres entails Party spirit, Marxism theory and Party-building practices. This particularly capitalizes on its rich "red resources" as being a red base of China's Communism. For Party spirit education, trainees are asked to ponder over questions such as: how to hold on to Communist ideals and beliefs in the new era; how to improve relations with the masses; and how to exercise self-discipline and avoid corrupt practices.

The 17th National Congress of the Communist Party of China in October 2007 put forward a plan to firmly encourage, support and guide the development of non-government-owned businesses. With the continuous deepening of reform and opening up and the gradual improvement of the socialist market economy, non-public companies are increasingly demonstrating their unique advantages and huge potential to develop.

The open recruitment of Party secretaries (also known as "red CEOs") for private enterprises normalized a system to hire leading posts for Party organizations in non-public companies. In reality, some heads for Party organizations in private firms struggle for power with enterprise managers, and cannot correctly understand and properly handle the relationship between themselves and business owners. In addition, some of them lack knowledge of the market economy as well as business management knowledge. Although they can do Party work, they are less flexible. Finally, some of them cannot correctly understand and properly handle the relationship between the Party building and helping businesses make profits. These are the constraints of Party building in the non-public enterprises.

On 05 June 2015 Chinese President Xi Jinping called for the strengthening of Communist Party leadership at state-owned enterprises (SOEs). In October 2016 Xi Jinping stressed the Communist Party of China's (CPC) unswerving leadership over state-owned enterprises (SOEs) during a national meeting on building the role of the Party within SOEs. “Party leadership and building the role of the party are the root and soul for state-owned enterprises,” said Xi, who is also the party's general secretary. While ordering strengthened grassroots Party organs in SOEs, the president warned that the leading role of Party organizations in SOE personnel selection must not change and efforts should be made to cultivate a number of quality corporate executives.

The distinction between China's state-owned and private firms is not always as clear-cut as it might seem. A company's formal status can be misleading. And the Communist Party is everywhere: article 19 of China's company law states that a party cell must be set up in every firm above a certain size. Larger firms must have a Party cell, whose leader reports directly to the Party at the municipal or provincial level. Party organs at non-state-run firms served as the party’s fortress and political core for employees.

China's Communist party is making clear that it expects to dictate business decisions — not only at state-owned enterprises, but also at private companies and joint ventures with foreign partners. Under President Xi Jinping, the party has become more assertive. China's Communist party is writing itself into the articles of association of many of the country's biggest companies in a blow to investor hopes.

A push to establish the Communist Party in Chinese state enterprises is rolling through Hong Kong, raising corporate-governance concerns. China will continue to “deepen” reform of state-owned enterprises and experiment with new ownership structures, but strengthening ruling Communist Party leadership remains the guiding principle. The state-owned enterprises in China contain 10,000,000 Communist Party members and 800,000 party committees.

Multinationals operating in China have party committees. Party consultants help private companies integrate party work. The old rule that any organisation with three or more party members should set up a party cell is being enforced. China's Communist party is making clear that it expects to dictate business decisions — not only at state-owned enterprises, but also at private companies and joint ventures with foreign partners.

The presence of party units has long been a fact of doing business in China, where the law requires companies, including foreign firms, to set up a party organization. Many executives had long seen the measure as symbolic. Party cells in foreign firms were well-received as a way of helping them understand Chinese policies and resolving disputes, CCP Organization Department deputy head Qi Yu told a news conference on the sidelines of the party’s 19th National Congress in Beijing. “Senior executives at some foreign invested companies say party organizations can help them to understand in a timely manner Chinese policies, to resolve salary disputes and to provide positive energy for the company’s development,” Qi said.

The education campaign which kicked off in February 2016 sought to encourage all Party members to study theoretical and practical issues related to Party-building. As the 19th Session of the National Congress of the Communist Party of China (CPC) approaches, Party-building activities of all kinds were held at CPC branches nationwide. Previously 'Party activities' simply meant attending meetings and studying reading materials, and some members did not actively get involved. Now there are various forms of Party work and Party members call early to ask about the activity every month.

Classes focus on studying the speeches of General Secretary of the CPC Central Committee Xi Jinping and enhancing the members' Party spirit. They boost this spirit by singing red songs; visiting patriotic sites like Lugou Bridge, where Japan's full-scale invasion of China kicked off; visiting an exhibition named "The Road of Rejuvenation" about China's rise; and watching anti-corruption documentaries.

While members could easily skip Party branch activities before, they are now required to take part in each session. They do not only need to show up for classes and meetings, but also need to study for enough hours and take notes in a special notebook. The regular activities no doubt remind people that they are a Party member and enhance their sense of identity.

By 2017 West Nanjing Road subdistrict in central Shanghai, which is home to a large number of regional headquarters of leading multinationals, had witnessed the development of Party organizations. The Party working committee in the subdistrict was responsible for the operation of 93 Party organizations in multinational companies, including eight general branches, 51 independent branches and 34 united branches. In total, these Party organizations oversee 1,587 Party members in 289 multinational companies.

In July 2017, executives from more than a dozen top European companies in China met in Beijing to discuss their concerns about the growing role of the party in their local operations. One senior executive whose company was represented at the meeting said that some firms were under “political pressure” to revise terms of their joint ventures with state-owned partners to allow the party the final say over business operations and investment decisions. Party officials are tightening their control over state-owned enterprises and want a voice in how some foreign companies are run.

At least 32 Chinese companies with shares traded in Hong Kong have proposed changes to their legal structure to make the party an adviser to their board. Financial commentators complain this might hurt shareholders.

According to the Party constitution, as long as there are three Party members, a primary Party organization should be formed. But in foreign countries, this will depend on each country's laws and regulations. Party members at overseas branches are required to hand in a report about their thoughts every three months, participate in a group Party activity and hold a Party meeting once every half-year, then report their activities to the university's politics department.

Zheng Xuexuan, vice president of the China State Construction Engineering Corporation, the largest construction company in China by revenue with projects worldwide, wrote on Guangming Daily that the need for Party building in overseas branches is urgent. "When employees leave their hometown and motherland for a long time and live in a strange environment … it is easy for their thoughts to fluctuate, posing challenges to the ideological and political work," he wrote.

Many State-owned enterprises (SOEs) that are dual-listed or listed in multiple markets must further strengthen their efforts on communication and explanatory work to gain more recognition and support over the matter of putting the Party construction clauses in writing in company articles, a senior official at the country's securities market watchdog said.

"Putting contents on the Communist Party of China's (Party) construction into company's articles of association is an important step for the fusion of the leadership of the Party into corporate governance and efforts in building a modern enterprise system with Chinese characteristics," said Yan Qingmin, vice-chairman of the China Securities Regulatory Commission, at a May 2018 industry meeting.

By June 2018 the government was pushing domestically listed companies to strengthen Party building, according to an amendment on governance regulations for domestically listed companies. Domestic listed companies should take on social responsibilities, even though the economic returns may not be evident in the short term. China's securities watchdog, the China Securities Regulatory Commission (CSRC), was seeking public opinion about the amendment, according to a statement published on the official website of the CSRC on 15 June 2018.

According to the new amendment, State-owned listed companies should include Party-building work in their corporate statutes, and companies should integrate Party leadership and corporate governance.

Dong Shaopeng, an expert advisor for the CSRC, told the Global Times on 18 June 2018 that leading companies in any country should take on social responsibility, including political responsibilities. "Companies have social attributes. They should not ignore social interests in the course of their development," he said.

According to Dong Shaopeng, Party building is not just about developing Communist Party members within the companies or planning activities. "It's about letting outstanding people, those with good political awareness and good technical abilities, bring their talent into full play in the management structure and production chain of companies," he said.

Dong Dengxin, director of the Financial Securities Institute at the Wuhan University of Science and Technology, said that Party member workers can help set a good example for other workers and spark their enthusiasm for work.

According to a report from Shanghai-based thepaper.cn on 18 June 2018, a listed company Party-building alliance was launched on 15 June 2018 in Wenling of East China's Zhejiang Province to promote the upgrading of listed companies.



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