January 11, 2017 4:30 pm JST
Xi's Supremacy

Communists tighten grip on Chinese state companies

Ignoring good business practices in pursuit of national clout

Dong Mingzhu, left, the iconic chief of Gree Electric Appliances, was ousted as chairwoman of its parent company in 2016.

The ruling Communist Party is bending state-run corporations to its will under efforts to increase China's global influence, with serious consequences for those defying orders.

Leading automaker FAW Group amended its articles of incorporation last April to let the company's Communist Party committee provide input or make proposals regarding key management decisions.

Many state-run enterprises have an internal body representing the Communist Party. Such bodies were originally intended to support employees in the party but not to get involved in business decisions. FAW, a key partner in Toyota Motor's Chinese operations, has dispensed with such technicalities.

FAW is one of many Chinese state-run companies welcoming party involvement in their business. The trend has sparked no outrage over government overreach.

Chu Xuping, director of research for the State-owned Assets Supervision and Administration Commission, called in late December for greater party involvement in operations of state-run companies. He then said that companies and their Communist Party committees should be headed by the same person.

The comments, which almost suggest that the companies be made part of the party in name and in fact, provide a window into President Xi Jinping's strategy for fighting the U.S.

State-run companies over the last decade have been more interested in pleasing individual political players than the Communist Party as a whole, leading to ample opportunities for corruption and appropriation. Xi hopes to tap the power of China's roughly 160,000 state-owned businesses that together own more than $15 trillion of assets through greater party involvement, preparing for all-out economic war with the Americans.

China invested a grand total of more than $160 billion in foreign companies in 2016 -- up 50% from the year before. The amount was spread over 7,000 entities across 160 countries. State-run enterprises are the pawns through which Beijing targets not only foreign businesses, but also key ports in Greece, the Middle East and the Indian Ocean.

The uncooperative face a rough road. Dong Mingzhu, a charismatic leader who turned Gree Electric Appliances of Zhuhai into a global player in air conditioning units, was sacked as chief of the company's state-owned parent. She apparently drew the party's ire for pursuing an acquisition it did not approve of.

"They've even taken away passports of junior employees like me, and we can no longer play golf or have meals with our business partners," said a 36-year-old employee of a Guangdong Province-based metal company. Since Xi took office, the government has tightly controlled even those at the bottom of the pyramid.

Xi is demanding that companies become an extension of the state and contribute to his goal of turning China into a superpower. But his flagrant disregard for business theories and corporate independence threatens the nation's economic future.

(Nikkei)

Toyota Motor Corp.

Japan

Market(Ticker): TKS(7203)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 184,159.62M
Shares: 3,262.99M
Asia300

Gree Electric Appliances, Inc. of Zhuhai

China

Market(Ticker): SHE(000651)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 35,084.21M
Shares: 6,015.73M

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