Since the rise of China, Western scholars have tended to label the economic system practiced in China as “state capitalism. It is an economic system in which the state dominates business activities. Today, China’s state capitalism is becoming stronger and more competitive, but it has also given rise to many problems. According to several U.S. experts and scholars, the Chinese Communist Party‘s interference in private business not only threatens global markets, but also seriously undermines the international order.
In an online seminar held Feb. 16 by the Center for Strategic and International Studies (CSIS), a U.S. think tank, several experts and scholars reiterated their concerns about the invisible hand behind many Chinese companies: the Chinese Communist Party. In recent years, the Chinese government has used commercial channels to step up the Party’s hand into private enterprises in an attempt to intervene and take control, while also distorting the global business market.
The Party’s Hand in Private Business
Carolyn Bartholomew, Chair of the U.S.-China Economic and Security Review Commission (USCC), told the seminar that not only do China’s state-owned enterprises now carry capital security concerns or potential threats to national security, but even private enterprises are subject to the threat of the Party’s influence. Even private companies can be forced to make decisions or take actions that benefit the party because of Chinese Communist Party interference, and the outside world should have a clear understanding of this.
“I wouldn’t think that because Alibaba is a private company that it would be safe to deal with them and that the Chinese government would never ask them to hand over their information. It’s unrealistic to think that.” Carrie Bai said.
At the end of last year, Chinese regulators called off the Ant Group IPO without warning and launched an anti-monopoly investigation into Alibaba, while foreign media also disclosed earlier this year that Chinese financial units had asked Ant Group and other companies to share their consumer loan data. Foreign media also revealed earlier this year that Chinese financial institutions were demanding that companies such as Ant Group share their consumer loan data. The Chinese Communist Party has been questioning its attempts to expand its digital authoritarianism by taking control of technology companies such as Ant Group, and its interference in private enterprises has made Western countries uneasy.
At the end of last year, Chinese regulators halted Ant Group’s IPO without warning and launched an anti-monopoly investigation into Alibaba. (Photo by Radio Free Asia)
Do party-controlled companies perform better?
Wendy Leutert, an associate professor at Indiana University who has long studied China’s state-owned enterprises, also looks at the development of China’s small and medium-sized enterprises under different Communist Party leaders. She highlighted the ways in which the government has made connections between Party leadership and corporate leadership positions more frequently since Xi Jinping took office, such as making joint appointments of board chairs and Party secretaries a very common practice, or having the Party guide changes to corporate bylaws to comply with Party requirements and formalize the Party’s leadership role in corporate decision-making.
“The cumulative result of all of these measures is that political parties have significantly more control over SMEs,” says Lert, “The official thinking is that a more significant role for the party will result in more economic and political benefits, increased party control, the ability to promote accountability and oversight, and ultimately the ability to reduce corruption while improving performance.”
CCP’s Ignoring International Rules Threatens Global Markets
The Chinese Communist Party’s interference in private business is also increasingly threatening the global marketplace and international rules. Experts at the conference expressed concern that China will threaten multilateral institutions, led by the World Trade Organization. James McGregor, China president of APCO Worldwide and former president of the American Chamber of Commerce in China, said bluntly that the Communist Party’s plan is to make the world more dependent on China while China is less dependent on the world and more arbitrary, selectively adhering to international norms that benefit it while demanding renegotiation and even ignoring those that are not favorable to it. provisions that are unfavorable to itself.
“The WTO is like a Sino-foreign joint venture for the Chinese Communist Party. If the rules are favorable to the CCP, they will abide by them; if the rules are unfavorable to the CCP, these rules do not exist.” Mai Jianlu said.
He stressed that the Chinese government relies on its huge commercial market to threaten and entice companies from all over the world to follow Chinese norms.
Mak: “Globalization has removed the loyalty of these companies to the United States, and all their key performance is about shareholders and profits. Because China is a bigger market for them than the U.S., these companies care more about dealing with the Chinese government.”
If the U.S. hopes to stand up to the Chinese government, it will have to get these companies on the same page as the U.S. government, McKinloch said. But he admits this is not a few overnight, and must have long-term planning, including investment in science, technology and other research and development and Education, and to attract top talent to the United States, and these methods require the U.S. government to participate in it, and actively work with academia and business together.
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