They're coming for the private sector
Why on earth would the Chinese Communist Party (CCP) mess with the private sector? I hear this question a lot. Private firms generate all the new jobs and tax revenues, they drive innovation and they’re hip! Chinese kids dream of growing up to code for Ali (though not so much about delivering food for Meituan); only those worried about getting a job, and who have a connected uncle, work at PetroChina. Mess with the private sector and you’ll just undermine the CCP’s own power base, I’m told. And didn’t the Big Boss have a nice meeting in 2018 telling private firm bosses that they’re very important, that they’re family (我们自己人)? So, stop worrying your pretty lil’ head about ‘politics’ You Shu.
A few days ago we got the Party Central’s over-arching ‘Opinion on Strengthening the United Front Work of the Private Economy in the New Era’ (关于加强新时代民营经济统战工作的意见) (here). Bloomberg and the Times reported, but it was a tough job given the vagueness of the document. It called for better educating business leaders about government policy, encouraging them to take part in big state projects, improving business-government communications and the business environment. Tedious.
And so we come to this far more practical speech by Ye Qing, Vice Chairman of the All-China Federation of Industry and Commerce (which like all effective industry groups the world over is run by the Communist Party). It was published on the 17th September here, two days after the Opinion came out. I’ve added the machine translation below.
The long and short of it, I think, is that it marks the next step in the Party’s attempt to take-over privately-owned business from the inside. First was the requirement to have a Party Committee, which we were told would not interfere, just help with gov relations and organize the Xi Jinping Thought competition/rap battle at the annual party etc. And now - what do you know! - they’re being encouraged to take-over key firm functions.
But why would they do that, You Shu? Because they can’t help themselves. Please stop thinking they think like you. They might not look like Leninists but they live and breathe in an ever-more Leninist system, so check your naive liberal views and realize that anything they can’t control they view as a threat.
First, Ye sets up the rationale for these moves. Private firms are beneficiaries of the ‘system’ (tizhi), we are told, so they need to do more to protect the system. Jobs, taxes and innovation? Not enough! No more free riding for them. Second, apparently Party-building will help them become more productive and uphold regulations better. Nothing like an untouchable team of political workers to boost worker morale and come up with whizz new product ideas.
And what is the scope of these next steps?
First up, since they’re not busy enough entrepreneurs ‘must study and implement’ Xi Jinping’s Socialist Thought. All of it, presumably - lots more enchanted users of the Xuexi Qiangguo app and the Xuexi Xiaozu wechat channel (here) in-coming. Do they start getting their scores compiled. Once properly educated, they’ll realize that ‘in order to create favorable conditions for party organizations to carry out their work, [they] should hire full-time secretaries and full-time party workers’ on their own dime. And these people will find things to do. And the Party is expert at externalizing costs.
Then Ye outlines three broad fronts for their focus: human resources, monitoring of behavior and improving the Party-led union.
First, he calls for ‘a working mechanism for the Party to lead the human resources department and giving full play to the leading role of Party organizations in selecting and employing personnel.’ So, Party people will end up controlling hiring and firing? Sounds like that’s where we’re going, however crazy. The new Party-led HR should be able to prevent ‘the appointment and dismissal of the enterprise’s personnel by the professional managers’. And, god forbid, ‘avoid the phenomenon of the team of professional managers promoting whoever they like’.
Then we get to internal monitoring. ‘Private enterprises may establish a monitoring and auditing department under the leadership of the Party organization, which is responsible for supervising the implementation of enterprise compliance and the enterprise management system’. Suddenly the boss and the board is not so much in charge of what happens internally. And the guidance is nice and vague, giving plenty of scope to influence key business decisions. My mind goes to the recent People’s Bank staffer write up of the Baoshang Bank take-over who waxed lyrical about the future need for more Party involvement in bank regulation. Not better-trained professional regulators and stricter punishments for bribe-taking, but more Party hacks. He knows how to get promoted. These days there’s not a problem that can’t be solved by more Xi Jinping Thought.
And then, third, the Party-led union should ‘advocate enterprises to invest more of the production proceeds into employee motivation, employee training, improving the labor environment and enhancing humane care’. I’m all for stronger trade unions everywhere, including China, and the Party-led union system here could do a way better job protecting their supposed members. But it needs to be worker-led. And, color me cynical, I’m wondering if the Party will always be on the side of the staff.
I can already hear my friends advising me to cool it, stop being so sensationalistic. Others will pipe up to say it’s all much more nuanced and complicated than I’m presenting here. (This sounds quasi-smart, but you can usually be pretty sure they won’t be to explain all the apparent complexity.) Another line of defense would be that Mr. Ye’s just laying out his hopes of how things might develop over time, with the best of intentions, just some friendly advice for his private sector friends. And of course, even if my fears are well founded, these things take time. Said the frog in the pot.
Here’s the DeepL translation:
Promoting the organic integration of the Party’s leadership system and the governance system of private enterprises Ye Qing
At present, in the practice of exploring the establishment of a modern private enterprise system with Chinese characteristics, three aspects of work should be focused on, namely, the establishment of a working mechanism for Party-led human resources, a working mechanism for Party-led monitoring and auditing, and a working mechanism for Party-led trade unions.
Establish a working mechanism for Party-led human resources departments and play a leading role of Party organizations in selecting and employing people. Ensure that the Party organizations of private enterprises have a leading role in hiring decisions as well as the role of Party organizations of private enterprises in talent training.
Establish a working mechanism for Party-led monitoring and auditing to promote the rule of law and legitimate operation of private enterprises. Private enterprises may establish a monitoring and auditing department under the leadership of the Party organization, which will be responsible for supervising the implementation of the enterprise’s compliance with laws and regulations and the enterprise’s management system, the warning and education of the leading management and employees, the supervision and management of employees’ abnormal behavior, the investigation and handling of irregularities and disciplinary violations, and the conduct of risk investigations in key business fields and other related work.
Improve the working mechanism of Party-led trade unions to achieve shared governance between enterprises and employees. Through the trade union organization under the leadership of the Party, the shared governance of enterprises and employees can be realized, harmonious shared labor relations can be established, and a community of interests between enterprises and employees can be formed.
General Secretary Xi Jinping pointed out at the National Conference on Party Construction in State-Owned Enterprises held in October 2016 that the “special” feature of the modern state-owned enterprise system with Chinese characteristics is the integration of Party leadership into all aspects of corporate governance and the embedding of corporate Party organizations into the corporate governance structure. Socialism with Chinese characteristics into a new era, the Fourth Plenary Session of the 19th CPC Central Committee put forward for the first time to “improve the modern enterprise system with Chinese characteristics”, which is not only to deepen the reform of state-owned enterprises put forward the goals and requirements, but also for the new era of exploration and innovation of private enterprise governance system to indicate the direction.
The private economy is an important mass and social base for the ruling Party and an important force in social governance. Of the more than 100 million market players in the country today, more than 90 million belong to the private economy, and the number of employees absorbed has reached 360 million. To unite and rally such a huge team of private economic people and practitioners around the Party, to stimulate their vitality to serve the modernization of the country’s governance system and governance capacity, we must adhere to and strengthen the overall leadership of the Party, and must strengthen the Party building work of more than 90 million private enterprises to lead the 360 million practitioners. Exploring the establishment of a modern private enterprise system with Chinese characteristics under the leadership of the Party is the current need of enterprise management.
To establish a modern private enterprise system with Chinese characteristics, we must effectively strengthen the Party building work of private enterprises and enhance their productivity and competitiveness.
Private entrepreneurs must study and implement Xi Jinping’s Socialist Thought with Chinese Characteristics for a New Era in depth, enhance “four consciousness”, firm “four self-confidence”, and do “two maintenance.” We should consciously maintain a high degree of consistency with the Party Central Committee in ideology and politics, and ensure that enterprise development is always in line with the Party’s requirements. We should sincerely and fully support the establishment of enterprise party organizations and support to ensure that enterprise party organizations carry out party-building work.
First, private enterprises are the beneficiaries of the socialist system with Chinese characteristics. Both leading cadres within the system and private entrepreneurs and private economic figures outside the system are beneficiaries of the system. This system is the socialist system with Chinese characteristics under the leadership of the Communist Party of China. Only by maintaining this system and making it more solid can private enterprises develop better and everyone can live and work in peace and happiness. To maintain this system we must actively support enterprises to carry out Party building work.
Second, the Party building work is productive, stronger is competitive. Party building to lead private enterprises to adapt to China’s national conditions, to follow the laws of socialist market economy with Chinese characteristics, and building a strong, democratic, civilized, harmonious and beautiful socialist modernization powerhouse goal, the essence is to lead private enterprises to do things according to the law and according to the rules, so that enterprises and national development goals, this fit, the higher the competitiveness of enterprises, the higher the degree of success of enterprise development.
Third, private entrepreneurs on the Party building work to be truly committed, sincere support. Support party building work can not just shout slogans, the key is to respect the ideology of the enterprise party organizations, will “strengthen the leadership of the party, support the development of party building work and play the role of party organizations,” written into the company’s charter, to maintain the authority of the party organizations, support the party organizations in accordance with the party’s charter to carry out the work; in the activities of funding, activities and other material venues to be protected! In order to create favourable conditions for party organizations to carry out their work, private enterprises should hire full-time secretaries and full-time party workers. In particular, for larger private enterprises with a larger number of Party members, it is necessary to hire full-time secretaries and full-time Party workers to take up solid positions and bear burdens, giving them a big stage to fully display their talents; to build a platform and a mechanism to open a through train for them to participate in corporate governance; and to build a high ground and heavy care, so that they deeply feel trust and support.
At present, to explore the establishment of a modern private enterprise system with Chinese characteristics in practice, should pay attention to three aspects of work, namely, the establishment of party-led human resources work mechanism, party-led monitoring and auditing work mechanism and party-led trade union work mechanism.
Establishing a working mechanism for the Party to lead the human resources department and giving full play to the leading role of Party organizations in selecting and employing personnel.
First, the party organizations of private enterprises are guaranteed the right to play a leading role in employment decision-making. Clarify the Party organization in the enterprise employment “deliberation and management” of the scope, form and work procedures. The human resources department under the leadership of the Party organization is responsible for the investigation of employees and the assessment of candidates proposed by the team of professional managers for employment. After the comprehensive inspection, the appointment is discussed and approved by the Party Committee, and then communicated to the Board of Directors and the trade unions of the enterprise, and forwarded to the management team for implementation. Firstly, the Party organization leading the human resources department can avoid the appointment and dismissal of the enterprise’s personnel by the professional managers’ side, and avoid the phenomenon of the team of professional managers promoting whoever they like and not using whoever they dislike. The second is to be able to resolve labor conflicts, in the enterprise between employers and employees to erect a firewall.
The second is to ensure that private enterprise party organizations play a role in talent training. Party building work well, not just a few activities held each year, but should be “educate people” as a measure of whether the effectiveness of the standard. Party organizations to adhere to the “training of talent” as the work of the main line, focusing on cohesion, gathering strength, cultivating talent, to establish a set of party members, employees, private economic people more complete talent training system, through political leadership, ideological guidance, organizational training, private economic people to build a platform for growth and progress. First, for the cultivation of selected outstanding employees, first recommended to join the Communist Party of China, always for the party priority to transport elites and talents. The second is to recommend outstanding young talents with good basic qualities, development potential and outstanding business ability to the corporate reserve cadre echelon. At the same time to achieve cross-tenure, the head of our enterprise’s second-tier companies and departments are also the Party branch secretary. Thirdly, we should sort out, discover, cultivate, educate and recommend outstanding people outside the Party, build a platform for them, unite them around the Party and urge them to play a better role.
Establish a working mechanism for Party-led monitoring and auditing to promote private enterprises to govern and operate legally.
Private enterprises may establish a monitoring and auditing department under the leadership of the Party organization, which is responsible for supervising the implementation of enterprise compliance and enterprise management system, warning and education of leading management and employees, supervision and management of abnormal behavior of employees, investigation and handling of irregularities, as well as carrying out risk assessment of key business fields and other related work.
Conducting monitoring and auditing work.
First, it is conducive to promoting the management of enterprises in accordance with the law. The effective integration of monitoring and auditing work with business management work is extended to all aspects of business management. An internal audit system has been set up to regulate the operation of enterprises through such means as setting boundaries of authority, implementing market-oriented operations and strictly enforcing management systems, regulating the use of power by leading cadres and employees, incorporating the fight against corruption and the promotion of probity into all operations and management, running through all levels and processes of production and operation management, especially key management links such as personnel, finance and materials, and eliminating hotbeds of corruption and illegal soil.
Second, it is conducive to leading the construction of pro-clear government and business relations. On the one hand, the party organizations to carry out monitoring and auditing work to guide private entrepreneurs, enterprise employees to strengthen self-learning, self-education, self-improvement, to always uphold the “do healthy business” concept, according to regulate their own behavior, to overcome the “rent-seeking” power! The inertia, consciously assume the economic and social responsibility of promoting the healthy development of the economy and jointly resist various risks and even crises. On the other hand, the Party organization can be an effective bridge for communication between the government and enterprises, smooth the two-way communication channel between enterprises and the government, convey the voice of the Party and the government in a timely manner, reflect the reasonable demands of enterprises in a timely manner at the top, and promote the establishment of a legitimate, long-term and stable relationship of mutual trust between government departments and enterprises. In recent years, the Party Committee of the building has invited the Development and Reform Commission, industry and commerce, taxation, public security and other functional departments to enterprises to conduct policy propaganda, skills training and on-site offices, face-to-face communication with entrepreneurs, listening to the demands of enterprises, to effectively solve problems for enterprises, to help enterprises and at the same time guide enterprises to operate in compliance with the law and operate in good faith. Through the Party organization and Party building stage, the interaction between enterprises and the government is more justifiable, open and transparent. Individual behavior into party behavior, so that all levels of government departments dare to enter the enterprise, dare to go deeper into the enterprise.
Third, it is conducive to the construction of corporate culture of integrity. Party organizations should be combined with the actual development of enterprises, strengthen the construction of corporate integrity culture, integrity, according to the law, clean and other concepts into the construction of advanced corporate culture, infiltrate all aspects of business management, leading employees to comply with the law, strict self-discipline, standardize the conduct of practitioners, to achieve the synchronized construction of codes of conduct and system norms, cultural orientation and system constraints complement each other.
Improve the working mechanism of the Party-led trade union to achieve shared governance between enterprises and employees.
The Fourth Plenary Session of the Nineteenth Central Committee elevated the distribution according to labor as the mainstay and the co-existence of various distribution methods to the basic socialist economic system, while emphasizing the need to adhere to and improve the social governance system of shared governance. Entrepreneurs and employees, as both labor and management, are builders of socialism with Chinese characteristics and should not stand on opposing sides. Through the trade union organization under the leadership of the Party, it is possible to realize the sharing of common governance between enterprises and employees, establish harmonious and shared labor relations, and form a community of interests between enterprises and employees.
First, in realizing sharing, advocate the construction of harmonious shared labor relations. Harmonious shared labor relations, the foundation of which is harmony, the key is sharing, which is a further enhancement and deepening of the foundation of harmonious labor relations. By introducing the concept of sharing, on the basis of protecting the legitimate rights and interests of employees, we advocate enterprises to invest more of the production proceeds into employee motivation, employee training, improving the labor environment and enhancing humanistic care. Explore the innovative sharing distribution system, implement long-term incentive plans such as wage sharing system and annuity system within the enterprise, and build a system arrangement for benefit sharing between enterprises and employees to ensure that both labor and management share the fruits of enterprise development. Pay attention to the spiritual needs and psychological health of employees, and keep abreast of the ideological trends of employees. Strengthen the construction of recreational facilities, and actively organize employees to carry out enjoyable and colorful cultural activities to enrich their cultural life. Broaden the development channels of employees, expand the space for career development, and realize the harmonious unification of personal dreams, corporate dreams and the Chinese dream. We will improve the labor environment and continuously enhance the enterprise’s investment in safe production conditions, labor protection measures, safety education and training, prevention and treatment of occupational diseases and employee health examination. Strengthen humanistic care, cultivate a distinctive entrepreneurial spirit and a healthy corporate culture, build a common spiritual home for employees, create a common vision for workers and enterprises, truly embed shared labor relations as an enterprise soft system into production and operation activities, and promote the formation of stable, long-term labor relations between the two sides.
Second, in terms of realizing shared governance, it solidifies the master status of enterprise employees. Under the leadership of the Party organization, trade union organizations can fully mobilize the enthusiasm and initiative of both sides of labor relations subjects, and promote consultation between enterprises and employees to work together, mechanisms to build, benefit co-creation and benefit sharing. Through the implementation of democratic management, the full respect and protection of employees’ right to know, so that employees can participate in enterprise management as a master. By establishing a collective wage consultation mechanism with employees and signing collective contracts, the employees can effectively enhance their sense of gain, happiness and security from the results of enterprise development. A distinctive feature of the institutional reform since the 18th CPC National Congress is the people-centered development ideology throughout the whole process. Likewise, for private enterprises, pay attention to the staff, rely on the staff, to achieve and staff co-governance and sharing, is bound to inject a stronger momentum for the development of high-quality enterprises.
To establish a modern private enterprise system with Chinese characteristics, the relationship between the party organization and the board of directors of private enterprises should be correctly handled to improve the corporate governance structure.
Private entrepreneurs and private enterprise party organization is the relationship between the rudder and compass, is an important guarantee for the healthy development of private enterprises, can not replace the work of the party organization, nor can the work of the party organization replace the business management of entrepreneurs. To combine with the actual business, the specific functions and responsibilities of the party organization to be clear, and to establish a standard operating procedures and mechanisms, especially to clarify the role and responsibilities of the party organization in the decision-making, implementation and supervision of the various aspects of the enterprise, to ensure that the work of the party organization and the operation of the enterprise organic convergence. Give full play to the basic political function of the Party organizations to set the direction, gather the people’s hearts and minds and gather manpower, put into practice Party-controlled manpower, Party-controlled supervision and auditing and Party-controlled trade unions, establish a mechanism for Party building to lead enterprise culture, enterprise management and team building, promote the formation of an enterprise governance structure and system in which Party leadership and enterprise production and operation are integrated and mutually reinforcing, and continuously improve the governance capacity and level of governance of the relevant parties, so that the Party’s leadership and enterprise production and operation are mutually reinforcing. The modern system of private enterprises with Chinese characteristics has taken root in the private economic sector, and further formed a vivid practice to comprehensively promote the healthy growth of private economic figures and the healthy development of private enterprises, so that the mass base of “56789” is firmly in the hands of the Party, consolidate the Party’s long-term ruling base, and serve to uphold and improve socialism with Chinese characteristics. We will contribute to the modernization of the national governance system and governance capacity, realize the goal of “two centuries” and realize the Chinese dream of great rejuvenation of the Chinese nation.
The author is Vice Chairman of the All-China Federation of Industry and Commerce and Chairman of the Board of Directors of Beijing Ye Enterprise Group Ltd.