The increased penetration of the private sector by the Chinese Communist Party (CCP) is causing widespread concern. The establishment of party branches within private companies is perceived as a potential lever of control, alongside financial and regulatory tools, that the government could wield to keep businesses in line. But while the increasing centrality of the CCP in state-owned enterprises (SOEs) is evident, its role in private companies remains less obvious.
Party units in private companies are not a new phenomenon. Since the 1980s, the CCP has stressed its willingness to affirm its presence in the growing private economy, especially in foreign joint ventures. In 1992, the CCP charter included “companies” in its list of structures where a party organization should be set up if they host three or more party members. The 1993 Company Law required all companies based in China to allow the establishment of units to “carry out the activities of the CCP.”
The CCP’s infiltration of the private sector gained momentum after former president Jiang Zemin’s call in the early 2000s for the CCP to represent “the advanced productive force” and welcome China’s emerging private entrepreneurs.
The private sector is still seen as a frontier for party-building, with Chinese President Xi Jinping making it a priority. In 2012, the CCP’s organization department called for the party to “comprehensively cover” the private sector. This new wave of party-building efforts includes sending “party-building advisors” to private firms without party branches and creating party-building supervisory bodies.
According to the All-China Federation of Industry and Commerce (ACFIC), the ratio of private businesses hosting a party unit has risen from 27 percent in 2002 to 48 percent in 2018, with a bias towards the northern part of the country and the manufacturing sector. Most of the companies without a party branch do not meet the basic requirement of hosting three party members.
Yet according to the CCP’s own numbers, 73 percent of private firms had established party units in 2017. The difference in figures might be explained by the existence of various forms of coverage. Joint party branches covering more than one firm are established for the ones that do not have their own embedded CCP unit.
Historically, these party branches are tied to the recruitment and management of party members among employees. In contrast to SOEs, the CCP charter gives a somewhat circumscribed role for party units in private businesses. They are mainly charged with ensuring the company complies with the laws and promoting its “healthy development.”
In most businesses, party branches tend to focus on “business-friendly” activities and do little more than organize study sessions or social gatherings for party members. Yet that may be changing as Xi has called on the private sector to “unite around the party.” Following a requirement initiated in 2015 for SOEs to enshrine the role of CCP entities in their articles of association, an increasing number of private companies, mostly those with mixed ownership or political connections, have also implemented such amendments.
The CCP’s objective is to “cultivate a team of private economic persons who are resolute in walking with the party” and can be relied upon “in times of crisis.” Entrepreneurs are expected to undergo further education and monitoring to make sure they remain in line with the party’s objectives and “cultivate a healthy lifestyle.”
ACFIC Vice Chairman Ye Qing said in 2020 that private firms should not only recognize the leading role of the party in their corporate charters but also dedicate specific funding to the party branches’ activities. In addition to the dues they collect from members, the CCP units can often rely on funding from the firm, generally around 1 percent of the total personnel-related expenditures.
The ACFIC also calls for the CCP to “exercise leadership over personnel management,” aiming to avoid “professional managers promoting whomever they like.” It also recommends that firms establish a monitoring structure under CCP leadership to surveil employees, detect ‘abnormal behavior’, and deal with disciplinary violations.
Assessing the extent to which these guidelines regarding party-building in the private sector are implemented remains very difficult, especially as fieldwork-based research faces growing challenges in China. While party-building varies greatly across businesses (depending on their sector, size, or region of operation), in most cases, the party units remain populated by company employees, which limits the CCP’s leeway as these employees cannot easily challenge the firm’s leadership.
The appointment of the CCP secretary within the company hierarchy matters greatly. When the business owner or CEO holds this position, there is a clear alignment between the CCP unit’s and the firm’s priorities. This can even lead to CCP branches becoming family clubs as the company head appoints family members to top party positions.
Things become more complicated when someone else from the firm’s management is appointed as CCP secretary: it can directly impact the internal balance of power by strengthening this person’s position within the firm. Firms’ internal power dynamics are vital to understanding how the party’s top-down approach to private businesses may materialize on the ground.
This article was originally published on the East Asia Forum.