Much of modern China’s epic growth was driven by private enterprise – but under Xi Jinping, the Communist party has returned to being the ultimate authority in business as well as politics.
When Xi Jinping took power in 2012, he extolled the importance of the state economy at every turn, while all around him watched as China’s high-speed economy was driven by private entrepreneurs. Since then, Xi has engineered an unmistakable shift in policy. At the time he took office, private firms were responsible for about 50% of all investment in China and about 75% of economic output. But as Nicholas Lardy, a US economist who has long studied the Chinese economy, concluded in a recent study, “Since 2012, private, market-driven growth has given way to a resurgence of the role of the state.”The author rather blithely skips over the National Security Law.
From the Mao era onwards, Chinese state firms have always had a predominant role in the economy, and the Communist party has always maintained direct control over state firms. For more than a decade, the party has also tried to ensure it played a role inside private businesses. But in his first term in office, Xi has overseen a sea change in how the party approaches the economy, dramatically strengthening the party’s role in both government and private businesses.
International governments have noted Xi’s interventionist instincts with alarm. When US officials were pressed in early 2019 to provide evidence that Huawei, the Chinese telecommunications giant, had facilitated spying on the US and its allies, they pointed out that Beijing had already made their case for them: first with the party’s systematic infiltration of private companies, and second with the introduction of a new national intelligence law in 2017. The law states that “any organisation and citizen” shall “support and cooperate in national intelligence work”. The director of the US National Counterintelligence and Security Center, when asked about China’s entrepreneurs, cited these two policies in asserting that “Chinese company relationships with the Chinese government aren’t like private sector company relationships with governments in the west”.
Such shifts, under Xi, have gifted the US and EU an excuse to limit Chinese access to their markets, technology and companies. Australia has cited the same intelligence law to keep Huawei’s 5G technology out of its future mobile networks. Gordon Sondland, Donald Trump’s envoy to the European Union, gave such sentiment a hyperbolic spin to argue that Europe should do the same. “We want to keep critical infrastructure in the western world out of Chinese malign influence,” Sondland said. “Someone from the politburo in Beijing picks up the phone and says, ‘I wanna listen in on the following conversation, I wanna run a certain car off the road that’s on the 5G network and kill the person that’s in it’ – there’s nothing that company legally can do today in China to prevent the Chinese government from making that request successfully.”
Until recently, such a statement would have been laughed out of court. No longer. Nor would Washington have contemplated the policy of “decoupling” the US and Chinese economies – shorthand for the administration’s commitment, through taxes, tariffs and other punitive measures, to disentangle its companies and their technologies from China’s supply chains.
The relationship between the party and private sector companies is, up to a point, flexible – certainly more so than with state companies. The party doesn’t habitually micromanage their day-to-day operations. The firms are largely still in charge of their basic business decisions. But pressure from party committees to have a seat at the table when executives are making big calls on investment and the like means the “lines have been dangerously blurred”, in the words of one analyst. “Chinese domestic laws and administrative guidelines, as well as unspoken regulations and internal party committees, make it quite difficult to distinguish between what is private and what is state-owned.”
The answer to the question “does the party control a company?” is that it is impossible to tell. In the current environment, fewer foreign governments want to give Beijing the benefit of the doubt. If there was any question as to who was in charge of the economy and business, Xi’s local and overseas critics alike only have to take the Chinese leader at his word, that in private enterprises, as with state-owned firms and every institution in China, the party is the ultimate authority....MORE
Here via China Law Translate:
There is not a lot of wiggle room in Article 7
Article 7: All organizations and citizens shall support, assist, and cooperate with national intelligence efforts in accordance with law, and shall protect national intelligence work secrets they are aware of.All means all, including foreign companies operating in China.
The State protects individuals and organizations that support, assist, and cooperate with national intelligence efforts.
Ditto articles 14:
Article 14: National intelligence work institutions lawfully carrying out intelligence efforts may request that relevant organs, organizations, and citizens provide necessary support, assistance, and cooperation.And 16:
Article 16: When national intelligence work institutions staff lawfully perform their tasks in accordance with relevant national provisions, with approvals and upon the presentation of relevant identification, they may enter relevant restricted areas and venues; may learn from and question relevant institutions, organizations, and individuals; and may read or collect relevant files, materials or items.And then there's The Cybersecurity Law and the Foreign NGO Law (2016) and the Counter-espionage Law (2014) and all worded vaguely enough that the laws can mean whatever the Party and the authorities want them to mean.
Making a bit of a straw man argumentum ad absurdum, the top Canadian spinmeister for one of the companies subject to the National Security Law said:
‘At Huawei, we’re not attaching laser beams to the heads of sharks’
—Alykhan Velshi, Vice President, Corporate Affairs, Huawei Technologies Canada, Markham, Ont.
Letter to the Editor, Maclean's Magazine, published July 23, 2019
Personally I think laser-enhanced sharks would be kind of cool, it's the required handing over of data should the Chinese government request it that gives one pause.
The quibble on the importance of the National Security Law aside, my Mandarin speaking friends say the Guardian article is a fair representation of Xi and how he is shaping China.
