China's SOE reforms tighten Party control of economy

Subject

Communist Party control over businesses in China.

Significance

China has openly confirmed and legalised the direct influence of the Communist Party in the business decisions of state-owned firms, undermining the roles of market forces and the board of directors in corporate governance. Foreign joint ventures also report coming under political pressure to give their Party committees a formal say in management decisions.

Impacts

• Formalising Party control of SOEs does not directly affect private firms, but the underlying intent to exercise more control could.
• If internal policy in general became less constrained by a desire to placate foreign partners, the repercussions would be serious.
• Chinese exporters will face further anti-dumping measures from regulators overseas.
• EU members that do not use anti-dumping procedures against China may support recognising China as a market economy anyway.