China to increase government presence in private corporations

China move to increase government presence in the private sector, including huge corporations like Alibaba. Specifically, the government of China’s tech city, Hangzhou, is sending officials to 100 local corporations, in an effort to increase control over the growing private sector in the communist state. 

The website of Hangzhou, in the eastern province of Zhejiang, revealed in their website that they are going to assign representatives from to government to different corporations in order to streamline the collaboration between the company and the government, as well as to expedite projects. 

Chinese beverage giant Hangzhou Wahaha Group Co. and automaker Zhejiang Geely Holding Group Co. are two of the private Chinese companies that were affected by the city’s move. 

The press release in the city’s website said that their move was part of the government’s effort to implement their new “new manufacturing plan” and the “[translated] the strong kinetic energy of Hangzhou’s “double engine” development.”

“[translated] It is necessary to thoroughly study and implement the important guiding spirit of General Secretary Xi Jinping on the development of the manufacturing industry, and resolutely implement the relevant work arrangements of the provincial party committee and the provincial government and the spirit of the Seventh Plenary Session of the 12th Municipal Party Committee. In order to be successful, I don’t have to be in my heart and my strength, I must be determined, continue to exert strength and work hard for a long time. I will vigorously promote the high-quality development of the manufacturing industry in the new era and form the powerful kinetic energy of Hangzhou’s development of “double engine,” Zhou Jiangyong, member of the Standing Committee of the Provincial Party Committee and Secretary of the Municipal Party Committee said in the meeting. 

While the Hangzhou government said that their move was to help facilitate the technology and manufacturing industry in the region, it can also be perceived as China’s move to control the industry, which accounts to be the second-biggest economic mover in the country and to gain influence in the private sector. 

Analysts also believed that this is also a way that China may be monitoring the private sector amid the threat of losing economic deceleration. The Chinese government may also be looking out for possible job cuts amid the volatile economy. 

“They might be checking whether the Communist party units are working effectively within the companies,” said Paul Gillis, a professor at Peking University’s Guanghua School of Management. “While China legitimized capitalism, the level of government influence was never intended to disappear. Occasionally private entrepreneurs forget about this and are reminded of it.”

In recent years, amid the efforts of the Chinese government to keep the private sector in its pocket, the relationship between them still remains sensitive. The government has since tried to establish a presence in different non-state firms and companies, by among other things mandating that private company of scale set up and maintain a Party branch.

“We understand this initiative from the Hangzhou city government aims to foster a better business environment in support of Hangzhou-based enterprises. The government representative will function as a bridge to the private sector, and will not interfere with the company’s operations,” Alibaba said in a text statement. 

Until now, it is still unclear whether the 100 companies where state representatives were dispatched to included foreign entities and corporations. 

Meanwhile, Brock Silvers, managing director of Kaiyuan Capital also believes that the move of China to increase government presence in corporations could be a way for the government to mitigate the effects in the economy of the ongoing trade war against the United States. 

“The economic slowdown and trade war is having a significant impact on China’s manufacturing base, and officials probably don’t see a quick resolution on the horizon,” Silvers said. “As the government expects manufacturers to experience near-term difficulties, it wants to exert firm control over local policy decisions and implementation.”

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