Don’t panic! Party leadership is China’s answer to West’s corporate governance issues, say SOE bosses
Foreign firm threatened to quit JV over inclusion of Communist Party leadership in company articles, GAC chairman says on sidelines of Fortune Global Forum
A foreign firm this year threatened to walk away from a joint venture with Guangzhou Automobile Group (GAC) after the Chinese side lobbied to include “the leadership of party” in company articles, GAC chairman Zeng Qinghong said on the sidelines of the Fortune Global Forum in Guangzhou on Friday.
“Foreigners, particularly those from Europe, do not understand how we work to weave party leadership into corporate governance and improve it. I would say there is no reason to panic,” he said during a panel discussion on the outlook for state-owned enterprise reform in China.
Zeng did not clarify which joint venture encountered the dispute about including the Communist Party of China’s leadership in day-to-day operations and value system. GAC is a state-controlled car maker based in Guangzhou that owns several joint ventures, including those with Honda and Fiat Chrysler.
The GAC chairman’s concern and eagerness to persuade foreign companies about the importance of strengthening the party’s role in state-owned enterprises is shared by other bosses.
China has been pushing reforms to strengthen its 131.7 trillion yuan (US$19.9 trillion) state sector, by wooing foreign and private capital, talent and expertise from Western companies, but an intensive plan to bolster the role of the party in companies in the past months has triggered concern from non-state shareholders over efficiency and conflict of interest.
“[For management of state-owned enterprises,] there is always a question about how to balance the desire for better efficiency with social purposes on top of profitmaking obligations … my understanding is there is not going to be a satisfactory result,” Arthur Kroeber, founding partner of the Beijing economic research company Gavekal Dragonomics, said during the panel discussion, adding that he was concerned about the outlook of state-owned enterprise reform as he did not see a clear direction chosen by the leadership when facing contradictory missions and fast-piling debts.
