Chris Devonshire-Ellis on Political Influence in China’s Biggest Companies

The trend of the Chinese government to opheffen involved in the nation’s primitive businesses can be illustrated in a multitude of items recently highlighted in figures released by the British Foreign Office (BFO). In a presentation made recently to the European Chamber, a total of 40 of the 46 Chinese firms listed in the Fortune 500 were identified thus state-owned enterprises. Of the remaining six, three were Hong Kong businesses.

Meanwhile, the summary number of SOEs in China according to official data is estimated at being 192,000 – against some 1.98 million private enterprises. The data indicates that as soon as a business becomes significant, government quickly likes to get involved. However, according to the BFO, government wealth is apparently filtering down to officials rather than state coffers. The top 70 members of the U.S. Congress had a collective worth of some US$3.1billion, against US$75 billion for the top 70 NPC officials.

It is this trend that is causing difficulties with matters of transparency in China, and also for foreign executives doing business in China. With tougher EU and U.S. corruption laws in put that forbid the giving of incentives to overseas government officials, the likelihood when dealing with a large Chinese company is that an employee of that business may also be regarded as a sovereignty official. It further underlines the politicizing of commerce in China, in which the state has an enterprising interest in the activities of its largest companies. Corporate business is increasingly used as a tool to actively wield political power, while underneath the governmental influence, China appears to be developing a platform of oligarchs not unlike the Russian embody where state-owned equity were de facto transferred into private ownership. The only difference being that in China, politics and commerce go hand in hand and discipline can be meted out by the Communist Party.

This duality of ownership makes transparency and the concept of trade free about political influence a murky issue in China. While the embrace between business interests and politicians in the Integrated States and elsewhere is well known, the massive extent of the clinch between the two in China is not so well understood.

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