Time US Businesses Leave China as it Forces Foreign Firms to Create Communist Party Units

Xi Jinping gives remarks to Vladimir Putin in Russia/ Kremlin.ru via (https://creativecommons.org/licenses/by/4.0/deed.en) Wikimedia Commons

In a sign that Communist China is getting more totalitarian, even with foreign investment fund management firms operating on its soil, the Chinese regime is now requiring all these foreign firms, including American ones, to set up an internal unit for surveillance and supervision by the ruling Chinese Communist Party (CCP).

Other Chinese national laws require all companies in the country, including foreign firms, to establish internal CCP organizations, but those laws had been largely symbolic.

Until now.

Ignites Asia — an extension of Financial Times — first reported that in May, the China Securities Regulatory Commission (CSRC) implemented new changes to its industry rules governing publicly offered securities investment funds.

And now, this week, it reported that one of the provisions in the new CSRC rules requires that these companies establish a CCP organ within their companies.

According to a translation by Ignites Asia, the provision states:

Fund management companies shall, in accordance with the provisions of the Articles of Association of the Communist Party of China, establish party organizations, carry out party activities, and provide necessary conditions for the activities of party organizations.

State-owned fund management companies shall, in accordance with relevant regulations, integrate party leadership into all aspects of corporate governance, and include party building work requirements into the company’s articles of association, so as to implement the legal status of party organizations in the corporate governance structure.

Logan Wright, the leader of the China Markets Research for the Rhodium Group, told Ignites Asia that “It’s another small signal that China’s system is increasingly diverging from global business practices and norms, rather than converging with them over time.”

Wright added that the requirement for foreign businesses to accept a CCP unit within their structure will “add to the perceived political risks associated with deepening foreign investment in China.”

Coincidentally, the new rules specifically governing fund companies come as major U.S. and international investment firms are working to bring branches of their business to China.

As American Military News reported:

A Shanghai-based lawyer who works with foreign business managers told Ignites Asia that this rule is the first explicit “party organization” requirement for the public fund industry. The lawyer, who declined to be named due to the political sensitivity of the matter, told Ignites Asia the new rule applies to foreign-Chinese joint ventures and the Chinese subsidiaries of wholly foreign-owned companies working in China. U.S. multinational firms like BlackRock, Fidelity and Neuberger Berman are among these entities expanding into the Chinese market.

Maybe it’s time these huge American investment businesses stop ‘trading with the enemy’ and focus their powerful financial efforts elsewhere. ADN

Paul Crespo is the Managing Editor of American Defense News. A defense and national security expert, he served as a Marine Corps officer and as a military attaché with the Defense Intelligence Agency (DIA) at US embassies worldwide. Paul holds degrees from Georgetown, London, and Cambridge Universities. He is also CEO of SPECTRE Global Risk, a security advisory firm, and President of the Center for American Defense Studies, a national security think tank. - paulcrespo.substack.com - PAULCRESPO.COM

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