Germany’s peak trade representative to China has warned that many businesses may withdraw from the country following the Chinese Communist Party’s push for the establishment of internal party branches within enterprise.
The Delegations of German industry and Commerce in China said in an official statement released last week that the CCP’s efforts to increase its influence within foreign companies was have a detrimental impact on business.
“We do not believe that foreign-invested companies generally should be required to promote the development of any political party within company structures,” said the Delegations, which represents the Association of German Chambers of Industry and Commerce in China.
“Should these attempts to influence foreign-invested companies continue, it cannot be ruled out that German companies might retreat from the Chinese market to reconsider investment strategies.”
Over the past five years the CCP has sought to dramatically expand its influence within foreign-invested enterprises via the establishment of internal party organisations.
Figures from the Central Organisation Department released last month indicate that the number of foreign-invested enterprises with internal party branches had increased to around 106,000 at the end of 2016, as compared to 47,000 in 2011.
70% of foreign-funded companies in China have established internal party branches, as compared to 67.9% of private enterprises in the country.
Qi Yu, deputy head of the Central Organisation Department, hailed the establishment of party branches within foreign-invested enterprises at a press conference last month.
According to Qi the party branches can help senior executives to better understand government policies and resolve labour disputes, and claims that the move has been welcomed by foreign enterprise.
Some domestic media outlets have censured the statement made by the Delegations, defending China’s right to push for the establishment of internal company branches and claiming they put no pressure on foreign enterprises.
An editorial piece entitled “German Enterprise Threatens Mass Withdrawal from China, the Reason is Extremely Mysterious” (德企威胁要集体退出中国，理由却极为魔幻) published by Sina said that “everyone must know that the establishment of party branches is a right conferred upon party members by Chinese law.
“Article 19 of our ‘Company Law’ stipulated that a company only needs more than 3 official party members in order to be able to establish a party branch.”
The editorial further claims that large-scale foreign enterprises have expressed no complaints concerning this stipulation.
“We pursued inquiries with many large-scale German enterprises in China, including renowned German auto companies such as BMW, Audi, and Volkswagon, and discovered that whether or not they had party branches, none of them felt that the establishment of party branches would put pressure on the company, given that this is a stipulation of Chinese law, and any enterprise that has come to China to develop will make such preparations.”