It is widely agreed by foreign multinational corporations operating in China that the Chinese Communist Party (CCP) is strengthening its influence — often gaining direct decision-making power — over the international firms doing business in China.

CCP officials are increasingly calling on companies to support the creation of party organizations among their employees. The potential for party groups to influence corporate decision making has raised concern among many US company executives - such an environment is only adding more stress to the US-China commercial relationship.

Since taking power, Xi has reasserted the CCP's supremacy, with himself as its “core” leader. This has meant greater control over personnel and strategy at state-owned enterprises, which control about 40 percent of the China’s industrial production, as well as schools and universities. Xi’s chief policy-making instrument has been an increasing array of party “leading small groups,” which set and coordinate policy. 

Foreign companies are concerned about the establishment of a party unit in a foreign company and what this means should the CCP play a broader role in foreign companies’ operational decision making. For example, making decisions which are political rather than for business reasons. 

No doubt American business is telling the Trump administration such moves by the CCP into potential management roles of foreign-invested enterprises is not a positive step for the commercial relationship. 

Should the current trade irritation between China and the United States worsen, Beijing could be moved to intensify the party’s role in foreign business further, even allowing the boycotting of American goods and services, creating yet more headaches for businesses operating in China.

This real time business environment has put American companies in particular in the middle of a brewing fight between Beijing and Washington.

Enjoy the ride.

-Marc A. Ross

Marc A. Ross is the founder of Caracal Global and specializes in global communications and thought leader management at the intersection of politics, policy, and profits. Working with boardrooms and C-Suite executives from multinational corporations, trade associations, and disruptive startups, Marc helps business leaders navigate globalization, disruption, and American politics.