China ignoring US demand for trade war reform by reinforcing state-directed economic model
- Beijing increasing the influence of state-owned enterprises as well as Communist Party intrusions into boardrooms of private companies
- Reforms of state-owned enterprises has been a key demand by US President Donald Trump during trade war negotiations, including the ‘Made in China 2025’ plan
China is reinforcing its state-directed economic model despite demands for change from the United States as a condition to end the trade war, and is in fact increasing the influence of state-owned enterprises and the Communist Party’s intrusion into the boardrooms of private companies, as highlighted by a string of recent events.
On Monday, the State-owned Assets Supervision and Administration Commission (SASAC), which directly supervises more than 50 trillion yuan (US$7.3 trillion) of state assets, announced that China Poly Group, one of the industrial giants under its scope of influence, would absorb China Silk Corporation as part of a government restructuring plan.
The consolidation of state-owned enterprises has also touched local government-owned firms, especially those in resources, port and overcapacity industries. In the first half of this year, controlling stakes in at least four listed firms, including Hainan Strait Shipping and Maanshan Iron & Steel, have been shifted from local governments to the SASAC.
Also on Monday, filmmaker Huayi Brothers Media joined the growing ranks of leading private firms that have set up Communist Party cells within their organisations. Similar party organs have been established in more than 1.5 million non-public corporations nationwide, official data showed.
Li Yiping, a professor of economics at Renmin University, defended China’s growth model, saying it already had characteristics in common with market economies, including corporate entities with clear ownership, market mechanisms that played a decisive role in resource allocation, and a role for government to provide necessary public services and development guidance.
“There’s not just one market economy model. It is even different among developed countries,” he said in an article published on Tuesday on the website of People’s Daily, the mouthpiece of the Communist Party.
His comments represent an increasingly vocal faction in Beijing policymaking and Chinese academic circles that is calling for the country to stick to its current development model, regardless of pressure from the US.