China ignoring US demand for trade war reform by reinforcing state-directed economic model

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.