Chinese Businesses Not Like US

I had a section on the differences between Chinese businesses and ours in my first book.  Jamil Anderlini had an interesting article on this in the Financial Times over the weekend and confirmed a couple of things that I discussed.  The first is that the Communist Party has a lot more power than business leaders, and the position in the Party will trump any position in the business structure.  Anderlini points out that the Chinese have two mechanisms to keep the Party in control of state-owned businesses.  The Party appoints all managers above a certain level [ he doesn't say what that level is, but it may vary on the size of the company ]  and operates cells in all state-owned businesses that "function as a parallel power structure..." that controls the actions of the business.  The head of the companies are often the leaders of that cell.  Xi Jinping left no doubt he wants to strengthen that control and those appointments.

Second, China admits to having 150,000 state-owned enterprises with more than $16 trillion in assets.  Aviation, Finance, and Petro-chemicals are dominated by state-owned industries, acting as monopolies.

We gloss over the differences too often.  When our businesses do their work in China, they operate with several disadvantages because the Party has an interest in protecting its investments in State Owned Enterprises (SOE).  They steal our technology and plow that back into other SOEs to make themselves successful. Picking winners and losers is a hard thing for a government to do.  As the Chinese markets crashed, you can bet the SOEs got first dibs on the money that state put into reviving the economy.  These businesses are too closely linked to the people who oversee them.  We can't pretend they are like us.  They aren't even close.