China Steps Up Communist Party Control in State-Owned Firms

(Bloomberg) -- China's Communist Party issued new rules for state-owned enterprises, giving it greater control of companies that span industries from energy to banking and telecommunications.

Wholly or majority state-owned companies must “integrate party leadership into every part of company governance,” according to rules published Sunday on the central government's website. The regulation took effect at the end of last month on a trial basis.

The rules formalize some steps China has been taking over the past few years to improve performance at state-owned companies. The government's role in owning and operating enterprises has also exacerbated trade tensions with the U.S., where some officials have said the system gives China's companies an unfair advantage in global trade.

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China's effort to strengthen party control of the companies started in 2015, when the government issued guidance to establish party organizations into company bylaws. Chinese President Xi Jinping stressed the legal role of those bodies in company management at a meeting in October 2016.

Following Xi's speech, many state-owned enterprises in Hong Kong wrote the role of party committees into their bylaws, while critics raised concern over growing state control in the international financial hub's free market.

To contact the reporter on this story: Shirley Zhao in Hong Kong at xzhao306@bloomberg.net

To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, Dave McCombs, Sharon Chen

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