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Strange Bedfellows: Communist Party Institutions and New Governance Mechanisms in Chinese State Holding Corporations

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  • McNally Christopher A.

    (East-West Center)

Abstract

Analyses of corporate governance problems in China's state sector have mainly focused on administrative interference from state agencies. So far the influence of Communist party institutions has received little attention. Although the influence of ideology has diminished greatly, the Chinese Communist party continues to monitor and control economic actors at every level of the state sector. This article shows that the institutional structure through which the party executes its monitoring and control functions has a corrosive effect on the day-to-day governance of the vast majority of state enterprises. The party's management structure aggravates the inadequate monitoring of managerial performance, weakens managerial incentives, and amplifies insufficient corporate transparency, thereby allowing state asset managers to carve out informal spheres of autonomy. These spheres of autonomy create opportunities for insider control, economic corruption, and the illicit privatization of state assets. Effective and sustainable privatization and corporate governance reforms in China's state sector will thus require the party to substantially diminish its authority over state sector executives.

Suggested Citation

  • McNally Christopher A., 2002. "Strange Bedfellows: Communist Party Institutions and New Governance Mechanisms in Chinese State Holding Corporations," Business and Politics, De Gruyter, vol. 4(1), pages 1-26, April.
    • Handle: RePEc:bpj:buspol:v:4:y:2002:i:1:n:4
    DOI: 10.2202/1469-3569.1032
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    Cited by:

    1. Holz, Carsten A., 2018. "The Unfinished Business of State-owned Enterprise Reform in the People’s Republic of China," MPRA Paper 94093, University Library of Munich, Germany.
    2. Wei YU, 2013. "Party Control in China’s Listed Firms," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(4), pages 382-397, August.
    3. Chi, Wei & Wang, Yijiang, 2007. "Ownership, Performance and Executive Turnover," MPRA Paper 3545, University Library of Munich, Germany.
    4. Chi, Wei & Wang, Yijiang, 2009. "Ownership, performance and executive turnover in China," Journal of Asian Economics, Elsevier, vol. 20(4), pages 465-478, September.
    5. Choon-Yin Sam, 2013. "Partial privatisation and the role of state owned holding companies in China," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(3), pages 767-789, August.
    6. Chen, Christopher Chao-hung & Guo, Re-Jin & Lin, Lauren Yu-Hsin, 2023. "The effect of political influence on corporate valuation: Evidence from party-building reform in China," International Review of Law and Economics, Elsevier, vol. 73(C).

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