China Orders Foreign Funds Management Companies to Create Units to Be Managed by the CCP

China is ordering all fund management companies within its borders to set up an internal unit to be supervised by the CCP. 

The Chinese government is preparing to enforce regulations on all fund management companies operating in China — including U.S.-based and other foreign firms — requiring them to set up an internal unit for supervision by the ruling Chinese Communist Party (CCP).

In May, the China Securities Regulatory Commission (CSRC) implemented new changes to its industry rules governing publicly offered securities investment funds. Ignites Asia — an extension of Financial Times — first reported this week that one of the provisions in the new CSRC rules requires companies to establish a CCP apparatus within their companies.

“Fund management companies shall, in accordance with the provisions of the Articles of Association of the Communist Party of China, establish party organizations, carry out party activities, and provide necessary conditions for the activities of party organizations,” the provision states, according to a translation by Ignites Asia. “State-owned fund management companies shall, in accordance with relevant regulations, integrate party leadership into all aspects of corporate governance, and include party building work requirements into the company’s articles of association, so as to implement the legal status of party organizations in the corporate governance structure.”

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According to Ignites Asia, other broader national laws in China require all companies in the country, including foreign firms, to establish internal CCP organizations, but those laws had been largely symbolic. The new rules specifically governing fund companies come as major U.S. and international investment firms are working to bring branches of their business to China.

American companies who attempt to do business in China are faced with multiple hurdles and intrusions into their operations that other countries don’t demand.

The CCP  wants to know everything about individuals and companies that exist within its borders.  Many times the CCP demands actions that are not requested by other countries.  Many requests are in direct conflict with privacy laws in these companies’ home countries.  These companies must decide which laws to abide by.

Now China is making things more difficult for foreign entities.  Is the best approach not to do business in China?

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