China Instructs Foreign Fund Management Companies to Create Units Managed by CCP

China has ordered all fund management companies within its borders to set up an internal unit to be controlled by the Central Committee.

The Chinese government is preparing to impose regulations on all fund management companies operating in China – including US-based and other foreign companies – requiring them to set up an internal device for oversight by the ruling Chinese Communist Party (CCP).

In May, the China Securities Regulatory Commission (CSRC) introduced new changes to its industry rules managing publicly available investment funds for securities. Ignites Asia – a sequel to the Financial Times – first reported this week that one of the provisions of the new CSRC rules requires companies to set up a CCP apparatus in their companies.

“Fund management companies, in accordance with the provisions of the Statute of the Communist Party of China, establish party organizations, carry out party activities and provide the necessary conditions for the activities of party organizations,” the regulation said, according to a translation by Ignites Asia. “State fund management companies must, in accordance with the relevant provisions, integrate party leadership in all aspects of corporate governance and include party building requirements in the company’s articles of association so as to implement the legal status of party organizations in the structure of Corporate management.”

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According to Ignites Asia, other broader national laws in China require all companies in the country, including foreign companies, to establish internal CCP organizations, but these laws were largely symbolic. The new rules that specifically govern stock companies come as major US and international investment intermediaries work to bring branches of their business to China.

American companies trying to do business in China face many obstacles and incursions that other countries do not require.

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

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

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