The Role of the Party Committee in State Owned Enterprises and Stakeholder Representation in China

The recent introduction of party committee into China’s SOEs has raised concerns in the West of political interference by the CCP in the SOEs’ operation thereby affecting the objectives and efficiency of the SOEs. The introduction of SOEs’ duty to implement CSR without detailed mechanism since 2005 has also raised questions on how this duty is to be fulfilled by SOEs. This paper traces the developments of CSR in China, the struggles of SOEs to improve efficiency that ultimately led to the introduction of the party committee system, the extend of its implementation in China SOEs and the evidence of its efficiency or otherwise, and identifies some of its weakness, and proposes a modification in the form of stakeholder representation in the party committee or SOE board of directors to further improve the efficiency of party committee or board of directors and to implement CSR more effectively.