The Chinese government has set out its stall for a harmonious future and, at least on paper, corporate responsibility has a part to play
The Chinese government, in the form of the central government in Beijing and municipal, regional, provincial and township authorities, still remains by far the most important framer of the corporate responsibility debate where it exists in China.
The national government – the current administration led by Hu Jintao and Wen Jiabao – has had the concept of the “harmonious society” (he xie) at its centre, shifting China’s focus from economic growth to one of societal balance and harmony. Some time in 2012, around the autumn, the Hu-Wen team will stand down and a new leadership will emerge. But it is likely that this emphasis on the harmonious society will remain in force as the guiding policy of the Chinese government. Therefore, all government statements on social policy, worker rights and corporate responsibility must be put in the context of the harmonious society policy.
Though harmonious society is of course not a democratically decided policy and is ultimately in place to ensure regime survival for the Communist party, it is also the case that it has led to some pro-corporate-responsibility measures. Primary among them has been the passing of Article 5 of the 2006 Chinese company law requiring firms to “undertake social responsibility” in the course of conducting business.
Though vague and effectively unenforceable, the mention of corporate responsibility in Chinese law was a breakthrough. A recent report from Ivey Business School in the US – Winds of Change: Corporate Social Responsibility in China – noted that, despite the inclusion of corporate responsibility in the company law, “enforcement has been relatively lax”.
Indeed, Ethical Corporation has sought examples of any enforcement and found none. In this sense, little has changed in the past few years – the Chinese legal system remains as problematic as ever for those seeking to enact corporate responsibility initiatives at a policy level.
Beijing digs in
As long as the Chinese economy remains on its current growth trajectory it seems unlikely that there will be any direct threat to the Communist party and its rule. Many China analysts argue that the state has indeed become more powerful in recent years.
Kerry Brown, head of the China programme at the London NGO Chatham House, notes in his recent book Ballot Box China that the growing programme of village elections of a few years ago has been virtually halted now after setbacks for the ruling party.
Richard McGregor, the former Financial Times’s Beijing bureau chief, notes in his book The Party that the government has become more, rather than less, involved in Chinese companies (listed and unlisted) and state-owned enterprises through shareholding and joint stock arrangements. This has coincided with crackdowns on cultural freedoms, perhaps best exemplified by the arrest and detention of China’s leading artist Ai Weiwei. However, there have also been more welcome clampdowns on corruption in the past 18 months.
Some believe that progress has been made. Ethical Corporate noted in the conclusion of our China Briefing in 2010 that too many company managers in China perceived corporate responsibility as simply PR, something for the investor relations team to prepare a press release on.
This has started to change as government regulations on corruption, social welfare provision and tangential issues such as intellectual property have become stricter. Similarly, competition to secure remaining manufacturing contracts in a recessionary world have meant that western brands can demand more from their suppliers now than they could previously. Under-capacity in manufacturing has become over-capacity, meaning a new set of rules for China’s manufacturing heartlands.
At the same time there is a growing awareness of corporate responsibility among the public, an important component now for both domestic and foreign companies as the Chinese domestic consumption market becomes seen as crucial to long-term growth for many corporations.
Public opinion may well be stifled in China compared to the west, but the blogosphere is active and discussion is healthy. It is a far from a perfect world in terms of corporate responsibility in China, but perhaps a growing number of companies are starting to take it seriously.
Being mandated by law to enact corporate responsibility initiatives is a clear improvement. But there are issues to work on. Corporate governance and transparency among Chinese companies remain low; effective communication of programmes remains poor among many foreign companies in China; and Beijing’s resistance to independent and freely operating NGOs remains a block. Perhaps most inexcusably, foreign company “aloofness” and low levels of disclosure in China have yet to be addressed.