"The notice called for a full understanding of the importance of further promotion of the establishment of party subsidiary organizations in non-publicly-owned economic organizations. The non-publicly-owned economic organizations are a crucial component of the party’s grass-roots organizational work. In recent years, the work of party buildup in non-publicly-owned economic organizations has been vigorously advanced, but generally speaking there is still weakness, such as limited coverage of the party organizations and widely existent ‘difficulties in launching activities and playing effective roles.’” [1]

"(The noticed required that) in non-publicly-owned economic organizations with three or more party members, a grass roots party organization is to established; those with less than three party members can either partner with organizations in the same region or industry to set up a joint party organization or rely on industry and business federations, self-employment associations, private enterprise associations, trade associations, and industrial leaders to institute a party branch. Those that qualify for the conditions to have party organizations should do it actively and timely. For those non-publicly-owned economic organizations that for the time being do not meet the conditions to establish a party branch on their own, a higher level party organization can dispatch a political instructor to create the conditions for the establishment of a party branch in the future." [1]

"Additionally, the notice stressed to pick the right person to be in charge of the party organization in non-publicly-owned economic organizations, especially the secretaries. It emphasized to appoint to the leading positions those who have a strong party character, understand business operations, are capable of management, and are good at working with people. For the economic organizations that do not have a suitable candidate, after consultation with the company, the higher party branches may recommend or appoint someone for the job. … A timely adjustment is needed where those persons in charge of party branches are not competent to hold their position." [1]

"The notice also called for playing effective roles in the grass roots party organizations in non-publicly-owned economic organizations. … (It required) improving the education, management, supervision, and services for the party members in the non-publicly-owned economic organizations. (The notice asked to) do a good job in actively and steadily recruiting party members in non-publicly-owned economic organizations, to pay close attention to enrolling party members among people who work on the frontline of production as well as among the outstanding youth, to discover, train, and recommend talented people, and to strengthen the education and training of those who are active in joining the party to ensure the quality of new party members. … (It expected to) further improve the leadership and guidance of the party organizations in non-publicly-owned economic organizations, and effectively resolve issues such as the lack of operating funds and lack of activity venues." [1]

Prior to this, on July 2, 2009, Xinhua.net published another article by Zhong Youping, a member of the party branch of the State Administration of Industry & Commerce (SAIC). Zhong Youping “asked the party branches at all levels below SAIC as well as party branches of all the associations of private firms, to adapt to local conditions and times, and actively advance the party buildup in private firms." "Zhong Youping requested that the party branches of all the industrial and commercial authorities and private firm associations focus especially on larger enterprises, and take effective approaches to expand the coverage of party organizations. The enterprises that do not yet meet the conditions to establish a party branch on their own may adopt formats such as ‘joint formation with other enterprises,’ ‘joint formation with local communities,’ and ‘relying on trade associations, under the guidance of the organization department." "Zhong Youping emphasized that the party branches of the industrial and commercial authorities should establish party organizations, conditional on consent from the organization department of the local party committees and relying on private enterprise associations at each level. They should timely enroll the mobile party members from private enterprises in grass roots party organizations, so as to reduce the ‘blind spots’ and ‘blank spots’ of party coverage.” [2]

Last year, there were special instructions from the higher authorities at the CCCCP, calling for strengthening the ideological and political work of people from the non-publicly-owned enterprises. Owners of some private enterprises seemed to show positive responses to “political trainings to enhance ideological and political enlightenment” by saying “This makes the corporate direction more clear; we will just follow the party.” [3] Some said that this policy can “develop and strengthen a team in private enterprises that will firmly support the party’s leadership and unswervingly take the road of socialism with Chinese characteristics.” [3]. On November 8, 2009, Global Times under People’s Daily reported that, driven by Weng Jieming, Chongqing City’s Municipal CCP Committee member and chief of Chongqing’s United Front Department, the Chairman of Chongqing’s Creative Business Association, Zhou Jin, on behalf of Chongqing’s Association of Industry and Commerce, signed the ‘Cooperative Agreement for an Advanced Training Course for Representatives of Non-Public Enterprises in Chongqing, with the Central Party School, sending a group of 59 representatives from private firms to the Central Party School for a week long training.” “In the organizer’s view, this ‘Advanced Training Course for Representatives of Private Enterprises’ was to be very significant for the enterprises to be in sync with the government on ideology.” The report quoted the class leader of the training, the chairman of Chongqing Construction Materials Business Association, and CEO of the Ao’yun Group, Sun Renyuan, who said, “This was not only a power charge, but an opportunity for us to upgrade our political consciousness and accurately steer the direction of private enterprise development.” The report said at the end, “In fact, as early as 2001, there was a ‘fever’ for owners of private enterprises across the country to go and study at the Central Party School. The ‘External Training Center’ under the Central Party School, responsible for giving short trainings and ad hoc classes, was also established that year. According to their data, since then, nearly ten thousand private enterprises owners have attended these training courses." [3]

Compared to building party organizations in the private enterprises, the CCP’s policy in state-owned enterprises is to ensure that these businesses are always under the party’s leadership. [4] As for how to maintain the core position of the party in the state-owned enterprises, on August 27, 2009, People’s Daily published a commentator’s article, stressing “firmly establishing the party branch as the political core in the governing structure of state-owned enterprises is a valuable experience learned from 30 years of reform and practice, as well as an important principle that must be strictly followed while strengthening and improving party development work in state-owned enterprises. It reflects the distinctive character and requirements of the modern Chinese state-owned enterprise system." [5]

"The basic channel for the party branches to play a core political role is to actively participate in the decision making process on the enterprises’ major issues. Party branches in enterprises should focus on major issues, the big picture, and a clear direction. For major decisions and important personnel appointments and removals that matter for the overall reform and development of the enterprise, as well as critical issues that involve personal interests of the employees, the party branches should give serious study and discussion, and put forward opinions and suggestions. In order to participate in the decision-making process on major issues, it is necessary to strengthen the buildup of the system, make the issues transparent, standardize the procedures, and improve the mechanisms. On one hand, this will assure the board’s unified decision making power on major issues. On the other hand, the opinions of the party branches are respected and reflected in the decisions, (representing) a real combination of the party organization’s participation with the board’s decision making on major issues." [5]

"The key for the party branches to play a core political role is to perform a leading role in the selection and appointment of personnel. The leading role is reflected in the party branches’ determination of standards of hiring, and also in recommending candidates, improving the evaluation system, strengthening supervision and management, training reserve personnel, and so on. Adhere to the principles of the party’s managing cadres, combined with the board’s selection of managerial talent and managers deploying personnel; also adhere to the principles of the party recommending hires, combined with market oriented hiring of managerial personnel. Vigorously advance the reform of the human resource system to make enterprise personnel selection and appointments institutionalized and standardized with proper procedures, so as to both adapt to the requirement of the corporate governance structure and ensure the party’s leading role in the selection and appointment of hires inside the enterprise.” [5]

“The fundamental requirement for the party branches to play a core political role is to assure and supervise the implementation of the nation’s principles and policies inside the enterprise. The party organizations in the enterprises should not only pay attention to supervision of human resources, finance, and materials, and of key personnel in the enterprises, but also strengthen the supervision of how well the enterprises are carrying out the Concept of Scientific Development and national policies. The party should push the enterprises to play their leading role in national economic growth and carry out their political and social responsibilities.” [5]

"Truly carrying out the party branches’ core political role in the corporate structure of state-owned enterprises cannot be done without the support of necessary policies and mechanisms. … It is necessary to build an operational mechanism to ensure that the party organizations will give full play to their central political role. … The party has superiority on political ideology, leadership, and experience working with people. Only if adjustment is first made on the operation mechanism, can these advantages of the party (enhance) the core competitiveness of the state-owned enterprises. In turn, the party branches’ core political position will be consolidated, the party’s development work will become a crucial part of the values of the enterprise, and the party branches will truly become an integral part of the modern state-owned enterprise system with Chinese characteristics." [5]

The StudyTimes.com.cn published an article on October 12, 2009, detailing the measures to maintain the core political position of the party branches. “To ensure that the enterprises are always under their party’s leadership, we must create an organizational establishment, and strongly push for the model that ‘every subsidiary and division of an enterprise has a corresponding party branch.’ Within administrative agencies, institutes, state-owned enterprises, non-publicly-owned enterprises, China-Hong Kong joint ventures, and other ownership entities, we can establish stand-alone, joint, or affiliate party branches. This is to guarantee that wherever a business identity develops, the party organization and organizational work will also go. … Have middle-level leaders and cadres wearing party, administration, and business hats to cover all divisions and subsidiaries of the enterprise, making sure that the party’s leadership is everywhere. … At the same time, pay great attention to choosing good party branch secretaries with strong party character and who are good at ideological and political work, so that the party cadres take care of all of the internal divisions and subsidiaries who will be focusing on party buildup.” “Insist on advancing corporate cultural development through party buildup, and community cultural development through corporate cultural development. Actively deploy media outlets that carry the party buildup, including party journals, party newspapers, propaganda bulletin boards, and websites. Establish party member service centers, party member responsibility zones, party member pioneer posts, and conduct the activities of ‘showing your party nature.’” [4]

Endnotes:
[1] Xinhua, November 16, 2009
http://news.xinhuanet.com/politics/2009-11/16/content_12470825.htm
[2] Xinhua, July 2, 2009
http://news.xinhuanet.com/politics/2009-07/02/content_11640304.htm
[3] Global Times, November 18, 2009
http://china.huanqiu.com/roll/2009-11/636187.html
[4] Study Times, October 12, 2009
http://www.studytimes.com.cn/WebPage/ny1.aspx?act=0&id=2980&bid=11
[5] Chinese Academy of Social Science, August 27, 2009
http://www.cass.net.cn/file/20090827239716.html

I. Focus on the global economic transformation behind the financial crisis

From the perspective of the long-term business cycle, the current world financial crisis is, in essence, a crisis of the world business cycle. The world’s economic history shows that a global economic crisis has often been the drive and opportunity for major scientific and technological innovation and new industries. … Now that the period when the IT industry was the engine for economic growth has ended, there is a lack of new industry to be the economic growth engine. Thus the huge amount of capital accumulated during the high-tech period flew to the real estate and financial industries. Financial investors and real estate developers jointly created a deformed engine for U.S. economic growth: a virtual economy. From this perspective, the global financial crisis is essentially a business cycle crisis. As a result, our key strategy dealing with the financial crisis should be not simply to reconstruct the financial order, but to remake an industry in the real economy.

The looming new economy has the following three characteristics.

First, a new energy revolution is solving the problems of human civilization that could not be solved within the framework of the industrial economy. Energy and environment are global difficult problems that constrain sustainable growth of the industrial economy. … The new energy revolution, with renewable energy at its core, marks the birth of a new wealth manufacturing model and production method for human beings.

Second, new energy will enable a series of new industries and new technologies. … A leading industry should have three major characteristics: it affects the overall economy, its technology is universally adopted, and it constitutes the basic industry for economic development. The emerging new energy revolution has all of the above three characteristics.

Third, the incentive mechanism for the new energy revolution has matured. … Among the economic stimulus plans in response to the financial crisis, energy and environment have suddenly become the investment targets of developed countries. This is definitely not a consequence of the developed countries all of a sudden having raised their moral standard for protecting the environment. Rather it is an indication of the formation of an incentive mechanism for new energy and environmental industries. The reason why the financial crisis became an opportunity for the new energy revolution is that the economic crisis greatly damaged traditional industry and its incentive mechanism, bringing the advantages of a growing new industry to light, and ushering in opportunities for marginal industries, which can now enter  the decision making horizon for government and business investment.

II. Obama’s new policy aims to promote economic transformation and seize the new economic heights

First, the purpose for Obama’s new policy of developing new energy sources as its core strategy is to seize the new economic heights. The way the U.S. is responding to the financial crisis is to treat the financial crisis as a crisis of a hollow real economy, and to use the development of new energy as a way of reviving the U.S. economy and occupying the strategic high ground of the new economy.

Second, Obama’s new policy focuses on the long-term goals of economic development and structural adjustment, rather than immediate economic growth. Since Obama took office, his three-step plans are all about how to advance structural reform and strengthen economic competitiveness. The first step was the "American Recovery and Reinvestment Act of 2009," passed by Congress, with a 787 billion investment, which established developing new energy as the core of the revival of U.S. economic long-term goals. The second step was to stress test companies in crisis, so as to strengthen the U.S. economy’s microstructure function. The third step was, after six months of deliberation, the announcement of Obama’s Remarks on the 21st Century Financial Regulatory Reform, on June 17, 2009, at the White House. This started the financial system reform from the angle of system innovation, to create a positive financial environment for the new economy.

Third, Obama’s new policy raised the development of the ecological economy that combines high-tech and eco-focused concepts as a strategic priority to rebuild the U.S. image and to enhance its competitiveness. … The U.S., a country with innovative and adventurous spirit, can often make strategic decisions and choices during periods of major change. This is worthy of our research and study.

III. The lesson learned from the failure of the Japanese economic transformation during the 1980s
 
As early as the 1980s, having achieved huge success in its strategy of catching up with developed countries, Japan also experienced a period of world economic transformation similar to what China is facing today. In the 1980s, when the world economy went through a transformation from the electric economy to the information economy, Japan and the U.S. adopted two different strategies, resulting in two completely different paths of development after the 1990s. The failure of the Japanese economic transformation during the 1980s raised several issues that are worth consideration.

First, Japan did not realize the limitations of the model of "growth by following," but instead mistakenly viewed it as a growth model that creates miracles. The high speed economic growth in Japan after World War II is a typical model of "growth by following." Its advantage came from two aspects: first, after the introduction of Western technology, Japan gained technological advantages through second-round innovation, that is, innovation after its introduction from the West. Second, the cost advantage during the initial economic growth period helped it receive the industries transferred from Europe and the U.S. With these two advantages, Japan achieved high economic growth, catching up with other developed countries, and "squeezing" into the development space of the U. S. and Europe.
 
The advantage of the model of "growth by following" is to catch up with others while learning, instead of leading the trend through original innovation. … But Japan has not recognized the limitations of the model of "growth by following." In fact, Europe and the U. S. have also been confused by an illusion about such a temporary high growth model. … During the late 1980s, there was a widely recognized view of a “Japan threat” in the U.S., triggering competition between Europe, the U. S., and Japan. Today when we look back, this is clearly a misunderstanding: Japan cannot become a threat to Europe or the U.S. using the model of "growth by following."

Second, when facing global economic transformation, Japan did not respond strategically, but rather continued along the traditional thinking. … Under pressure from the U. S., Japan mistakenly chose the expansion of domestic demand as its strategic plan for new economic growth. They lost sensitivity to the global economic transformation with the satisfaction of economic achievement. To ensure continuous growth, Japan’s strategic focus remained on the existing traditional industries, channeling the huge capital surplus accumulated during decades of economic growth into domestic consumption. A large amount of capital entered into real estate and the stock market, leading to the bursting of the real estate bubble, and the financial crisis, which dragged the Japanese economy into a downturn for more than a decade. At the same time, the U. S. reallocated its social resources to the new high-tech economy as a strategic priority, resulting in the U. S. being the biggest winner in the information economy in the 1990s.

Third, Japan mistakenly attributed its economic recession to the failure of its monetary policy. … Throughout the 1990s when the Japanese economy was in a predicament, Japan did not reflect upon its growth model, but blamed the financial crisis, following the Keynesian theory and monetary theory. Japan failed to fundamentally reform its unique institutions such as the government-led economy, the monopoly of large business, and lifetime employment, which inhibited innovation. Japan’s economy has thus been lingering in a low growth path because of adopting the model of “growth by following.”

IV. Breaking through traditional thinking: some thoughts on promoting China’s strategic transformation
 
China has three advantages that support its transformation: First, we have begun to realize the limitations of importing growth models. Although we have not yet recognized such a limitation at a model level, people have begun to realize it from the perspective of transition in growth modes. Second, we are very sensitive to the new energy revolution and ongoing global economic transformation. Third, China’s cost advantage will continue to play a role in the new economy. At the same time, we are also facing three major obstacles: First, obstacles from vested interest groups. The 21st century has seen the Chinese economy enter a phase of heavy industry. Two vested interest groups were formed in the process of wealth accumulation, namely monopolistic business groups and local governments at various levels. As the monopolistic business groups are the source of tax income for the local governments, the two groups relied upon each other, forming an obstacle to strategic transformation decisions. Second, the obstacle of success-led habitual thinking. The success of China’s reform has achieved world acknowledgement. In the face of this success, we may be repeating the scenario Japan experienced during 1980s. We may gain strong self-esteem amid the views of the “China threat theory,” making the mistakes Japan made during 1980s, and forgetting the limitations of importing growth models. With the habitual thinking of simply applying our past experiences to the future, China’s economic transformation would be an empty word. Third, the obstacle of lack of motivation for transformation. Major economic transitions often come from opportunities created by major economic crises, as a crisis provides motivation for change. China is one of the least impacted countries in the current financial crisis, and is generally considered the first country to walk out of the crisis. This is obviously a good thing, but it has also formed an obstacle for China to meet the challenges and opportunities of global economic transformation. We may lose motivation to transform in our satisfaction with good growth momentum.

To this end, I hereby propose some thoughts on promoting China’s strategic transformation.

First, we must strengthen our awareness of the limitations of importing growth models. We should reflect upon the limitations of China’s reform model, and the successes and lessons from past transformation during the new China’s 60 year history from the perspective of responding to the world and China’s economic transformation. Without the transformation of China’s economy and society from a politics centered policy to an economy centered policy, starting in 1978, we would not have achieved the economic success we have today. Similarly, if we fail to achieve the transition of the growth model, we will not have a better tomorrow. We should strengthen the sense of crisis among all party members.

Second, policies should change direction from assuring growth to facilitating transition. Macroeconomic data from the first half of the year shows that China’s economic growth began to stabilize and recover. This indicates that the growth oriented policies in response to the economic crisis have achieved their goal. In such a situation, China’s strategy should change from assuring growth that helps recovery from crisis, into promoting transition that recreates the growth engine.

Third, under the guidance of the Concept of Ecological Civilization, we should deepen the reform of government functions, and break through the obstacle of the government’s vested interest groups. The key is to promote reform of government functions, management methods, and management objectives. According to the requirements of the Concept of Ecological Civilization raised at the 17th CCP National Congress, if we want to promote the eco-economy, green GDP, and a low-carbon life style as the goal of transition, the key is to promote transitions in government management and management objectives.

Fourth, I suggest to strengthen strategic planning and theoretical research into the eco-economy under the guidance of the Concept of Ecological Civilization, so as to provide theoretical support for China to enter an era of eco-economy. From the heights of transformation of the economic structure, against the background of transitions in the world economy, we should explore the laws of ecological civilization and eco-economy, new growth models, and new civilization models suitable for China and the world’s harmonious growth. This is a new challenge and opportunity after the establishment of a market economy with Chinese characteristics.

Endnote:
[1] Study Times, November 2, 2009
http://www.studytimes.com.cn/WebPage/ny1.aspx?act=1&id=3019&nid=11017&bid=4&page=1