There Are No Actual Private Companies in Communist China

Australia’s Foreign Investment Review Board has adopted a stance that no Chinese private company is free from Beijing’s control. (Image: via pixabay / CC0 1.0)
Australia’s Foreign Investment Review Board has adopted a stance that no Chinese private company is free from Beijing’s control. (Image: via pixabay / CC0 1.0)

Australia’s Foreign Investment Review Board (FIRB) has adopted a stance that no Chinese private company is free from Beijing’s control. Hence, FIRB is moving forward to treat all Chinese companies, whether they present themselves as private or not, as state-owned firms.

The illusion of a Chinese private company

A “private company” is an idea that originated in the free democracies of the West. The concept is founded on the fundamental right to private ownership and protection from third-party interference. So if the U.S. government asks a company to hand over its patents or customer data, the business can say no. And if the administration tries to use force to take such information from the company, the firm can file a complaint in the courts and take the government to task.

In China, the ruling communist government is the absolute authority in the country. Though courts exist, the Chinese Communist Party (CCP) can easily override judgments in its favor. If Beijing asks a company operating in Shanghai to hand over data of American citizens it had collected through a smartphone app, then the business has no choice but to comply with the order. Non-compliance can lead to the business being shut down as retaliation by the government.

As such, there is no real private company in China since the right of personal ownership is not absolute like in the U.S. People can own things only to the extent that the Chinese government allows. Recognizing this fact, the FIRB is screening all direct investments from China very closely.

The China-Australia Free Trade Agreement, which went into effect in 2015, confirms that private businesses can engage in transactions up to US$255 million in sensitive business sectors without FIRB approval. However, with the new policy that equates Chinese private companies with Chinese state-owned businesses, it remains to be seen how Australia will change the treaty.

Australia, China strike landmark free trade deal 중국, 호주 자유무역협정 타결 1-17 screenshot

The China-Australia Free Trade Agreement confirms that private businesses can engage in transactions up to US$255 million in sensitive business sectors without FIRB approval. (Image: Screenshot / YouTube)

Security issue

If Chinese companies are in no position to deny any instruction from Beijing, how can a country trust that their actions are not dictated by the CCP or the information they collect will not be shared with the Chinese regime? Unfortunately, you can’t. “The Chinese have done their private companies a great disservice… Chinese companies will do as they are told,” an anonymous source who has knowledge of the reasoning behind FIRB’s decision said in a statement (The Epoch Times).

The only reasonable decision an independent democracy can make regarding such companies is to disallow them to operate in sensitive sectors. This is why the U.S. and allies like Australia and New Zealand have been ditching Huawei products, as intelligence reports suggest that the company is working with the CCP to steal personal information of citizens.

Inside a Chinese tech giant 0-25 screenshot

The U.S. and allies have been ditching Huawei products due to intelligence reports suggesting that the company is working with the CCP to steal personal information of citizens. (Image: Screenshot / YouTube)

Though Beijing likes to blame the ban on Huawei as a “Western conspiracy against China,” the truth of the matter is that there is no conspiracy. It’s simply a matter of espionage.

If China were to become a democracy tomorrow where the rule of law is respected, offering a strong legal system and absolute protection of private property, the issue of mistrusting private companies would not be valid. But since the CCP is in no mood to allow companies to operate freely without supervision, businesses in the country have to bear the consequences of its actions.

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