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Decoupled State, Hollowed Civil Society: The Shifting Party-State-Society Nexus

Patricia M. Thornton

In December 2022, a high-stakes decision to delist nearly 200 Chinese companies from US stock exchanges was shelved at the eleventh hour, after months of intense negotiations that kept a trillion dollars’ worth of market capital held by American pension and other investment funds hanging in the balance. At the heart of the dispute was a 2020 law requiring companies to delist from US stock exchanges if they failed to permit US regulators to inspect the work of their principal audit firms. The Holding Foreign Companies Accountable Act, signed into law with bipartisan support after China’s Luckin Coffee chain defrauded NASDAQ investors in an accounting scandal that caused the loss of approximately $11 billion in shareholder wealth, pits US regulators against Chinese authorities who have repeatedly claimed that the mandated audit inspections violate its national sovereignty and put state secrets at risk (Bu 2021). The mandatory delisting was successfully forestalled when China agreed to allow US regulators to conduct inspections of audit work ‘without interference’ for eight state-owned Chinese companies, provided by the mainland China affiliate of KPMG and the Hong Kong affiliate of PricewaterhouseCoopers (PwC). Yet critics remain highly sceptical. In a 2021 letter addressed to the chair of the House Committee on Financial Services, the whistleblowing short-seller who exposed Luckin Coffee’s systemic fabrication of financial data and operating numbers charged that, even if US regulators were able to inspect China-based auditors:

there is no reason to believe that such inspections would be free of CCP manipulation and interference … China has sought to exploit what it perceives as weaknesses in its strategic competitors’ systems. So long as the Communist Party governs China, China will never be what we want it to be.¹

As another specialist testified to the congressional committee, the ‘key aspect of potential risk’ for US investors arises from the blurring of the roles of the Chinese state, the Chinese Communist Party (CCP) and the People’s Liberation Army in China’s business ecosystem: the CCP’s influence within firms has been strengthened immeasurably under Xi Jinping:

through the establishment and reinvigoration of corporate Party committees with individual firms, changes to companies’ Articles of Association, and influence through supervisory boards and trade unions that fall under state control.²

Senator Marco Rubio was considerably more direct, charging that: ‘Under pressure from Wall Street, the Biden Administration struck a bad deal with the Chinese Communist Party.’³

Central to the delisting decision is the role played by the CCP, not only in the mainland China-based branches of the Big Four accountancies, but also in the China Institute of Certified Public Accountants (CICPA), the certifying authority for public accountants in China. The State Council’s initial 2009 plan to press CICPA to accelerate development of the sector, underpinned by a ‘solid political guarantee’, resulted in the formation of a central Party committee within the CICPA’s national office, the creation of CCP branches in accountancies, and Party cells in specific audit engagement teams the following year. By the end of 2010, Party branches had been established in 4,985 accounting firms, or nearly 100 per cent of China’s accountancies, up 80 per cent from the previous year (Wen, Humphrey and Sonnerfeldt 2021, 662).

A decade later, in December 2020, a leaked database containing the personal details of some 1.95 million CCP members revealed the extent to which CICPA’s Party-building had succeeded. The China-based branches of the Big Four accountancies – PwC, KPMG, Deloitte and Ernst & Young – collectively employed more than 2,000 CCP members, including at least one partner in every firm. One KPMG partner was celebrated on a Party-building website for announcing that her chief goal in the workplace was ‘making the red gene take root in KPMG and passing that on through generations’. Another CCP member at a Big Four accountancy admitted that, with the help of the local Party branch: ‘We often organise to learn the spirit of the Party and Xi Jinping thought to improve and arm ourselves.’⁴ At PwC Guangzhou, Senior Partner Chen Jianxiang (陈建翔) serves as the secretary of its internal Party organisation. In 2018, Chen told reporters that, at his branch, the Party-building activities focused mainly on developing more positive interactive relationships with the state-owned enterprises among their clients. PwC Guangzhou account auditors who are Party members, Chen said, are encouraged to:

take the initiative in revealing their identities to state-owned enterprise clients in their work. Using the Party organization as a link, they draw closer to each other, [developing a] relationship that surpasses that of ordinary clients and auditors.⁵

Intensive Party-building efforts have targeted professional associations and chambers of commerce since the beginning of the Xi era, particularly since the 2015 ‘decoupling’ reforms that removed these organisations from state management and oversight. Numbering only a few hundred in the initial stage of market reform, by 2019 there were more than 70,000 such associations covering every sector and level of the Chinese economy.⁶ Once regarded as ‘transmission belts’ of state authority, by the mid-1990s private business associations were technically classified as ‘non-governmental’, despite acting as the ‘close cousins of the “mass” organisations with which students of Leninist systems are so familiar … closely integrated with, and function[ing] under, the leadership of institutions of the Party-state’ (Nevitt 1996, 28). Pearson (1994) characterised their role with respect to the party-state as ‘socialist corporatism’, whereas Unger (1996) drew a distinction between the overtly ‘state corporatist’ professional associations and more ‘social corporatist’ chambers of commerce, which, he argued, had a capacity for ‘bottom-up’ interest articulation and limited autonomy during Jiang Zemin’s rule.

Given this history, the State Council’s February 2021 announcement that 728 national and 67,491 local professional associations and chambers of commerce – 92 per cent and 96 per cent of all such organisations, respectively – had successfully ‘decoupled’ from state control might appear a significant step towards securing their independence. However, since a ‘top priority’ of the decoupling process was the establishment of primary Party organisations in those organisations,⁷ external oversight by state authorities was replaced with more intrusive control by internal Party committees, with regulations mandating disciplinary sanctions for failing to observe democratic centralism and protect the Party’s ‘core’. As Li (2018, 361) demonstrated, whereas close state ties do not correlate to a loss of autonomy for social organisations, Party-building is far more transformative for such groups by ‘affecting their agenda-setting, and even their internal activities’.

Taking the decoupling reforms applied to professional associations and chambers of commerce as a bellwether for the voluntary sector as a whole, I argue that the recent Party-building push alongside the simultaneous rolling back of state management signals an important shift in the balance of power within the ‘party-state-society trichotomy’ (Shen, Yu and Zhou 2020) strongly in the Party’s favour under Xi. Moreover, this expansion of the Party’s power and presence is occurring at the expense of the autonomy of both the state apparatus and the voluntary sector, through both organisational and legal means.⁸ Organisationally, as Huang (2020) noted, the CCP’s relationship to the state apparatus has undergone three distinct phases of development: from an ‘integrated’ or ‘unitary’ party-state model during the Mao era, to an attempted separation during the 1980s, to the current ‘embedded’ party-state model characterised by exclusive ‘Party groups’ and separate ‘Party committees’ internal to the state apparatus. This embedded Party model is now being extended beyond the state into private firms, non-profit enterprise units, charitable foundations and even sports teams and clubs – in other words, across both the economy and the voluntary sector (Thornton 2012). At the same time, the Party’s ‘core leadership’ is reshaping the state’s role with respect to the voluntary sector from a managerial to a more distant, regulatory one. Efforts ‘to deepen and accelerate the separation of the state from enterprises, from government funds, from public affairs, and from social organisations’ (zhengqi fenkai, zhengzi fenkai, zhengshi fenkai, zhengshe fenkai 政企分开、政资分开、政事分开、政社分开)⁹ are thus scaling back the state apparatus in operational terms while also enhancing the Party’s control over both the state and social forces.

New legal and quasi-legal instruments accompany these organisational shifts under Xi, who has stressed the paramount importance of ‘constraining [political] power within a cage of institutions’ (ba quanli guanjin zhidu longzi 把权力关进制度笼子)¹⁰ to vigorously ‘advance building a socialist “rule-of-law country”’ (jianshe shehui zhuyi fazhi guojia 建设社会主义法治国家).¹¹ Existing laws aimed at the voluntary sector were revised and new rounds of legislation drafted at a feverish pace to meet the central leadership’s aspiration of producing ‘a system of social organisations with a separation between state and society, clear powers and responsibilities, and legal autonomy’ by 2020.¹² However, in practical terms, Xi has been accused of ‘weaponising the rule of law’ (Trevaskes 2017) to more tightly constrain both state agents and social associations, while at the same time carving out an expanding extra-legal space for the Party to exercise greater influence and control.

A close reading of major policy decisions and new legislation concerning the voluntary sector informed by an historical-institutionalist approach demonstrates that, instead of breathing ‘new vitality’ into China’s third realm, as promised by Xi’s predecessors,¹³ these developments may have already begun to ‘hollow out’ social organisations. Caught between proliferating laws and regulations, and the Party’s demands to engage in political study and Party-building activities, smaller and less well-resourced social organisations are increasingly straightjacketed by a tightening regulatory environment and are struggling to cope.

The Rise of the Integrated Party-State

Like any new political party, the CCP was but one in a diverse field of social and political organisations. Its early survival depended upon its ability to build alliances with, and harness, other social forces in pursuit of its aims. Chen Yung-fa (1986) detailed how early Party activists relied on mass line tactics, filtered through a dense web of social organisations, to mobilise popular support. Sworn brotherhoods and secret societies in rural base areas were tapped as ‘parochial mobilisers’ and exploited for tactical gains, only to be later discarded or ruthlessly eliminated.

The provisional government of the rural Soviets supervised CCP engagement with social organisations, according to a May 1931 decree that formalised the ‘single united, dual body’ (yiyuan erti 一元二体) (Zhu 2019, 31) of the party-state in the making. The Sixth Party Congress in 1928 called for the establishment of internal Party committees ‘in every non-Party mass organisation and in all administrative bodies [such as in the government and in workers’ and peasants’ unions] if there are more than three CCP members’ so as to ‘increase the influence of the Party’, ‘implement Party policies among the non-Party populace’ and ‘supervise the activity of Party members working in non-Party organisations’.¹⁴ Despite the instability of the civil war period, an estimated 26,126 social organisations – including guilds, study societies and religious groups – persisted in Nationalist-controlled areas (White, Howell and Xiaoyuan 1996).

Once in power, the Party extended its reach over the state apparatus, as well as over existing social organisations. Although both enjoyed degrees of autonomy during the initial ‘New Democracy’ period when the CCP adopted an integrated or unitary party-state model (dangzheng heyi, 党政合一) (Huang 2020), by the mid-1950s, social organisations were either absorbed into the state structure as ‘mass organisations’ or repressed. The 1950 Interim Measures for the Registration of Social Organisations stipulated that the Ministry of Internal Affairs and the Council of State Administration would register and manage social associations;¹⁵ however, in the absence of a centralised system to do so, implementation was irregular. Nevertheless, as Lin (2007, 4) noted, the measures ‘fundamentally “hollowed out” the non-governmental nature of the various surviving bodies’, remaking them in the administrative model of Party and state organisations.

As Ma (2002, 119–20) documented, Mao-era social organisations fell into one of three categories: private organisations inherited from pre-revolutionary times, newly created apolitical professional and charitable groups, and mass organisations established and managed by the state apparatus. Although most social organisations were banned after 1949, a handful of scholarly and professional associations were permitted to continue operating. For example, the Chinese Medical Association and the Chinese Red Cross were used to co-opt educated, technical and managerial elites under the CCP’s ‘united front’. Mao-era social organisations of the second type included newly created professional and charitable groups, such as friendship associations, cultural agencies and a small handful of transnational research exchange associations relied upon by the new People’s Republic of China government to maintain international scientific and cultural ties. Finally, so-called national people’s and mass organisations representing workers, peasants, women and youth operated throughout most of the Mao era. Despite their rather different historical backgrounds, all three types were either transformed into, or established as, government-organised non-governmental organisations during the 1950s and 1960s. By 1965, roughly 100 remained at the national level and another 6,000 at the local level, all under direct party-state control (Xie 2004, 26).

The Party’s institutional absorption of state and social forces peaked in the mid-1960s, when the unitary party-state model evolved into an even more extreme pattern of the ‘Party substituting for the state’ (Zhu 2019, 34). This extraordinary concentration of power in the CCP’s hands arguably facilitated the radical Cultural Revolution practice of ‘kicking out the [old] Party committees to make revolution’, resulting in the ‘triple combination’ revolutionary committees beginning in 1967. These supplanted the established local Party and state organisations with a joint committee of revolutionary cadres, revolutionary masses and People’s Liberation Army forces. It was only after the death of Lin Biao in 1971 that Party organisations gradually began to be re-established at the local level (Zhu 2019, 32), although all 29 provincial-level governments housed ‘interlocking directorates’ under which the first secretary of a provincial Party committee served concurrently as the head of the provincial revolutionary committee between 1970 and 1971, a practice that survived into the early post-Mao era (Zheng 1997, 148, 196).

The Reformist Interregnum

Deng Xiaoping’s interest in party-state reform preceded his rise to power by several decades. As early as 1941, Deng warned that ‘the malady of ruling the country through Party institutions was the best way to paralyse, corrupt, and sabotage our Party, and separate it from the masses’. At a preparatory work conference for the Third Plenum in 1978, Deng condemned the practice of the Party substituting itself for the state apparatus. At the National Science Conference a few months later, he warned that the Party should be relied upon only to provide political leadership, and to ensure that the state was implementing the Party’s line, principles and policies; any internal Party committee or branch ‘should be acquainted with government work and check up on it, but should not attempt to take it over’. In 1986, with the progress of market reforms stalling under the weight of overlapping management by both Party and state officials, serious discussions about clearly delineating separate roles and responsibilities for each were initiated. At a meeting of the Central Finance and Economic Leading Group, Deng stressed that the goal of political reform ought to be ‘to motivate and raise the people’s initiative, and eliminate bureaucratism. The key should be the separation of the Party and the state’ (Chen 1995, 135–50). Zhao Ziyang’s political report to the Thirteenth Party Congress in October 1987 lamented that ‘the long-standing problems of the lack of a separation between the Party and the state, and of the Party substituting for the state, have not been fundamentally resolved’:

The Party led the people in establishing state power, mass organizations and various economic and cultural organizations. The Party should ensure that [these] organs of political power can fully perform their functions, and should absolutely respect but not underwrite the work of mass organizations, enterprises and public institutions.¹⁶

Although abandoned following the 1989 Tiananmen demonstrations in favour of re-embedding Party core groups within state offices, the original 1987 reform program also proposed separating the Party from mass organisations such as the Women’s Federation, the Communist Youth League and the Federation of Trade Unions. In 1988, these organisations had also briefly enjoyed a degree of autonomy from the Party while still being overseen by the state (Chen 1995, 150) before the window closed in 1989.

Mass organisations aside, the General Principles of Civil Law of 1986¹⁷ recognised social organisations as legal persons – along with enterprises, independently funded official organs (including national and local government offices) and public institutions engaged in public service.¹⁸ The State Council issued further regulations in 1988 concerning foundations,¹⁹ and, in 1989, regulations mandating the registration and management of social associations²⁰ as well as temporary measures regulating foreign chambers of commerce.²¹

The 1989 regulations introduced a system of dual management that required social organisations to find a sponsoring government department before registering with the state Ministry of Civil Affairs (MoCA). In return, the sponsoring agency was responsible for carrying out annual inspections of the organisation’s accounts and receiving work reports. Dual registration posed significant barriers, particularly for groups without historic relationships with the state, and those working in politically sensitive areas. MoCA frequently refused to register a social organisation working in a particular field if another was already registered in the same jurisdiction. In some cases, state officials purportedly established and registered social associations themselves to prevent other grassroots groups from attempting to do so (Deng 2010). Although larger municipalities, such as Beijing, Guangzhou and Shanghai, enacted local regulations to manage social organisations, legal and regulatory control prior to 1989 was patchy and uneven (Yan 2007), allowing some groups to evade registration altogether.

Managing Social Organisations under the Embedded Party-State

The aftermath of the 1989 Tiananmen crackdown saw the return of Party core groups to the state structure, many of which had only been dismantled the year before, and the revival of the interlocking directorates of the Mao era (Li and Zhou 2019). However, unlike the system of interlocking directorates that existed under Mao, the deepening of market reform in the 1990s necessitated new legal and regulatory regimes, creating two parallel governing logics. Within the CCP, the majority of Party meetings had long been taken up by the reading, studying and ratifying of policy decisions conveyed by official documents, driven by what Wu (1995) calls ‘documentary politics’. As Zhang (2017) observed, the Party’s ‘rule by document’ historically originated as a means of achieving a more responsive and efficient form of governance: policies issued by decree have the advantage of avoiding a prolonged and cumbersome process of public consultation and collective deliberation, particularly when an urgent decision or policy shift is required. However, since the Fifteenth Party Congress affirmed its intention to ‘rule the country according to law’ in 1997,²² legal frameworks, rules and regulations have increasingly emerged as a system operating in parallel to – and sometimes in competition with – the CCP’s ‘rule by document’, leaving social organisations caught between the two.

Most local governments prior to 1997 had practised a policy of ‘no recognition, no banning, no intervention’ – the so-called Three Noes Policy – with respect to unregistered social organisations. The origins of this practice apparently lie in a 1988 internal-circulation document issued by MoCA to Shanghai municipal authorities who had requested specific advice on how to deal with foreign NGOs. Although issued internally in response to a request for clarification, other local governments quickly followed suit, allowing unregistered domestic social organisations to exist so long as they did not threaten state security or social stability (Deng 2010, 190–1). As Spires (2011) observed, this ‘contingent symbiosis’ between local governments and the voluntary sector proved adaptive for overstretched and under-resourced authorities because charitable groups relieved public welfare pressures and demands. According to Snape and Wang (2020, 16):

State non-implementation was the norm; sporadic implementation was a supplementary habit. Unable or unwilling to register, an estimated 8 million social organisations existed in this grey social space beyond state control.

The Party’s Expansion into the Voluntary Sector

Confronted with the lax implementation of existing laws and regulations, central CCP leaders in 1994 began probing the possibilities of Party-building directly within social organisations (Yan 2007). In July 1996, the Politburo Standing Committee carried out a special investigation of social organisations that culminated in the issuing of its ‘Notice on Strengthening the Management of Social Organisations and Private Non-enterprise Units’,²³ which was released the following month. This notice flagged for urgent attention the possibility that social organisations operating within China were, in fact, ‘supported and manipulated by Western hostile forces’. Targeted with particular scorn was that handful of civic associations that claimed as their ‘backbone members’ ‘those “elites” who were behind the turbulence during the spring and summer of 1989’. In a pattern that would often be repeated in the coming years, the notice called for an overall ‘clean-up and rectification’ of all non-governmental social organisations to be carried out in stages, as well as the revision of existing regulations concerning the registration and management of social organisations and private non-enterprise units ‘as soon as possible’. The rectification and review process quickly became the norm during the 1990s and 2000s, beginning with local test runs to hone techniques before being rolled out in stages keyed to particular deadlines, across the whole of the voluntary sector (Dillon 2011).

In February 1998, the balance of power within the party-state-society trichotomy began shifting more notably in the CCP’s favour. A 1998 notice²⁴ called upon registered social organisations with three or more CCP members in good standing to establish separate internal Party organisations, pending the approval of either their sponsoring organisations or the state agency with which they were registered. At the same time, in the wake of the Fifteenth Party Congress’s 1997 call to ‘govern the country according to law’, the state’s persistent non-compliance began to be brought to heel. Regulations on the registration and management of social associations, and ‘civil non-enterprise units’ – defined as civil non-commercial organisations – were promulgated in 1998,²⁵ followed by new laws governing the management of charitable foundations in 2004.²⁶ The 1998 regulations provided a far more rigorous set of requirements for social organisations and private non-enterprise units to meet before they would be eligible for registration, including (for social organisations) a stipulated level of membership, a fixed address and a minimum financial requirement that made smaller and less well-resourced groups ineligible to register. Fieldwork surveys conducted in 2002–03 in Shenzhen and Anhui found that only 8–13 per cent of grassroots social organisations in the areas surveyed met the requisite standards for registration; self-help associations for farmers and migrant workers, temporary mutual aid organisations and short-term groups – for example, teams organised to plan celebratory or other such events – were deemed ineligible for registration and were therefore rendered technically illegal under the new framework (Xie 2004, 20).

The irony of this dilemma was captured, but by no means resolved, in the November 1999 Notice on Further Strengthening the Management of Non-Governmental Organisations,²⁷ jointly issued by the State Council and the CCP’s Central Committee. The notice decried the fact that ‘illegal civic organisations’ were still on the rise, despite the apparent success of three years of rectification that had reduced the number of social organisations from 200,000 in 1996 to 165,000. Nonetheless, problematic organisations remained. The notice named the Laid-Off Workers Association, the Veterans Association and the Migrant Workers Association as ‘illegal social organisations with quite complicated international backgrounds’. It also sounded the alarm over the Falun Dafa Research Association,²⁸ which had organised the largest outdoor mass protest since 1989 outside the Zhongnanhai leadership compound a few months before. In addition to reiterating the commitment of the Fifteenth Party Congress to build a ‘rule of law country’, the 1999 notice stressed the importance of not only strengthening the management of social organisations of all types in accordance with law, but also in developing new legal instruments to manage the voluntary sector as a whole.

Equally noteworthy was the notice’s observation that ‘Party organisations have not yet been widely established in civil society organisations’. The notice labelled the problem of illegal social organisations ‘a serious political struggle that concerns the destiny of the Party, the success or failure of socialism, and the fundamental interests of the people’, and called for an accelerated development of laws and regulations on the one hand, and a strengthening of the political leadership of social organisations through Party-building on the other. Social organisations with three or more Party members were required to establish separate internal Party organisations no later than 30 June 2000. A few months later, the Organisation Department followed with its detailed ‘Views Regarding the Strengthening of Work of Establishing the Party in Social Organisations’, which repeated the call for accelerated Party-building to ensure that the voluntary sector ‘adheres to a correct political orientation’, carries out ‘political thought work’, and complies with national laws and regulations.²⁹

By the time the Sixteenth Central Committee’s Fourth Plenum issued its 2004 call to ‘strengthen the Party’s governing capacity’,³⁰ a nationwide Party-building drive was already well underway. Aimed at ‘comprehensive coverage’ across so-called two new organisations (i.e. new economic and social organisations established since the adoption of market reforms), by 2008, the Party-building drive had resulted in the creation of new Party branches in 53.5 per cent of eligible social associations, 55 per cent of eligible private non-enterprise units and 51 per cent of eligible foundations nationwide (Sun 2009, 204–5), which had also just come under the purview of newly promulgated regulations.³¹

Decoupling State and Society

Under Xi Jinping’s leadership, the Party has unquestionably become more assertive in countering and constraining the power and prerogative of the state and its agencies ‘within a cage of institutions’. In redressing the perceived persistent non-compliance of state authorities with respect to the voluntary sector, as well as concerns that state offices might actually be benefiting (financially or otherwise) from their sponsorship of various associations, the Party under Xi has scaled back the state’s responsibilities, an approach that has been characterised as the ‘the state’s retreat and the Party’s advance’ (Li 2005; Thornton 2013; Shen, Yu and Zhou 2020, 71), and has begun instituting mandatory decoupling of social organisations from the state administration. At the same time, particularly in the wake of the 2008 financial crisis, the Party has firmly steered social associations at all levels through the deployment of ‘strategic’ incentives and ‘modular’ patterning in the direction of what Teets (2013) recognises as a form of ‘consultative authoritarianism’, encouraging a ‘civil society’ that enjoys a degree of autonomy but is still subject to indirect control from central officials. Whereas, under Hu Jintao (胡锦涛), social associations were able to advocate more or less actively for limited policy change, Xi Jinping’s robust efforts to recentralise control has left the voluntary sector with considerably less political space within which to operate (Teets and Almen 2018). Howell (2019) documented the transformation of the Hu–Wen-era welfarist incorporation in the direction of securitisation under Xi, who has overseen the most sustained and severe crackdown on rights-based and other advocacy groups since 1989.

In March 2013, the State Council announced broad plans for institutional reform,³² including a shift from the state’s management of the voluntary sector to a more distant regulatory role. Concluding that one reason for the persistently high number of illegal social groups was that the requirements for registration remained too high, the new scheme floated the idea of abolishing the dual management requirement for certain categories of social organisations, including for business and professional associations. The 2013 plan called for the decoupling of state agencies from social organisations and the introduction of competitive pressures to boost efficiency across the sector. The dual management requirement was partially lifted from private non-enterprise organisations, allowing them to register directly with MoCA as ‘social service organisations’; the state’s role was trimmed back to the tasks of registering them and monitoring their compliance with existing laws and regulations.

Two years later, in 2015, the CCP Central Committee issued an ambitious opinion (for trial implementation)³³ laying out a bold new model for the party-state-society trichotomy that placed the Party at the centre of all social organisations. While reasserting ‘the self-governance of social organisations according to law’, the opinion also called for ‘merging the Party’s work with the operations and development process of the social organisation’, with ‘social organisations and their staff closely united around the Party, constantly expanding the influence of the Party in social organisations’. Within a few months, the Party Central Committee issued further new regulations that extended the Party group system across every possible organisational sphere, including the voluntary sector. Revised in 2019, the regulations explicitly applied the principle of democratic centralism to Party groups in social organisations, requiring them to implement all the decisions and policies of the Party’s central leadership or face disciplinary sanctions.³⁴

Read together, the new scheme reworks the obligations of state agents dealing with social organisations such that they are now responsible for registering and certifying Party-building at the point of application. State agencies serving as the registering authority certify the compliance of social organisations with the requirement that they build and maintain an internal Party organisation, as well as a Party group composed of the leading full-time staff members and officers of the social organisation in question. Successful Party-building has been added to the key performance indicators for cadres within the registering authority. Party organisations within the registering authority are tasked with sharing office space and resources with the social organisation’s internal Party committee if necessary, whereas the social organisations are permitted to deduct the costs associated with Party-building from their taxable income allowances, in essence shifting assets and resources away from the state to support Party-building (Snape and Wang 2020, 17).

Under the new regime of ‘rigid embedding’ (Xu 2017) in eligible social organisations, Party-building responsibilities have become part of the annual evaluation process, with results reported regularly to the registering state authority. However, surveys show considerable disparities in the achievement of these goals. In Guangdong, which ranks second nationwide in terms of its number of social organisations and a CCP penetration rate of 86.6 per cent in 2015, Party-building work accounts for 30 of a possible total of 1,000 points, with 950 points required to attain the 5A rating needed to bid for government contracts as social service providers.³⁵ In Sichuan, where social organisation formation lags behind, less than 6 per cent of existing social organisations – or fewer than 100 – attained a 3A rating or higher, the minimum qualification to allow for the transfer of responsibility for some social services. Few social organisations assisting vulnerable populations in Sichuan were thus able to meet the minimum requirements for registration: less than 25 per cent had three or more CCP members as employees or volunteers, inhibiting the establishment of independent internal Party organisations. Of those with internal CCP branches and committees, many hosted Party ‘organisations without activities, and activities without value’ (Li 2017, 24–6).

Other obstacles abound: turnover rates are high for NGO staff and volunteers alike, making it difficult to maintain stable internal Party branches. Some social organisations, such as chambers of commerce, are populated chiefly by economic migrants who may be registered Party members back home and are reluctant to transfer their memberships to their current place of residence (Xu 2017). Most charitable organisations are too resource-poor to build a Party branch (Chen 2012). Many Party members in social organisations are reluctant or unwilling to take on the burden of Party-building, regarding it as a distraction; some are contemptuous of, or repelled by, such demands to the extent that they even conceal their Party membership rather than participate (Li 2016; Chen 2017). Likewise, registering authorities tend to ‘take economic development as the unyielding aim, and Party-building as a soft target’ (Yang and Hu 2018), prompting widespread ‘organisational idling’ in which requisite Party branches are established in name only to meet annual performance targets. One 2007 survey in Changsha found that 41 per cent of grassroots Party branches in the voluntary sector carried out few to no activities; in Shenzhen, a 2008 MoCA survey found that while only 19.8 per cent of Party branches in social organisations carried out activities ‘frequently’, 19.8 per cent of members found the events ‘dull, boring, and unimaginative’ (daiban, fawei, quefa xinyi 呆板、乏味、缺乏新意) (Chen 2012, 38).

Despite mounting evidence that the compulsory embedment of Party cells in social organisations has produced reactions ranging from ‘indifference’ and ‘perfunctory acquiescence’ to ‘antipathy to the extent of resistance’ (Chen 2012, 38), the 2015 decoupling reforms³⁶ nonetheless called for state agencies to end their sponsorship of all professional and industry associations and chambers of commerce, which are to host internal Party branches instead. Building upon the CCP Central Committee’s 2013 decision on comprehensively deepening reform³⁷ and the State Council’s 2013 institutional reform program, the Overall Plan ordered state agencies to delink from professional and industry associations and chambers of commerce by ‘five separations and five norms’ (wu fenli, wu guifan 五分离、五规范), separating institutions, functions, financial assets, personnel and Party-building, while protecting the same standards or norms of conduct for both state offices and social associations across all five realms. The plan was piloted in two rounds, involving 148 national-level associations in 2015 and 144 in 2017 (Ma 2020, 36–7).

To be clear, the 2013 Overall Plan did not end state oversight altogether: to the contrary, it called upon the state to strengthen a more circumscribed form of supervision by ensuring compliance with existing regulations working through those agencies responsible for taxation, finance, audit and public security. Its release was accompanied by a flurry of media reports detailing state corruption and failure in managing associations, which were said to have fallen ‘captive’ to the local officials supervising them. For example, in 2015, the Chinese Calligraphers Association either expelled or suspended 18 members, 16 of whom were either current or retired state employees receiving generous sinecures for serving as officers in the association. Media reports that appeared on the heels of the Overall Plan decried the ‘widespread’ practice of state officials receiving ‘hats’ from social organisations in exchange for facilitating their registration and management, leading to the forced withdrawal of 887 state cadres in Shaanxi in 2014 from such duties. In addition, in the case of the Shaanxi branch of the Calligraphers Association, a central inspection team found that calligraphic scrolls produced by state cadres were being sold through the association at greatly inflated prices to further pad their modest state salaries. One provincial inspector observed:

Once these officials took on roles within the association, the price of their works rose rapidly, not because their calligraphy had increased in artistic value, but because their power and official status boosted their worth.³⁸

In other cases, state officials were accused of embezzling membership fees from industry associations, misappropriating public funds in the name of supervising such organisations, or exerting undue influence over the setting of industry or environmental standards in return for generous kickbacks.³⁹

Yet, decoupling was by no means uniformly welcomed, either by state agencies or by the professional associations and chambers of commerce themselves, many of whom were reliant on state subsidies and administrative support. One 2014 survey of the full-time staff of chambers of commerce and professional associations had respondents pre-emptively complaining that ‘decoupling is dumping the burden [on us]’ and that ‘decoupling means losing our status’. Others lamented: ‘After decoupling, how will the Party Committee and state guarantee our survival and development?’ And: ‘How can we operate without higher-level supervision?’ (Ma 2020, 41). In one city in Jiangsu, of the 440 professional associations and chambers of commerce that underwent mandatory decoupling in 2016, 188 were unable to establish internal Party organisations two years later: 75 because the CCP members within their organisations were already registered elsewhere, and 42 because they had no CCP members at all within their ranks. Building new Party organisations proved so complicated for the municipal authority that the task had to be ‘triple-subcontracted’ out to various state agencies, causing ‘serious disconnection problems and a hollowing-out of the Party building process’ (Cheng and Xu 2018, 39). Another survey of 11 professional associations and chambers of commerce in one Shanghai district found that only one-third managed to adapt after decoupling from the state and building Party branches, whereas the majority found it difficult to proceed without the resources and administrative support previously supplied by their supervising agencies. A few within the sample indicated that they would likely cease operations once their extant surplus funds had been exhausted (Zhao and Zhou 2020), a clear sign that the new Party-building requirement is serving to extinguish, rather than to stimulate, the vitality of the local voluntary sector.

Party Supremacy

Nie and Wu (2022) confirm that Xi Jinping’s new Party-Building Campaign has proved ‘unprecedentedly resolute and compelling’ across the voluntary sector. Shortly after the 2015 CCP Central Committee’s declaration that it aimed to ‘effectively cover’ all social organisations, the CCP appointed MoCA’s Social Organisations Management Bureau (SOMB) with overseeing Party-building across the sector. SOMB routinely conducts investigations of social organisations, provides training and support for Party organisations within NGOs, and regularly publishes lists of illegal and non-compliant social organisations. Its successes earned SOMB’s former director Zhan Chengfu a promotion to vice minister of MoCA in 2018; shortly thereafter, MoCA issued a new directive requiring all social organisations to revise their articles of association to include a commitment to establish a Party organisation, carry out regular Party-building activities and uphold socialist core values.⁴⁰ As recently as March 2021, MoCA introduced a new campaign to ‘cleanse the social organisation ecological space’ by orchestrating ministerial initiatives across 22 functional systems – including education, public security, state security, justice, finance, housing and foreign exchange – to deprive non-compliant social organisations of access to the space and resources they need to operate and to strip away the ‘cloak of legality’ beneath which some organisations have continued to operate (Snape 2021). Thus, the ‘legal grey zone’ (Froissart 2018) that once allowed both local state authorities and unregistered charities and NGOs to quietly coexist and function with a certain degree of autonomy is rapidly being erased.

The state’s role in China’s voluntary sector has been significantly rolled back and reshaped under Xi Jinping, reduced to facilitating registration, auditing and clearing the way for the Party’s further advance. The requirements of Party-building are transforming the voluntary sector by shrinking the scope for autonomous action and discretion on the part of social organisations. Internal CCP branches have been found to police compliance with the Party’s political line (Wang 2017), divert organisational resources away from the organisational goals in favour of Party tasks (Lin 2007) and encroach heavily on the ‘agenda-setting’ process from within (Xiang 2017). Unfortunately, early evidence suggests that Party-building requirements are rapidly instituting isomorphism across a once highly varied and heterogenous field, thereby ‘hollowing-out’ the sector as a whole (Nie and Wu 2022). The growing presence and visibility of internal Party groups in national-level professional associations, like the CICPA, as well as in high international profile entities like the Big Four accountancies, is raising serious questions about the reliability and quality of China-based firms, and therefore eroding the confidence of foreign investors. The narrowly averted delisting of some of China’s largest and most lucrative firms from US stock exchanges may only serve to delay, rather than reverse, a deeper process of economic decoupling that is already underway.

These are worrying signs as Xi embarks on his third term in power. As early as 2016, Ross and Bekkevold warned that the ‘most fundamental contradiction’ underpinning Xi’s style of governance was that ‘between the interests of the Chinese Communist Party and the Chinese state’. They predicted that the Party’s increasing reliance on confrontational and nationalistic policies would produce ‘increasingly uncertain prospects’ that could undermine the fundamental interests of the state in furthering economic trade, cooperation and development (Ross and Bekkevold 2016, 277–8). If such trends continue, it is difficult to envision how Xi might conceivably deliver on his initial promise of the ‘China Dream’.

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