When China began to require Western corporations to establish Chinese Communist Party (CCP) cells, businesses brushed off the move as benign. For example, when HSBC became the first international financial institution at which workers established a Chinese Communist Party cell in its investment banking venture in China in July, the bank stated that the CCP committee does not influence the direction of the firm and has no formal role in its day-to-day activities. But the CCP may have begun to flex its muscle in other ways. This week, the CCP cell inside the Beijing office of Big Four accounting firm EY demanded that party members wear CCP badges at work in the run-up to China’s annual parliamentary meetings. The presence of CCP cells in Western financial institutions may not mean that communists are managing your money. However, they spell trouble for Western businesses operating in China.

The CCP is a master practitioner of lawfare, or the purposeful use of law to achieve strategic objectives. In a recent legal salvo, the CCP launched several reforms to increase Party influence in the corporate world. In January 2020, a CCP regulation required all Chinese state-owned enterprises (SOEs) to amend their corporate charters to include the Party in their governance structure. SOEs must now appoint a Party secretary to serve as chairman of any corporate board, and establish CCP committees to facilitate Party activities and advance government policy. In September 2020, the General Office of the Central Committee of the CCP released a report asking China’s United Front Work Departments to spread Party ideology and influence in the private sector, including integrating Party leadership into all aspects of corporate governance.

Recently, the China Securities Regulatory Commission began requiring the creation of CCP cells in foreign financial firms as well. Within Chinese corporations, CCP committees serve as labor unions. In some cases, they function as a way to install a party member in a corporation’s executive ranks. The Party’s aim seems to be to ensure that private sector businesses fall under Party influence and will work with it to achieve national goals.