Wal-Mart China Workers Set Up Communist Party Branch

From the Wall Street Journal:

Wal-Mart Stores Inc., the world’s biggest retailer and an icon of American capitalism, said local employees have established a branch of the Communist Party at its China headquarters.

The party branch was set up in the office in the southern city of Shenzhen where Wal-Mart runs its fast-growing China business, said Jonathan Dong, the company’s spokesman in China. The latest branch, which was inaugurated Friday, follows the establishment of similar party organizations in five Wal-Mart stores across the country since August, Mr. Dong said.

Other multinational companies operating in China also have party branches, and analysts say they generally don’t interfere with such companies’ management. The party’s constitution requires that any company with more than three party members among its employees set up a branch.

Still, Wal-Mart’s acquiescence to the party cells – a decade after it opened its first store in China – reflects a stepped up effort to ingratiate itself with a country that it sees as increasingly vital to its future growth. The establishment of party branches follows a similar retreat for Wal-Mart in July, when the company – which has remained largely union-free elsewhere – caved to strong pressure from China’s All-China Federation of Trade Unions to allow union branches in its stores. The government-sanctioned union has quickly spread to almost all Wal-Mart’s Chinese stores.

The establishment of the party branches and trade unions are “part of Wal-Mart’s efforts to integrate with China,” and follow the rules of the country, said Mr. Dong.

China, with its double-digit economic growth and potentially huge pool of middle-income consumers, is drawing growing interest from foreign retailers facing tapering growth in their home markets. Wal-Mart Chief Executive Lee Scott has repeatedly said China is the only country where it can feasibly duplicate the size and success it has had in the U.S.

Along with French competitor Carrefour SA, Wal-Mart has ramped up its store openings in China following the liberalization of China’s retail regulations at the end of 2004 – the result of pledges China made to join the World Trade Organization in 2001. Over the past two years, the number of Wal-Mart stores in China has shot up by 58% to 68, with one more scheduled to open by the end of this year.

In October, the Bentonville, Ark., retailer signaled its intention to scale up its China operations further, offering $1 billion to buy Trust-Mart, a chain of Taiwanese-owned hypermarkets.

The Communist Party’s spread into Wal-Mart also shows how the party is changing. Party groups have long played an important role in state-owned enterprises, but in recent years it has made efforts to embrace entrepreneurs and increase its presence in private businesses. Other foreign companies that have Communist Party branches in China include local the subsidiaries of U.S. chemical giant DuPont Co. and Japanese retailer Isetan Co.

Lu Xianfu, the recently retired director at the Party School of the Chinese Communist Party’s Central Committee, said building these branches helps foreign companies “better develop their businesses” by raising the role of party members in the companies. In addition, he said, “it helps our party to unite the public.”

Xia Jincheng, party secretary in Wal-Mart’s Tianjin store, said most members in Wal-Mart’s party cells are midlevel or senior executives who participate actively in its activities, such as studying party materials. His branch has 20 party members, said Mr. Xia, who also heads Wal-Mart Tianjin’s public relations department.

Posted by Laura Jack on Monday, December 18, 2006

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