The Increasing Influence of Party Organizations in Chinese Internet Firms

• In Event: Domestic Sources of China’s Overseas Policies

Abstract

As Chinese internet firms (CIFs) have rapidly expanded into foreign markets, democracies have become increasingly concerned that these firms pose security risks by serving as instruments of Chinese government influence. However, it is unclear how much the Chinese government constrains the free behavior of CIFs. One indicator of government influence is the presence of Chinese Communist Party organizations (POs) in CIFs, but there is little empirical evidence about their prevalence and impact. A second indicator is state ownership, and although China’s private-owned enterprises (POEs) vis-à-vis state-owned enterprises (SOEs) hypothetically ferry less government influence, the difference is challenging to quantify. How much do these indicators modify CIF behavior? I use a text as data approach on a large corpus of publicly listed CIF financial disclosures spanning 2003–2022 to show that PO intensity and state ownership alter international engagement. I find that, first, POs are significantly increasing their activity within CIFs over time, especially within SOEs. Second, CIFs are increasingly using POs as talent pools for leadership positions, especially SOEs. Third, POEs are more likely than SOEs to operate internationally, while SOEs are more likely to operate in BRI states. At the same time, CIFs with a higher level of PO intensity are engaging more with Belt and Road Initiative countries. Finally, high PO intensity CIFs engage more broadly across Asia, overall.

Author

• Geoffrey Joseph Hoffman, University of California, San Diego