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Transparency and Opaqueness in the Chinese ICT Sector: A Critique of Chinese and International Corporate Governance Norms

  • Colin HAWES (a1) and Grace LI (a2)

This article critiques the current Chinese corporate governance framework and the OECD Principles of Corporate Governance (OECD Principles) on which the Chinese framework is largely based through detailed analysis of public disclosures by four prominent Chinese internet and communications technology (ICT) firms. These include State-controlled firms (China Telecom & China Mobile), mixed ownership (ZTE), and privately-controlled firms (Huawei Technologies). The article argues that neither Chinese nor international corporate governance norms deal adequately with the complex group structures that are so common among large Chinese firms. It also reveals deficiencies in the rules on independent directors, supervisory committees, and Chinese Communist Party committees as they are applied by Chinese ICT firms. The article concludes with reform proposals that would provide more useful information and better protection to outside investors and public stakeholders in the unique Chinese corporate environment.

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Dr Colin Hawes, Associate Professor, Faculty of Law, University of Technology Sydney, Australia.


Dr Grace Li, Associate Professor, Faculty of Law, University of Technology Sydney, Australia.

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1. The most high profile statements of this kind were made in a report published by the Permanent Select Committee on Intelligence of the United States Congress in 2012: see Rodgers, Mike and Ruppersberger, Dutch, ‘Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE’ (US House of Representatives 8 October 2012) <> accessed 1 March 2017 (PSC Report). See also Medeiros, Evan S, Cliff, Roger, Crane, Keith, and Mulvenon, James C, ‘A New Direction for China’s Defense Industry’ (RAND Corporation 2005) <> accessed 1 March 2017, on which the PSC Report heavily relied. Popular accounts of the Chinese Communist Party (CCP) also give this impression:

Callick, Rowan, Party Time: Who Runs China and How (Black Inc 2013). Callick states that the CCP has ‘ultimate approval over every investment, and branches in all state-owned enterprises and 85% of private enterprises’ at 142-43. He also quotes Cheng Li, an American expert on Chinese politics, as saying: ‘All the state’s assets are the Party’s in reality, if not in theory’ at 43.

2. For a good introduction to this ownership complexity, see Milhaupt, Curtis and Zhang, Wentong, ‘Beyond Ownership: State Capitalism and the Chinese Firm’ (2015) 103 Georgetown Law Journal 665 .

3. The literature on Chinese corporate governance is too extensive to cite comprehensively here, but for a few relatively recent monographs and edited collections, see Liebman, Benjamin L and Milhaupt, Curtis J (eds), Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism (Oxford University Press 2015); Chen, Jean Jinghan, A Primer on Corporate Governance: China (Business Expert Press 2015); Chen, Ding, Corporate Governance, Enforcement and Financial Development: The Chinese Experience (Edward Elgar 2013); Tan, Michael, Corporate Governance and Banking in China (Routledge 2013); Zhang, Lin, Venture Capital and the Corporate Governance of Chinese Listed Companies (Springer 2012); Leng, Jing, Corporate Governance and Financial Reform in China’s Transition Economy (Hong Kong University Press 2009); Liao, Chun, The Governance Structures of Chinese Firms: Innovation, Competitiveness, and Growth in a Dual Economy (Springer-Verlag 2009); Wei, Yuwa, Securities Markets and Corporate Governance: A Chinese Experience (Ashgate 2009); Nakamura, Masao (ed), Changing Corporate Governance Practices in China and Japan: Adaptations of Anglo-American Practices (Palgrave Macmillan 2008); Yu, Guanghua, Comparative Corporate Governance in China: Political Economy and Legal Infrastructure (Routledge 2007); Garnaut, Ross (ed), China’s Ownership Transformation: Process, Outcomes, Prospects (World Bank 2005).

4. For example, Lin (n 3); Jing (n 3); Wei (n 3); Nakamura (n 3); Yu (n 3). Other studies focus exclusively on large state-owned enterprises (SOEs), such as Liebman and Milhaupt (n 3), or downplay the distinctions between SOEs and private firms, for example Milhaupt and Zhang (n 2).

5. There are certainly some excellent studies on the privatization of Chinese business firms, but only few examine the corporate governance structures of individual private firms in detail. See, for example, Lardy, Nicholas R, Markets Over Mao (Peterson Institute for International Economics 2014); Jin, Zeng, State-Led Privatization in China (Routledge 2013); Chen, Jie and Dickson, Bruce, Allies of the State: China’s Private Entrepreneurs and Democratic Change (Harvard University Press 2010); Dickson, Bruce, Wealth into Power: The Communist Party’s Embrace of China’s Private Sector (Cambridge University Press 2008); Tsai, Kellee S, Capitalism Without Democracy: The Private Sector in Contemporary China (Cornell University Press 2007); Yusuf, Shahid et al, Under New Ownership: Privatizing China’s State-Owned Enterprises (Stanford University Press 2006)

6. For a description of this typical structure, see Lin, Li-Wen and Milhaupt, Curtis J, ‘We Are The (National) Champions: Understanding the Mechanisms of State Capitalism in China65 Stanford Law Review 697, 716-721 .

7. OECD, ‘OECD Principles of Corporate Governance’ (OECD 30 November 2015) <> accessed 1 March 2017 (OECD Principles). There are also modified principles for state-owned enterprises, the ‘OECD Guidelines on Corporate Governance of State-Owned Enterprises’ (OECD 19 November 2015) <> accessed 1 March 2017 (OECD SOE Guidelines).

8. OECD-China Policy Dialogue on Corporate Governance, ‘Corporate Governance of Listed Companies in China: Self-Assessment by the China Securities Regulatory Commission’ (OECD 9 September 2011) <> accessed 1 March 2017 (CSRC Report).

9. ibid 4.

10. OECD Principles (n 7) II and III.

11. OECD Principles (n 7) VI.

12. OECD Principles (n 7) V.

13. China Securities Regulatory Commission (CSRC), ‘Code of Corporate Governance for Listed Companies in China’ (CSRC 7 January 2001) <> accessed 1 March 2017 (PRC Code of Corporate Governance); Hong Kong Securities Exchange, ‘Corporate Governance Code’ (HKEX, 1 April 2003) <> accessed 1 March 2017.

14. Silverstrong, Roger et al, ‘Listening to a long conversation: an ethnographic approach to the study of information and communication technologies in the home’ (1991) 5(2) Cultural Studies 204 .

15. Statistics for internet users are available at China Internet Network Information Center, ‘34th Statistical Survey on Internet Development in China’ (Cyberspace Administration of China July 2014) <> accessed 15 January 2015. For recent mobile phone figures, see

Xinhua, ‘China’s Mobile Phone Users Hit 1.22 BillionXinhua Online (China, 21 November 2013), <> accessed 15 January 2015.The same report notes that fixed line phones declined to 269 million in 2013. For earlier statistics on mobile phone users, see

Ministry of Industry and Information Technology (MIIT), ‘The Development of Mobile Communications Prior to 2000 [2000 nian qian yidong tongxin fazhan qingkuang]’ (MIIT 10 January 2001) <> accessed 15 January 2015.

16. PSC Report (n 1) vi-vii.

17. Young, Angus et al, ‘Regulatory Multiplicities in Telecommunications Reforms in Indonesia and China’ (2005) 2 Macquarie Journal of Business Law 135 .

18. Li, Grace, ‘Moving Towards Unsustainability, A Study of the Chinese Telecommunications Regulation’ (2008) 1 International Journal of Private Law 47 .

19. ibid.

20. China Tietong, ‘Corporate Profile [Gongsi jieshao]’ (China Tietong) <> accessed 30 March 2015.

21. Li (n 18).

22. ibid. China Satcom, now a subsidiary of China Aerospace Science and Technology Corporation, focuses mainly on satellite communications and broadcasting rather than providing telecom and internet services to consumers, China Satellite Communications Co Ltd, ‘Company Profile’ (China Satcom) <> accessed 1 March 2017.

23. Young et al (n 17).

24. China Telecom, ‘About China Telecom’ (China Telecom, 2015) <> accessed 18 January 2015.

25. ibid.

26. China Telecom, ‘Company Overview’ (China Telecom, 2014) <> accessed 18 August 2014.

27. China Communications Services Corporation Limited, ‘Business Overview’ (China Communication Services Corporation Limited) <> accessed 18 August 2014.

28. China Telecom Corporation, ‘Annual Report 2013’ (China Telecom, 2013), 47 <> accessed 1 March 2017; and CCS Corporation, ‘Annual Report 2013’ (China Comservice, 2013), 51 <> accessed 1 March 2017.

29. The full list of SASAC-administered enterprises is available at SASAC, ‘List of Corporations’ (SASAC 20 December 2016) <> accessed 1 March 2017.

30. See Lin and Milhaupt (n 6) section II.

31. Its shares were listed in Hong Kong and then partially sold on the New York Stock Exchange in the form of American Depositary Receipts.

32. ibid; China Mobile, ‘About China Mobile Overview’ (China Mobile Limited) <> accessed 29 August 2014. When the company was first formed in 1997, both CMCC and China Telecom held large stakes of its shares, but in 2000, as part of the Chinese government’s attempt to promote competition in the telecom industry, China Telecom’s shares were transferred to CMCC.

China Telecom (Hong Kong) Limited, ‘Announcement’ (China Mobile Limited, 12 May 2000) <> accessed 28 August 2014.

33. ‘2013 Annual Report on Form 20-F’ (China Mobile Limited, 25 April 2014) <> accessed 28 September 2014.

34. China Telecom, ‘Management Team [Guanli tuandui]’ (China Telecom) <> accessed 28 October 2014.

35. CSRC, ‘Guidelines for Introducing Independent Directors to the Board of Directors of Listed Companies’, (Zhengjianfa [2001] No 102, CSRC 2001) <> accessed 1 March 2017; Clarke, Donald C, ‘The Independent Director in Chinese Corporate Governance’ (2006) 31 Delaware Journal of Corporate Law 125 .

36. China Telecom, ‘Company Directors’ (China Telecom) <> accessed 28 October 2014.

37. ibid.

38. OECD Principles (n 7) 63-63 (annotation to VI.E).

39. China Telecom, ‘Company Executives’ (China Telecom) <> accessed 28 October 2014.

40. CCS Corporation, ‘Directors, Supervisors and Management’ (China Comservice) <> accessed 28 October 2014.

41. Zhong Hua Ren Min Gong He Guo Gongsi Fa (中华人民共和国公司法) [PRC Company Law] (promulgated by the People’s Congress Standing Committee, 28 December 2013) Order No 18 (PRC Company Law), art 102.

42. China Mobile, ‘Corporate Governance Report 2014’ (China Mobile Limited) <> accessed 1 September 2014.

43. China Mobile, ‘Board of Directors’ (China Mobile Limited) <> accessed 1 September 2014; China Mobile, ‘Corporate executive structure’ (China Mobile Limited) <> accessed 1 September 2014.

44. PRC Company Law, art 75.

45. China Telecom, ‘Management Team [Guanli tuandui]’ (China Telecom) <> accessed 21 September 2014.

46. One official report from 2008 stated that among business enterprises controlled by the central government, only 64.2% had restructured into corporations. This was an improvement since 2002, when just 30.4% of state enterprises had become corporations. Wang Zheng, ‘Reforming state enterprises: Tackling difficulties head on will pave the way [Guoqi gaige: gongjian ponan lu geng kuan]’ (The People’s Daily [Renmin ribao], 3 October 2008) <> accessed 30 March 2015.

47. SASAC, Guanyu Zhongyang Qiye Jianli he Wanshan Guoyou Duzi Gongsi Dongshihui Shidian Gongzuo de Tongzhi (关于中央企业建立和完善国有独资公司董事会试点工作的通知) [A Notice on Experimenting with Establishing and Further Developing Boards of Directors in Central Wholly State-Owned Enterprises] (promulgated by SASAC, 7 June 2004) Order No 229 and Guanyu Guoyou Duzi Gongsi Dongshihui Jianshe de Zhidao Yijian (Shixing) (关于国有独资公司董事会建设的指导意见 (试行)) [Provisional Guiding Opinion on Developing Boards of Directors in Wholly State-Owned Enterprises] (promulgated by SASAC, 10 June 2004) Order No 229.

48. Information on Xiaochu Wang and Jie Yang is available at China Telecom, ‘Company Directors’ (n 36).

49. PRC Company Law, art 68-69.

50. China Mobile, ‘Introduction to the Board Members’ (China Mobile Limited) <> accessed 30 March 2015. By contrast, CT Group only has two directors, both of them executives.

51. China Mobile, ‘Annual Report 2015’ (China Mobile Limited) <> accessed 30 March 2015.

52. See Board of Directors (n 43) and Corporate Governance Report (n 42).

53. For example, Mr Lo Ka Shui is Chair and Managing Director of one company, non-executive Chair of another company, non-executive director of three other companies besides CM Ltd, and has senior positions in several Hong Kong non-governmental organizations and government advisory committees. See also the profiles of independent directors at China Telecom’s subsidiaries online: <> and <> accessed 31 October 2014 (Authors’ note: This information no longer exists publicly on the Internet but it was current when accessed back in 2014).

54. PRC Company Law, art 52-6.

55. CCS Corporation, ‘Corporate governance’, (China Comservice) <> accessed 24 October 2014; China Telecom, ‘Supervisory Committee’ (China Telecom, 2014) <> accessed 1 March 2017.

56. CCS Corporation, ‘Directors, Supervisors and Management’ (China Comservice) <> accessed 1 March 2017

57. China Mobile, ‘Advisory Committee Profile [Weiyuanhui jianjie]’ (CMCC) <> accessed 31 October 2014 (Authors’ note: This information no longer exists publicly on the Internet but it was current when accessed back in 2014).

58. ibid.

59. China Telecom, ‘Ethics Web [Sixiang zhengzhi gongzuo wang]’ (China Telecom) <> accessed 24 October 2014.

60. China Telecom, ‘Development of the Party’s Work [Dangjian gongzuo]’ (China Telecom) <> accessed 24 October 2014.

61. China Telecom, ‘Typical Experiences of Building the Communist Party’s Capacity in China Telecom [Zhongguo dianxin dangjian dianxing jingyan]’ (China Telecom) <> accessed 24 October 2014.

62. China Telecom, ‘Development of the Party’s Work’ (n 60).

63. China Telecom, ‘News for China Telecom’ (China Telecom) <> accessed 24 October 2014.

64. China Mobile, ‘Introduction to Corporate Culture’ (China Mobile Limited) <> accessed 31 October 2014.

65. China Mobile, ‘Notice on the Inspection and Rectification of Issues by the Chinese Communist Party Branch at China Mobile Group [Zhonggong zhongguo yidong tongxin jituan gongsi dangzu guanyu xunshi zhenggai qingkuang de tongbao]’ (China Mobile) <> accessed 16 March 2017.

66. Yeo, Yukyung, ‘Between Owner and Regulator: Governing the Business of China’s Telecommunications Service Industry’ (2009) 200 The China Quarterly 1013, 1021 .

67. ibid 1026.

68. China Telecom, ‘Company Directors’ (n 36); CT Corporation, ‘Announcement’ (CT Corporation, 2 November 2004) <> accessed 20 January 2015 (Authors’ note: This information no longer exists publicly on the Internet but it was current when accessed back in 2015).

69. Yeo, Yukyung , ‘Regulating China’s Industrial Economy: A Comparative Case Study of Auto and Telecom Service Sectors’ (PhD thesis, University of Maryland, College Park 2007) 160.

70. OECD SOE Guidelines (n 7).

71. ibid 13-17.

72. Liao, Jiehua, Chen, Yong and Wu, Qiaofa, ‘Unfinished Business: China Mobile’s Corruption Woes Roll On’ (The Economic Observer, 2 September 2013) <> accessed 20 January 2015; Chi, Yi, ‘China Mobile Corruption Scandal Continues to Unfold’ (The Economic Observer, 26 April 2013) <> accessed 20 January 2015; Song, Sophie, ‘Two Former China Mobile Ltd Executives Sentenced for $67 million in Bribes Involving an Acquisition by Australian Firm Telstra Corporation Ltd’ (International Business Times, 8 April 2014) <> accessed 20 January 2015.

73. ibid.

74. China Mobile, ‘Annual Report 2008’ (China Mobile Limited, 2008), 42-43 <> accessed 1 March 2017.

75. Chi (n 72).

76. The full name of the firm is Huawei Investment Holding Co Ltd (Huawei touzi konggu youxian gongsi: 华为投资控股有限公司).

77. See information about the company and its revenues on Huawei’s website, Huawei, ‘Corporate Information’ (Huawei Technologies, 2015) <> accessed 1 March 2017.

78. PSC Report (n 1) 24.

79. Zhang, Guanjing, Huawei Si Zhang Lian [The Four Faces of Huawei] (Jingji Chubanshe 2007) 23-24 , 135, 223-4.

80. PSC Report (n 1) 24-5.

81. Wang, Yongde, Langxing Guanli zai Huawei [Wolf-style Management at Huawei] (Wuhan University Press 2007) 100-101 .

82. Chen, Dongsheng and Liu, Lili, Huawei Zhenxiang [The Truth about Huawei] (Dangdai Zhongguo Chubanshe 2004) 116 .

83. Huawei did have regular meetings of all employees to engage in what it called ‘self-criticism’ but no formal voting occurred at these meetings. See Hawes, Colin, The Chinese Transformation of Corporate Culture (Routledge 2012) 38-39 .

84. Cheng and Liu (n 82) 76-8, 104-9; and for further details, see Wang (n 81) 283-6.

85. Wang (n 81) 285-6.

86. Zeng, Jin, State-Led Privatization in China (Routledge 2013) 27 .

87. Li, Grace, ‘Can the PRC’s New Anti-Monopoly Law Stop Monopolistic Activities? Let the PRC’s Telecommunications Industry Tell You the Answer’ (2009) 33(7) Telecommunications Policy 360, 361 ; Zhang (n 79) 8, 38, and 55.

88. With more than 50 shareholders, a company must normally be formed into a joint stock company, which stipulates one vote per share: see PRC Company Law, arts 79 and 104. With less than 50 shareholders, a company can be formed as a limited liability company (LLC), which allows flexibility in the way voting rights are divided up among shareholders: PRC Company Law, arts 24 and 43. The PRC Company Law (n 41) was first introduced in 1994, and Huawei was restructured from an employee-owned collective to a registered limited liability company in 1997: see PSC Report (n 1)15-16.

89. Huawei currently has two shareholders, which are the Union investment fund (98.6%) and Ren Zhengfei (1.4%). See Huawei, ‘2013 Annual Report’ (Huawei Technologies, 2013) 108 <> accessed 1 March 2015.

90. The PSC Report gives a very useful detailed summary of Huawei’s employee share ownership program based on information provided by the firm: PSC Report (n 1)15-20.

91. See Wang (n 81) 102, and PSC Report (n 1) 15-20. The process of transferring employee shares to the Union investment fund began in the late 1990s but Wang notes that it was not completed until 2001.

92. Huawei, ‘2013 Annual Report’ (n 89) 109.

93. Ren’s veto will last until 31 December 2018: PSC Report (n 1) 20.

94. The number of unit holders is taken from Huawei, ‘2013 Annual Report’ (n 89) 108.

95. Huawei gave this explanation in materials cited in the PSC Report: PSC Report (n 1)15-16.

96. PSC Report (n 1) 14, 21-2.

97. Zhang (n 79) 20.

98. Cheng and Liu (n 82) 112-113.

99. Cheng and Liu (n 82) 109, 115.

100. Wang (n 81) 102.

101. Cheng and Liu (n 82) 120.

102. Zhang (n 79)19-21; Cheng and Liu (n 82) 104-6.

103. See Huawei 2010 and 2013 Annual Reports: Huawei, ‘2010 Annual Report’ (Huawei Technologies, 2010) 55 <> accessed 1 March 2017; Huawei, ‘2013 Annual Report’ (n 89).

104. Huawei, ‘2013 Annual Report’ (n 89) 110.

105. For Ren’s full position title, which is deputy chairman of the Board and CEO see Huawei, ‘Mr Ren Zhengfei’ (Huawei Technologies, 2017) <> accessed 1 March 2017.

106. Profiles of all directors are given in Huawei 2013 Annual Report (n 89) 117-9.

107. See Huawei, ‘2013 Annual Report’ (n 89) 109. Non-Chinese employees of Huawei in other countries do not directly participate in the Chinese employee investment fund, but they are given units in employee investment funds managed by Huawei’s regional divisions overseas. This information comes from a conversation with a senior executive at Huawei’s Australian subsidiary.

108. PSC Report (n 1) 16, 20.

109. Based on the authors’ comparison of names on the list of Representative Commission members and information about Huawei’s boards and senior managers on its website.

110. Four new directors were elected by the representative commission in December 2013 to increase the size of the Board to its current 17 members, but no directors have been removed or resigned since 2010.

111. PSC Report (n 1) 20.

112. PRC Company Law, art 52.

113. Huawei ‘2010 Annual Report’ (n 103) 55.

114. See the functions set out in PRC Company Law, art 54.

115. Huawei, ‘2013 Annual Report’ (n 89) 120.

116. ibid 110, 118.

117. ibid 115.

118. ibid 117.

119. ibid 110.

120. ibid 110-11.

121. One of Ren’s sons and several of his six brothers and sisters also work at Huawei in less senior positions. See Fierce Wireless, ‘Cathy Meng, CFO, Huawei: 2013 Women in Wireless’ (Fierce Wireless, 21 August 2013) <> accessed 6 December 2014; Yee, Lee Chyen, ‘Huawei’s CEO says successor won’t be from family, no listing plans yet’ (Reuters, 29 April 2013) <> accessed 6 December 2014.

122. PSC Report (n 1) 13, 22-4. Chinese reports have stated that Huawei’s Communist Party Branch Secretary is Daiqi Zhou, who is currently listed in Huawei’s 2013 Annual Report as Chief Ethics and Compliance Officer and a member of the Audit Committee. See Jin, Sun, ‘Huawei’s Party Secretary Daiqi Zhou declares: Internationalization has pushed Shenzhen’s business firms to increase their competitiveness [Huawei dangwei shuji Zhou Daiqi: guojihua tuishen qi tisheng jingzhengli]’, Shenzhen Tequ bao (Shenzhen, 23 November 2011) <> accessed 16 January 2015. Zhou’s role as Communist Branch Secretary is not mentioned in Huawei’s Annual Reports or on its Chinese or English-language websites.

123. PSC Report (n 1) 23.

124. For further discussion of Communist Party branches in large Chinese firms, including private firms, see Hawes, Colin, ‘Interpreting the PRC Company Law through the Lens of Chinese Political and Corporate Culture’ (2007) 30 UNSW Law Journal 813, 816-819 .

125. PSC Report (n 1)14, 21-2.

126. Lee (n 121).

127. ZTE’s Chinese name is Zhongxing Tongxun Gufen Youxian Gongsi:中兴通讯股份有限公司.

128. ZTEAnnual Report 2013’ (ZTE, 2013) 8, 14, 18 <> accessed 1 March 2017.

129. ibid 8, which notes that ZTE’s Shenzhen listing was in 1997, and its Hong Kong listing was in 2004.

130. PSC Report (n 1) 38.

131. ZTE, ‘2013 Annual Report’ (n 128) 159-60.

132. Full name: Shenzhen Zhongxingxin Telecommunications Equipment Limited Liability Co (Shenzhenshi Zhongxingxin Tongxun Shebei Youxian Gongsi).

133. Zhongxingxin’s status as controlling shareholder is clearly stated in ZTE, ‘2013 Annual Report’ (n 128) 94, and other major shareholders are listed at 92.

134. For ZTE’s origins as a private enterprise, see Jinyun, Zhu, ‘Testimony to the US Permanent Select Committee on Intelligence’ (Permanent Select Committee on Intelligence, 11 September 2012) <> accessed 1 March 2017. That account, however, glosses over the fact that ZTE itself was not registered until 1997. Zhongxingxin’s website makes it clear that the company formed in 1985 was actually Zhongxingxin under its former name of Zhongxing Semiconductor: see

ZTE, ‘ Fazhan lichen [Development History]’ (ZTE Holdings) <> accessed 1 March 2017.

135. ZTE, ‘2013 Annual Report’ (n 128) 94. Neither ZTE’s annual reports/website nor Zhongxingxin’s website make it clear how many outside investors bought shares in Zhongxingxin in 1993, but these two state-controlled investors are currently the only other shareholders in Zhongxingxin besides Zhongxing WXT, discussed below.

136. ZTE, ‘2013 Annual Report’ (n 128) 159.

137. The full Chinese name of ZhongxingWXT is Zhongxing Weixiantong.

138. Allegedly, 38 of ZTE’s founders and senior managers who have interests in Zhongxing WXT. See the detailed analysis of ZTE, Zhongxing WXT, and various affiliated companies in Lirong, Xie and Song, Wei, ‘Seeking the root causes of ZTE’s losses: the problems lie deeper than commercial miscalculations [Zhongxing kuisun tanyuan: you bi shangye shisuan geng shenchen de bingyin]’ (Caijing, 27 May 2013) <> accessed 15 January 2015.

139. ZTE, ‘2013 Annual Report’ (n 128) 94.

140. For English versions, see ZTE, ‘Investor Relations’ (ZTE, 2017) <> accessed 1 March 2017; and for Chinese versions see

Touzizhe Guanxi [Investor Relations]’ (ZTE, 2017) <> accessed 1 March 2017.

141. ZTE, ‘Articles of Association (revised June 2014)’ (ZTE, 2014), art 78 <> accessed 1 March 2017.

142. ZTE, ‘2013 Annual Report’ (n 128) 100-1.

143. For discussion of the role of ZTE’s independent directors, see ZTE, ‘2013 Annual Report’ (n 128) 120-1.

144. See ZTEAnnual Report 2012’ (ZTE, 2012) 14 <> accessed 1 March 2017; Xie and Song (n 138).

145. ZTE, ‘2013 Annual Report’ (n 128) 117, 121-3, gives detailed information about the different Board committees and their members.

146. ZTE, ‘2013 Annual Report’ (n 128) 130-137.

147. For WEI’s profile, see ZTE 2013 Annual Report, p.100; and see, Art. 171.

148. For these directors’ other positions, see ZTE, ‘Articles of Association’ (n 141) 100-1, 109.

149. ZTE, ‘Articles of Association’ (n 141) art 191.

150. ZTE, ‘2013 Annual Report’ (n 128) 108, n 2.

151. ZTE, ‘Articles of Association’ (n 141) art 192.

152. Information about the supervisors in this paragraph is drawn from ZTE, ‘2013 Annual Report’ (n 128) 101-2, 107-11.

153. ZTE, ‘Articles of Association’ (n 141) arts 179, 163(2).

154. Information on ZTE’s senior executive in this paragraph is drawn from ZTE, ‘2013 Annual Report’ (n 128) 99, 102-6, 109-11.

155. Xie and Song (n 138).

156. PSC Report (n 1) 40.

157. ibid.

158. See, for example, Ta, Lina, ‘Jiangyou’s industrial school, the Zhongxing Earthquake Resistant Spring Bud School, is completed [Jiangyou gongye xuexiao ‘Zhongxing kangzhen chunlei xuexiao’ luocheng]’ (Sohu News, 14 July 2008) <> accessed 15 January 2015.

159. PSC Report (n 1) vi-vii & 42.

160. Xie and Song (n 138).

161. ibid.

162. See ZTE, ‘2013 Annual Report’ (n 128) 259; and for Mobi Development’s tortuous ownership structure, see HKEX, ‘Mobi Development Co Ltd Prospectus’ (HKEX), 58 and 70 <> accessed 15 January 2015.

163. Xie and Song (n 138).

164. ZTE, ‘2013 Annual Report’ (n 128) 259.

165. Xie and Song (n 138).

166. CSRC Report (n 8) 4.

167. See Kanda, Hideki, Kim, Kon-Sik, Milhaupt, Curtis J (eds), Transforming Corporate Governance in East Asia (Routledge 2008).

168. OECD SOE Guidelines (n 7) 16, 23-4, 43-4.

169. Milhaupt and Zhang (n 2), after noting the complexities of corporate ownership in SOEs and hidden state influence in supposedly private firms, also suggest that regulatory reform needs to take account of these complexities, yet they do not propose specific corporate governance reform measures that would solve the problems, such as increased disclosure requirements.

170. In Australia, if a corporation (including entities that it controls) meets two out of the following three conditions, it will be defined as a ‘large proprietary company’ subject to the stricter disclosure requirements: (1) consolidated revenue exceeds AUD25 million; (2) consolidated gross assets value exceeds $12.5 million; and (3) 50 or more employees: see Corporations Act (Commonwealth 2001), s 45A(3).

171. Qiye Xinxi Gongshi Zanxing Tiaoli [Provisional Rules for Public Disclosure of Information by Enterprises] (promulgated by the PRC State Council, effective 1 October 2014) (Disclosure Rules).

172. Disclosure Rules, r 1 and 7. Other relevant government institutions would be required to publicly disclose details of any licences granted to business enterprises and any administrative sanctions ordered against them (Rule 8). All business enterprises would be required to submit annual reports to SAIC containing detailed information about their business, including assets, liabilities, sales, business revenues, net profits, tax amounts paid, and capital amounts. Under the rules, however, companies may elect not to allow SAIC to publicly disclose the detailed financial figures associated with their enterprise: Disclosure Rules, r 9-10.

173. ibid r 11.

174. ibid r 18-20.

175. ibid r 22.

176. In most other jurisdictions, such as the UK, US, Canada and Australia, only public companies, large unlisted companies, or reporting issuers need to publicly disclose information about their finances and shareholders; small private companies generally need only provide minimal information to their relevant corporate regulator, such as company registered office, and details of shareholders, directors and company secretary. Having said this, most jurisdictions also have a personal property registry where potential creditors can conduct searches for prior secured interests registered against the company.

177. Disclosure Rules (n 170) r 10.6. Companies can opt out of publicly disclosing their total assets and liabilities, total sales, business revenues, gross and net profits, total taxes paid, and shareholders’ equity.

178. PRC Company Law, art 19, only states that companies must allow the CCP to set up a branch within the firm, but does not specify what the CCP branch should do and what powers it has in relation to the other organs of the company.

179. See PRC Company Law, arts 53, 151.

180. The supervisory board could still include representatives of shareholders and employees, as it does currently, so long as a significant proportion of the other supervisors are independent of those ties.

* Dr Colin Hawes, Associate Professor, Faculty of Law, University of Technology Sydney, Australia.

* Dr Grace Li, Associate Professor, Faculty of Law, University of Technology Sydney, Australia.

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