Public Affairs in China

Updated June 2018

Navigating the business climate in China, a country with no unified corporate law system and a semi-market political economy, requires a creative approach and keen understanding of the intertwined relationship between business and government. What are some of the primary considerations you must keep in mind when entering the Chinese market or trying to improve your company’s already existing in-country operations?

1. State of U.S.-China relations: China can be viewed as both a friend and a challenge. While private businesses tend to view their relationship with China in a positive light driven by long-term investment, representatives of the U.S. defense complex approach China with more caution due to geopolitical implications of China’s growing global influence.

2. The Chinese business environment: To succeed, you need a solid grasp of the defining characteristics of the Chinese business climate.

• Competition: China is no longer a cheap place to do business, a change driven by the increasing number of international companies establishing operations on the ground.
• Government: The Chinese government is becoming more ambivalent towards the growing flow of investment into the country, adopting a less compliant approach to foreign interests and taking an increasingly nationalistic stance.
• Risk: Due to systemic risk within China’s value chain, foreign companies must have a strategy for managing risk on the ground (primarily seen in issues of quality control), lines of accountability, breaches in safety standards and a highly fragmented regulatory structure. Foreign companies can benefit from proactive risk management by positioning their products and services as smarter, safer and better than those of their competitors.

3. Best practices for improving your position in China: How can you strengthen your status in a climate such as this?

• Know your stakeholders: Get to know the local community representatives and build trust with third parties that can speak on your behalf when needed. Due to overlapping jurisdictions at the national and provincial levels, it is important to develop trust with third-party stakeholders who can yield influence. Knowing the key players will help you navigate around specific economic guidelines, which often have vague interpretations.
• Engage with the community: Investing locally will increase trust in your brand and augment your reputation as a good corporate citizen. Face time with local consumers, suppliers and community leaders must not be underestimated as a way of creating relationships and indicating your company’s long-term commitment to helping advance China’s development goals.
• Don’t bite the hand that feeds you: Learn to work within the Chinese system without getting ahead of the government. Communist party doctrine sets the long-term agenda, and national economic goals will always be prioritized over foreign interests.
• Do your research: Partner with local think tanks and create communication channels with other sources of on-the-ground information to access data, policy analysis and local knowledge on what to anticipate in the immediate future.
• Create a holistic approach to government relations: Organize your public affairs function both globally and locally. Due to the fragmented nature of the Chinese government, there is no “silver bullet” and no top-down approach, so knowing who to approach “on the ground” is essential for dealing with unexpected issues. Communicating with both foreign and U.S. government representatives will allow you to create a two-sided approach to addressing problems as they arise.

4. Key Cultural Differences and Best Practices:

• For years, the Chinese idea of guanxi, literally translated to ‘relationships’ was the most important leveraging tool in business. Today, this has changed. Instead of simply building friendships and alliances with key government officials, you must be willing to work with them to accomplish their policy goals. This means investing in their community, hiring local workers, and doing anything else that may help bolster their overall work.
• Another cultural difference between the West and China is the treatment of time. In China, timing is far more flexible. For instance, when planning an event, sending out invitations just two or three days in advance is not uncommon and sending them earlier could even upset some, as many may not know what their schedule will look like too far in advance. Therefore, public affairs in China can feel last-minute. Oftentimes, when meeting with a Chinese official, one will be notified of who will be there only a few days in advance, unlike in the United Sates, where such meetings are scheduled weeks or months in advance.

5. Important Government Policies and Initiatives:

• President Xi’s tenure has been characterized by a widespread anti-corruption initiative running parallel to his own consolidation of power., In 2018 Xi abolished term limits for the presidency, thereby securing power indefinitely. Officials have also become increasingly cautious around their business dealings in order to avoid being perceived as corrupt.
• In March 2016, China released its thirteenth Five-Year Plan, which describes President Xi’s vision for the future of Chinese development. Outlined in the Five-Year Plan are several key changes to the way China wants to conduct business, including growing foreign and domestic R&D spending in the country, increasing coordination between provinces, investing more in green energy, becoming a key global trade player, boosting living standards and slashing the poverty rate. The plan showcases China’s ambitions for the future – growing its role in the international community and continuing to grow its domestic economy. Understanding the Five-Year Plan is essential to understanding where and why Chinese policy is going in the future.

A recording of the webinar, “Public Affairs in China,” is available for purchase. Click here to learn more.