Public Affairs in China

09 Dec, 2015

International

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Public Affairs in China

In December 2015, the Public Affairs Council invited Marc Ross and Jeremy Haft, partners and co-founders of Caracal Strategies, to present at a webinar titled “Public Affairs in China.” Here are some of the key takeaways Ross and Haft stressed during that session.

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.
  1. 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.
  1. 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.
  1. What’s ahead: China’s next five year economic road map will be released in March 2016. The anticipated agenda for financial advancement and development will likely include:
  • Financial reforms, such as the acceptance of the renminbi as an international reserve currency, to further solidify China’s economic global presence;
  • Sector-specific reforms to create more autonomous universities, a better-functioning healthcare system, innovative cyberspace and e-commerce platforms, modernized capital intensive industries and a more professional agricultural system;
  • Reforms of state-owned enterprises and an increased emphasis on creating a decentralized, private economy; and
  • Reforms to streamline the regulatory structure to eliminate overlapping jurisdictions and fragmentation (but it may take years to create a unified legal system due to a high presence of conflicted vested interests).

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

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Dasha Iventicheva
Senior Associate
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