The challenge of transparency
The changes seen in China over the last decade have resulted in a more transparent yet more complex public affairs process, says Yuan Haiying
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| Yuan Haiying: Corporate reputation 'important' |
The increasingly transparent environment in China is good in terms of information. But the other perspective is that China is getting more and more diversified.
More groups are lobbying for their own interest; and that includes domestic Chinese enterprises. This makes lobbying itself more difficult.
In the past, the Chinese government only heard a small number of voices – MNCs and local provincial governors. But now they hear more and more voices, trade associations, domestic business and so on.
If you want the government to hear your voice you need to be more sophisticated – especially when the government is attempting to heat up the economy.
Consultancies should be sounding boards for clients. Clients have their strategies, their business plans. But they need to work out whether this strategy or plan makes sense in China. How do you expect a foreign businessman to engage in political dialogue with a Chinese official?
Chinese laws are difficult to interpret. One reason for this is that government officials talk in this way on purpose. They do not give a clear statement, so they have an exit. That is a culture of Chinese government.
Many officials are also not yet capable of producing polished laws and regulations.
China has only be using modern written language for 80 years, until then it was the language of Shakespeare. So they cannot yet use the modern language to describe the modern regulations.
It is up to the lobbyist to interpret these laws from a cultural and political perspective. To me, that is the most valuable service a consultancy can provide.
Value add
Everybody can make a plan and develop a strategy, but the important thing is tailoring that plan into Chinese reality. It is about developing a “value add” to “value add” relationship.
Every business objective is to grow in China. The question is whether you want to have growth by relationships or growth by policies. That is a key issue. When I started in this industry in 1999 we talked about government “relations” not government “affairs”. Everyone was talking “Guanxi, Guanxi”. Business expected to grow by relationships.
But that state has now past. Relations are important but they are not enough. You must lobby the Chinese government and work with the Chinese government to stimulate the growth environment in which your business will grow.
There is also a question of corporate reputation versus issues management. Every company has issues, but it is better to proactively build corporate reputation than be seen to be responding to issues.
Corporate reputation is your deposit in the bank; when you have a problem you can go back to the government and say you are a responsible company and point to what you have done in the past.
You have to admit you have issues, but you use your reserves to show that you will come back to the right track. You will get understanding, even forgiveness, from the government if you build corporate reputation.
Multinationals generally enjoy a positive reputation in China, but there can be lots of twists and turns. At this moment national protectionism is rising, so companies must present themselves as contributors to China not to be in conflict with it.
Manage issues
Issue management is also vital. Every multinational corporation engaged in China faces many issues, ranging from labour to regulatory issues.
Managing these issues, identifying their nature, the key infuencers and developing a strategy to address them is important. We are trying to stop issues escalating into a crisis – to prevent us being forced to put out a fire.
There must also be an awareness that nationalism exists inside foreign multinationals. You have to do something to repay your staff.
You need to lobby the government, but you also need to lobby your staff, to show you are contributing to the growth of China. That makes corporate communications a lot more complex.
The issue of federal government affairs versus local government affairs is also important.
When you talk with Hu Jintao and the national leaders they always make clear that the government has a very strong political will to the meet WTO commitments, to international standards, to IPO. But when you go and speak to officials at a local level it is a very different story.
You have to address issues at a local level to reach business and government affairs objectives. Local government relations are becoming more and more important.
Compliance and enforcement are also important issues. The enforcement agencies target the McDonald’s and the Wal-Marts but not always the domestic companies.
The MNCs are engaged with government in saying that they are operating in China as they do everywhere else in the world – by obeying the law. On the other hand they are also lobbying for a level playing field regarding domestic enforcement of laws and regulations.
A further trend concerns the issue of the individual lobby versus the group lobby. Every one of the top 500 companies are in China now. This opens up the possibility for the group lobby.
You present the issue as an industry issue, and a China national issue. If it is a Wal-Mart issue who cares? But if it is a China retail issue then people will certainly pay attention to you. Setting up coalitions and leveraging that coalition is important.
The targets
And when we are talking about government affairs in China there are several targets.
The first is the central government and its agencies, the second is local government and the provincial cities and townships.
The third target are industry associations, with the reform programme of the Chinese government, these are playing a more and more important role in developing standards and formulating policy. Even when central government is formulating policy they always consult with industry associations.
The fourth are NGOs, they are an emerging and new power in China. They monitor government behaviour and the actions of enterprises in areas such as environmental protection and human rights.
Fifth, are the “thinker centres”, the universities, the state council research centres. When the Chinese government makes big policies they always seek the opinion of academics.
Lastly there is the state media. Every month the Chinese propaganda department provides a set of guidelines to these mediums.
They are still considered the organ of the Chinese government and the Chinese Communist Party.
These agencies must be the target when seeking effective government affairs in China.
Monitoring
Government affairs in China requires lobbying just as it does in London, Washington and Paris. But it also involves policy monitoring of the regulatory environment.
What is important is then the cultural interpretation of these laws and regulations. It is very difficult to understand Chinese laws; what does “harmonious society” mean?
You need to systematically capture the laws and regulations, then interpret them culturally and then advise on how to deal with these changing policies.
It is also important to identify the most important government agencies.
You cannot establish relations with everyone involved, everyone’s resources are limited so establish relations with the most influential government agencies.
Establish a targeted programme with agencies, media, institutes at different levels. It is important to know who to meet with whom and for what.
Being aware of the regulatory bodies and the processes of market entry are important. During the process of a merger or acquisition every minute is money.
The money is already allocated – if you can speed up the process you add value.
Government affairs is also about capacity building in in-house teams. This operates at three levels, at a global CEO level, at China president level and at the level of the day to day operators.
Almost no in-house government affairs team can completely support their business objectives. Out-sourcing is vital for small, medium and large sized companies.
More and more multinationals have set up their own in-house teams. Consultancies should do more strategic work, more value added work.
The relationship between a consultancy and its clients in Chinese government affairs should be complementary. It should be a "win, win situation".
Yuan Haiying is president of Yuan Associates, the Beijing-based government relations consultancy. He has over 30 years experience in the Chinese government, including senior positions in Washington DC
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