Why Government Relations in China is Not About Lobbying…Or Guanxi

One day not too long ago I was in Singapore addressing a large room full of local executives all eager to hear about what was in store for China in the coming year. After I had stepped down from the dais, an executive from a major Japanese electronics multinational buttonholed me to ask me about hiring a lobbyist who will address their government relations in China. I demurred, but he really pressed me – I need a good lobbyist, he said. Who should I hire? Unfortunately, while I have no lack of names of individuals who could lobby on his behalf, all of whom have wonderful ties to the government, I had to send the gentleman away disappointed.

One reason I had to demur was that he was unwilling to give me enough of an idea of what the problem was to even allow me to suggest the right person to reach out to. Which indicated another problem – somehow he had convinced himself that all he needed was a really good fixer. And, coming from a very, very large company who should know much better, this was more than a tad disturbing.

This Ain’t Washington

American companies have long understood the importance of hiring a lobbyist in Washington in an effort to inform (or, less charitably, to influence) the legislative process in their own favor. European, Japanese, and Korean firms learned quickly about how this process could show genuine results, and indeed to take the greatest possible advantage of the situation (see Agents of Influence, Pat Choate’s alarmist but indeed fact-based polemic about the influence of Japanese lobbyists in the US.)

It is natural, therefore, for American, European and Japanese firms to consider their policy, regulatory, administrative, and political issues in China and to wonder whether or not they need to hire a lobbyist — or, to cut to the chase, a well-connected political fixer. Without doubt, all are encouraged by a growing number of individuals and firms who suggest (if not promise outright) that they have sufficient leverage or guanxi in the PRC government to help mitigate these issues.

A vast range of players exist in this market who will promise to solve all of a company’s problems for a payment. Former PRC government officials, family members of government officials and senior academics on the Chinese side, former U.S. Presidents, Cabinet Members, Senators, Congressmen, former U.S. ambassadors to China and a similar number of former officials of other governments on the other make for a formidable array of consultants, not to mention U.S. lobbying firms who ply a somewhat different version of their trade in China.

In many cases, these individuals and firms offer genuine assistance, usually because of the specific and limited scope of their mandate. When the issue is about using association with a distinguished person to raise a company’s profile in Zhongnanhai or to get a meeting with one of China’s top leaders for a chief executive, few can deliver on such a requirement as well as a Henry Kissenger, a George H.W. Bush, a Lee Sands, or indeed a James Sasser.

And many former officials of the PRC government – retired, downsized, or entrepreneurial – make a good living arranging for meetings with working level officials ranging from a department head to a full minister, and occasionally even higher.

Each of these can occasionally deliver a message, and even provide some insights or advice on one or several government entities.

But such efforts alone are by nature incomplete at best and, at worst, can be counterproductive, particularly if pursued before a company understands the full range of issues it faces in the Chinese government. The common perception that the Chinese government is a monolith leaves executives, directors, and shareholders with a critical blind side. What is worse for U.S. firms, the Damoclean threat of the Foreign Corrupt Practices Act hangs above any efforts in China — with most intermediaries, you can never be entirely certain that the influence is not being in some way purchased on your behalf.

The far less publicized truth is that there are a range of interests operating inside the Chinese government, and indeed different viewpoints and factions contend for power inside ministries, departments, and administrations that form the real rocks and shoals of business in China. To venture forth without as complete a chart as possible invites disaster.

Rather than depend on some unqualified “guanxi”, a mapping exercise is in order as a first step. A company (and in some cases, divisions and even products and services) needs to spell out its goals in China, and go methodically through the Chinese government and list the entities and individuals who by their position would have a direct or an indirect influence on the interests of a company in China. As a second step, individuals and entities who have a personal (rather than a professional ) interest in one’s company, business, or industry need to be assessed both individually and, once the motivations that like them are understood, collectively as well.

The second step requires that at least those officials with a direct interest in the company’s business are assessed for their specific opinions and stances on a variety of issues from the role of foreign companies in the PRC economy/specific sectors to their take on a specific project – all without mentioning names and all without inadvertently affecting the process in a Heisenberg-style nightmare.

Once these assessments have been made, it becomes clear that a company’s interests are not just affected by a small group of government officials or ministries, but that in most cases there are a broad range of entities and individuals who might take a piece of a company or, equally important, see some part of a policy decision that affect the company as falling under their jurisdiction. This is the point at which the company uses its map to navigate those shoals, and to select the appropriate device to win friends and influence China’s governmental processes. In short, this exercise needs to be undertaken before hiring a former president or ambassador, or an influence peddler in China.

Regardless of the company or industry, it is a truism that government relations reaches beyond mere lobbying or guanxi. It presumes a complete understanding of the regulatory, policy, and administrative environment, and the appropriate, coordinated use of internal and external resources. While not as simple as hiring a name or a face, it is the only real way to guarantee continued success in navigating the trecherous waters of Chinese business.