Silicon Hutong

China and the World of Business • China Business and the World

Silicon Hutong - China and the World of Business • China Business and the World

Business and The Xi Team: Focus on the Drivers

Xi Jinping 习近平

Xi Jinping 习近平 (Photo credit: Wikipedia)

In the Hutong
Information coma
1958 hrs.

Over the last couple of weeks, several people have asked me what the changeover in the Communist Party leadership will mean for international business in China. The short answer is that if I knew, I’d be wealthy. The longer answer is a bit more helpful.

Many years ago I had a mentor and boss who taught me that the parade of personalities and the flow of policies were fun to watch, but that sticking your finger up to feel the political winds would never offer the insight a business requires to make decisions beyond a six month threshold. What you need to understand, she told me, were the fundamental drivers of policy, not the policies themselves.

By fundamental drivers she meant the five or six issues that the nation’s leaders worried about the most, overlaid with the three core goals of the party at any given time. Add to that a general understanding of the climate in the country, and any relatively educated person could at least have a general hunch about a company’s horizons.

For example, I believe the thee core goals of the Party are:

  1. The continuance of Party rule
  2. The social stability of the nation
  3. China’s rise to global economic and political leadership

No rocket science there. Beyond this, though, things get tricker. What are the five things the members of the Politburo Standing Committee worry about when they wakes up at four o’clock in the morning?

Here is my list of the top five.

  • Controlling corruption without blackening the entire Party in the process
  • Getting the economy stabilized and on track for continuing growth
  • Keeping the PLA in line while retaining its political support
  • Cleaning up the environment without disrupting the economy
  • Keeping expressions of popular discontent from coalescing into a coherent anti-party front.

These are certainly open for debate, but what all of this suggests is that global companies will be welcome in China to the extent that they address (i.e., demonstrably take into account) these five priorities. What is more, given that domestic attitudes about foreign investment in China have, in the past five years, gone from “generally positive” to “generally ambivalent,” companies are going to find themselves compelled to make a case to their local stakeholders that they have something unique to offer just by being here.

Mind you, I’m not necessarily talking about approvals to do business, although that is an issue. Instead what I mean is that with every audience, from regulators to consumers, every business would do well to remember that being foreign no longer buys you much, and that in the current environment there is no particular priority placed on letting foreign firms into China.

In short, the outlook is not exceptionally good in the near term, but there is as yet little cause to be pessimistic. All of us need to stay tuned.

Hu comes to the U.S. with a pre-approved script

Amplify’d from www.washingtonpost.com

“For us, China’s decision-making on North Korea was always a black box. There was the party, the Foreign Ministry and the military,” recalled Victor Cha, who served as a Korea expert on the National Security Council in the Bush administration and traveled to Beijing for now-suspended six-party talks on Pyongyang’s nuclear program. Chinese diplomats “are the ones that show up at the table, but I don’t think they steer overall policy.”

Read more at www.washingtonpost.com

The same could be said for Hu in Washington. Make no mistake, any position he takes, any messages he delivers, any concessions he grants have been discussed and vetted before he got on the plane. This is a stark contrast with U.S. foreign policy, where the President makes the deal, then comes back to Congress for approval.