As the PublicAffairsAsia/Edelman Public Affairs Dialogue White Paper is published, Craig Hoy offers an executive summary of the report’s central findings
The world is focused on China, and the world is still confident about China. That is the central finding of the Public Affairs Dialogue White Paper, but within this confidence lurk considerable challenges: these are formidable in the public affairs and trade relations arena.
The key conclusion of the 2011 white paper is that global MNCs remain bullish about future trade relations with China, but are under-equipped to deal with the increasingly complex political, regulatory and stakeholder landscape. In addition, we note, the same mismatch is now being felt by Chinese corporations and State-Owned Enterprises as they take their operations out into the wider world.
Getting to grips with the new world order, and in some cases disorder, requires a fundamental rethink of corporate strategy and governmental approach. But beyond glib CEO and political pronunciations about creating “win-win” relationships between China and the West, the fundamental means for achieving this objective is less clear. China’s 12th Five-Year Plan, which sets a route map for the country’s own economic and social development, underpins this report.
In an age of global interdependence, policy decisions inevitably cross borders, and the impact of China’s policy blueprint will be felt further afield. As Europe enters 2012 grappling with enormous economic uncertainty – and the US struggles to break out of its zero growth morass – the focus of MNCs continues to shift to the new consumption markets of the East, such as those seen in China’s rapidly-developing towns and cities.
As that change continues, the impact of China “going global” is being felt from Bali to Brussels to Baltimore. In three parts we examine what this means for inbound investment, outbound Chinese enterprise and finally for the public affairs and government relations professionals who will attempt to make sense of it all.
THE FIVE-YEAR PLAN
JUST as US business will look for the nuances in the presidential State of the Union address, or British lobbyists will pore over the legislative fine print of the Queen’s Speech, commerce and industry look to China’s Five-Year Plans to examine how to align their own development with that of China’s society and economy.
The current Five-Year Plan sets out bold commitments to increase domestic consumption, expand and enhance social welfare, and create a less export-dependent economy capable of sustainable growth. To achieve this, it both encourages inbound and outbound investment, supports indigenous innovation and promotes the development of new emerging industries in arenas such as renewable energy and the development of alternative fuel vehicles. Collectively the Plan presents a myriad of opportunities for Chinese business and global commerce. But there are concerns…
THE INBOUND DIMENSION
TWO PHENOMENA are aligning to present a challenging, but nonetheless potentially encouraging, picture for MNCs in China. The government’s policy goals are widely seen as being good for Western MNCs, with 77% citing the Five-Year Plan as giving grounds for optimism. On the downside, however, are reservations about future levels of state control in the business arena, with nearly eight in ten believing that “greater engagement by Chinese government in the development of industry and economy is beckoning”.
Yet running counter to this view is the observation that significant steps towards greater and more transparent use of existing regulations (such as the inquiry into the broadband services of China Telecom and China Unicom) are evidence of a stronger commitment to the rule of law in the business arena.
THE OUTBOUND DIMENSION
JUST AS the Five-Year Plan is encouraging for inbound investment, so too are the prospects for China’s externally-focused corporations. Nine in ten business leaders surveyed for this white paper see greater opportunities for Chinese business globally. However, as China seeks to expand its engagement and investment overseas, it will have to tackle commonly-held misconceptions about its motives, navigate a vastly different political and media environment, and overcome protectionist tendencies which the majority of respondents say will result in the regulatory bar being set higher for Chinese corporations than for domestic enterprises. Put bluntly, the land of the free may not be so free after all.
At the forefront of the going-global push are corporations such as Huawei and Haier, but even these adept Western-orientated players are encountering difficulties overseas. In China, government relations are central to the success of business. The same, it appears, is true for Asian MNCs and SOEs as they make their first forays onto Capitol Hill or into the myriad of Brussels’ directorates and regulatory bodies. These companies have capital but often overlook, or undervalue, the need to win arguments or tackle the challenges which cautious governments, regulators and consumers will put in their path.
The white paper detail the overarching trends, attitudes and public affairs strategies impacting upon this transformative period in Sino-global economic and trade relations.
Craig Hoy is Executive Director of PublicAffairsAsia
• Follow THIS LINK to download the White Paper from the PA Dialogue microsite