Stability first among China’s stakeholders


The incoming Chinese leadership will build on the achievements of its predecessors, but MNCs must prepare to navigate a more challenging stakeholder community, says Chris Liu

china dragon

China has adopted an approach of “stability first” over the last three decades. Since the modern-day open door reform championed by the late Deng Xiaoping in 1978, this has been the leadership’s paramount objective and a critical factor in the country’s phenomenal growth.

As the transition in China’s political leadership approaches we should not expect to see any major changes in either the policy or the political environment. The situation confronting MNCs in the investment and operating arena is therefore unlikely to change.

The transition will see the current and future leaderships work together to ensure a smooth transfer of power and the policy priorities during this period will closely follow those set out in the twelfth Five Year Plan. In contrast to the US or Europe, the transitional period is one where business can predict what will occur: although corporations should start to build relationships with the new leadership and develop an understanding of their thinking.

Big changes to machinery

However there will be significant changes in the government machine: a huge reshuffle, which precedes the formal handover of power, has already seen nearly 10,000 officials changing roles, mostly at local levels so far, and few of the 100,000 bureaucrats will be unaffected by the transition in China.

Once this process is complete and the transitional government has settled in we can then expect to see the new government set out its priorities. These are likely to build on those of the government of Hu Jintao and Wen Jiabao. Ministers will want to implement careful reforms domestically, while
maintaining a focus on national stability – which is very much a continuation of the approach taken over the last 30 years.

The government of future President and Premier (popularly predicted to be Xi Jinping and Li Keqiang) is likely to develop policies along the same lines as that of Hu and Wen. Many political analysts believe the next leadership has been handpicked by the current leaders precisely because they are desirable successors to move forth and build on the current policies.

However there are some differences. In this new era, government will have to balance market forces with social forces and the latter could be quite
powerful. In this new system of complex stakeholder societies, government policy alone cannot deliver economic growth or dictate the exact pace of social change. This is resulting in corporations having to develop public affairs strategies which engage a wider universe of influencers.

In the West, this system evolved over many years, but in China the pace of change has been so rapid that issues and crises arise which have to be grappled with at very short notice. This is presenting corporations, and their communicators, with a steep learning curve in mainland China.

At the same time, unpredictable international events and difficult domestic issues such as healthcare, food and commodity prices, energy fuel and property are likely to create some challenges for the new government.

New approaches

This means that the complexity of the situation faced by MNCs in China is likely to grow as the new government pursues its twin goal of maintaining
stability and ensuring the livelihoods of the Chinese people. The government has already lowered its growth forecasts and China will not be immune from developments overseas.

However the incoming government will remain committed to developing the seven strategic industries under the current Five-Year Plan: energy efficiency and environmental protection industries; new energy; new materials; next-generation IT; high-end manufacturing; bio-engineering; and, alternative energy vehicles.

To compete effectively in these sectors corporations will have to deal with the fast-evolving macro stakeholder and communications environment. Simply striking a deal or building good understanding with the top government policymakers will not automatically mean they achieve their objectives.

Social stakeholders, industry influencers and the media can all have a direct impact on government thinking and therefore in turn affect the operating environment. As a result of this government relations strategies must now focus on the social-political arena and not just on the ministers and officials responsible for their industries.

Plan ahead

The reality for corporate public affairs practitioners operating in China is that they will have to both plan ahead and develop a broad based approach. They will not be able to take shortcuts with the media or rely on making quick wins with government officials. The power of grassroots movements and the rise of social networks mean that they will be held to account. Problems and crises now brew in the social media and transfer to the mainstream media and then almost instantaneously move onto the government’s radar.

However, corporations should avoid over-reacting to the social media community. It is important that they are open-minded and work carefully to develop awareness of the culture and patterns of behavior among netizens. They can then properly engage using the correct language and approach.

In conclusion, China is approaching a time of transition but we should not expect any major surprise changes in either policy or approach. However,
corporations, and their communications teams, will only be able to navigate this transition if they develop comprehensive engagement strategies which
include both government and social stakeholders.

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Chris Liu is Partner and Chief Business Officer, Greater China at Ketchum

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