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A practical strategy for business in China…

Release Date

17 March 2014

The 18th Congress of the Chinese Communist Party (CCP) held in November 2012 and its Third Plenum, focused on macroeconomic policy held in November 2013, have set out the Party’s vision for China’s economic, social and political development over the next decade. Indeed, traction since these two conferences is already occurring across many economic, political and social areas.
 
But what’s really clear from these two seminal conferences is that the CCP is determined to lead China into its future. To secure its leadership, the CCP will continue to learn, to evolve and change as a unique governing institution. In so doing however, it will not give up its influence across the economy as this is a primary source of the Party’s legitimacy.

The CCP has a direct and driving influence over the economy at all levels that is pervasive and ubiquitous yet is often also opaque.  It’s vital for Australian businesses seeking to start or to grow business interests in China to invest in developing a deeper appreciation of the role that the CCP has across China’s economic landscape. This appreciation of context is critical to any practical successful China strategy and should include:
 
Understanding the relationship between the CCP and governments at all levels.
It’s not easy to distinguish the lines between the CCP and government and often lines do not appear to exist. Party officials outrank their government colleagues and Party organs exist at all levels of government and steer  shape and supervise national, provincial and local government priorities including investment attraction and approvals, joint venture licenses, the delivery of public services and services to businesses.
 
Understanding the role of the CCP in business and commercial activity
The Party is very much involved in commercial activity. State Owned Enterprises are a visible example. Yet the CCP is also heavily involved in brokering joint ventures with local partners and investors, facilitating access to domestic supply chains, providing access to land for production facilities and access to local workforces.
 
Building ethical and trusting relationships with local CCP officials
The work of local party officials and their government counterparts is driven by their individual and collective performance criteria. Officials are recognised, rewarded and promoted based on the achievement of these criteria which are set by the next level up. Often these are a mix of economic, social and political factors. If your business aligns with these criteria, you are more likely to obtain the support and attention of local party and government officials.
 
Becoming familiar with cities other than Shanghai, Beijing and,Guangzho. 
China has long shifted its development focus to its west and interior and there are hundreds of new cities being built as part of the CCP’s ambitious urbanisation effort, which is a key part of the central government’s economic plan for the next decade. These cities are led and managed by party and government officials who are eager to bring the best of the world to their constituents. These cities have a wide range of emerging needs and represent significant new potential markets and segments.

The glittering cities of Shanghai, Beijing and Guangzhou perhaps belie the fact that the CCP in particular and governments at all levels in general have been the driving force behind the speed, scale and manner of economic development in China. This will continue and Australian businesses will be well served if we are able to better grasp and deal with the complexities and nuances of the CCP’s role in everyday economic and commercial activity. Doing so will enable Australian businesses to participate more actively, sustainably and successfully in China’s progress and development. This is just good business… with Chinese characteristics!

About the Author

Andrew Simon - Cheif Executive Officer, Yellow Edge

Andrew Simon is a founding director and Chief Executive of YE Performance Architects, a company which works with individuals, teams and organisations for inspired performance.
 
YE conducts the Global Leadership Practices Program to China for senior Australian business and government executives in partnership with the China Executive Leadership Academy, Pudong (CELAP) in Shanghai. CELAP is the CCP’s premier leadership development institution for senior party and government officials.
 
Andrew is a member of the Asia Society and is a board member of the International Leadership Association, headquartered in Washington DC.
 
 

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