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Five Ways To Improve Your Relationship With The Chinese Government.

By Dan Harris on Posted in China Business

Rich Brubaker of The All Roads Lead To China blog did an excellent post entitled, Managing Government Relationships in China. The post sets out the following five suggestions by Rich for attaining and sustaining a successful reltionship with Chinese government officials: 

1. Have a clear value proposition aligned with the objectives of the organization with which you are in discussions with.  The simple way to say this is that you should seek out and work with those governmental entities that can benefit by what you are doing. 

2.  Understand the scope and scale of your potential governmental partnership.  As Rich puts it, “there are areas where foreign partnerships are needed, and needed in a big way, but if a firm cannot support the market for that need then it is not a solution that will rank as highly as a local firm who will risk it all to scale to the government need.”

3. Be ready to manage the relationship. “Working with the government requires meetings.  a LOT of meetings.”  You must be prepared for this. 

4. Learn the difference between what officials say and what they can do.  This is the one that most directly impacts us as lawyers. Way more times than I can remember, our clients have been promised by a local government official that it can do A when we know A is not legal in China. In these situations, we tell our clients something like the following: You can do A, but if the people who have approved it are pushed out, then you will likely be facing serious problems or if Beijing (in one of its audits) finds out about it, you will likely be facting serious problems. You need to weigh these risks. 

5. Be Prepared to Give. Rich talks of having heard James McGregor give a speech in which he said that “If western firms want to be treated like Chinese firms, they should start acting like one.” Here’s Richard’s take on this:

I was once naive to think that I could ask for the moon and give nothing for it.. and many firms are no different. Being accepted is something that can be very rare, and the opportunities once accepted can be very interesting, lucrative, etc… but there is a cost.  Perhaps it is giving up a bit of IP, or accepting the resumes of friends, or working with organizations that (while somehow aligned) you’d rather not… it is part of the game.

I like Richard’s list.  What do you think?

  • http://rightsite.asia Michael Cole

    I agree with most of Rich’s points above, but I would take exception to the last bit about “giving” in order to receive with government officials.
    The statement, “Being accepted is something that can be very rare, and the opportunities once accepted can be very interesting, lucrative, etc… but there is a cost. Perhaps it is giving up a bit of IP, or accepting the resumes of friends, or working with organizations that (while somehow aligned) you’d rather not… it is part of the game.”
    In my experience, government officials are typically quite expert at taking (that’s what they do and why they have their jobs), but expecting to receive equal in return would truly be naive.
    In particular, accepting resumes of government officials nieces, nephews or mistress’ younger sister is going to create the expectation that sooner or later you are going to employ one of these people. To do so would violate the number one HR principle of never hiring anyone you can’t fire and is one of the surest ways of disrupting your organisation. Nonetheless, many inexperienced managers follow this tack in the vain belief that they just bought a friend in high places. What they just did was hire someone who is at best worthless, and at worst a corporate spy.
    As an executive of a foreign corporation, you will never truly be friends with government officials, but you can earn their respect and receive good treatment. The best way to do this? Just contribute a lot of tax revenue to the district economy, keep your mouth shut, and avoid messy relationships.

  • http://www.chinalawblog.com Dan

    @Michael,
    That recommendation troubled me as well as it skirts too close for my liking to potentially violating Chinese and other potentially applicable anti-corruption laws. Accepting a resume is no violation, but hiring to gain governmental favors very well might be.

  • allroads

    Michael / Dan
    I should clarify by saying that BEFORE firms should understand that in cooperating with government agencies, that this could be part of the game. Many groups I have worked with, and even as part of some of my projects, it is easy to think that the fact that the agency yo uare working with NEEDS you, and that it enough. IT is a market based belief vs. the reality.
    Now, does that mean that the organization MUST accept those resumes, or the partnerships that are suggested/ requested/ etc? No, and for the firms that are prepared, I have found that they (1) understand that these requests could come and (2) work out way ahead of time to deflect them… but the firms that think in a market minded way, and give no thought to the what requests could come, may find that the suggestion comes with a little more force.. and may find that they are unable to deflect.
    Perhaps that is troubling, but in my experience, this is what I have seen.. and at times, groups were able to successfully deflect requests, while others were not (either by having to accept the “request” or in their attempts to deflect found themselves irritating the other side).

  • http://www.gam-phuketlawyer.com Green

    Really good advice!!

  • Twofish

    Quote: If western firms want to be treated like Chinese firms, they should start acting like one.
    Ummm…. In most situations, a Western firm *doesn’t* want to be treated like a Chinese firm.

  • Twofish

    McGregor: I was once naive to think that I could ask for the moon and give nothing for it..
    Remember that if they didn’t think that they couldn’t get something from you, they wouldn’t be talking to you. In the case of most foreign businesses, you are providing capital, jobs, and intellectual know-how. Chinese officials are promoted based on how much economic growth they can provide, and you are critical for providing that.
    McGregor: Being accepted is something that can be very rare, and the opportunities once accepted can be very interesting, lucrative, etc… but there is a cost.
    And the cost is paid for my the amount of money you are putting into the locality,
    McGregor: Perhaps it is giving up a bit of IP, or accepting the resumes of friends, or working with organizations that (while somehow aligned) you’d rather not… it is part of the game.
    If you are going to get paid for giving up know-how, then sure.
    Accepting the resumes of friends of officials is a terrible, terrible idea. If you are in that sort of situation, you are a lot better off to just give the official a suitcase of cash, and have him put his friend on his payroll rather than on yours. It makes life less difficult for everyone.

  • http://www.pbl.com DLW

    I particularly like Michael’s and Two Fish’s comments. The initial (guiding) principle is that for most foreign firms in China, Two Fish is dead right. Their strategic plans in China, at least as formulated in the West, definitely are NOT “to become treated like Chinese firms”!
    With the growing wealth in China, and the near obsession with Western higher education, one client I work with notes that many Chinese officials now mention that they have a child or a niece/nephew at a university in America (or Canada or Europe), often near to where the client may have facilities. That client has told me that its senior managers in China are instructed in advance to make a point of obtaining information on these Chinese students abroad, and not merely to give assurances, but also to follow up internally, to make sure that the students are safe and healthy, take them to an occasional dinner or event, and so forth. It shows a level and gesture of universal caring that is greatly appreciated by the people in China, provides a matter of pride for them to share with their other family members, and also can be far more valuable and comforting than a material hung bao gesture or bottle of XO (and it can’t be easily replicated by people in China, and client says it makes it clear that it does not imply employment or the like–it is all about wellbeing).
    I will add that in my experience, trying to understand the precise “jurisdictions” of potentially-overlapping or competing bureaucracies in China, and which agency has authorization to purchase what (at any given time) in itself is often very confusing (it’s probably just as bad in most other countries, though), and can require a great deal of unravelling of knots. So if Richard’s list seems simple, in practice I think it is actually very difficult, and many so-called experts in China (as could probably be said for those in many other countries, too) may well be outdated, or simply wrong, about which government departments oversee various different activities these days.

  • Twofish

    There is a social custom to this sort of thing.
    You may have an official “hint” that they have a son or daughter that needs a job, and that getting them one would be appreciated, but you can play that game and “hint” that you’d love to do whatever you can to help, but that unfortunately there are issues that are out of your hands that make this impossible. (i.e. I have a son that goes to school at place X near plant X. You: That’s wonderful. It’s a shame that we haven’t been hiring people there.)
    You can also play stupid. Official mentions that the have a son or daughter that is near the place of business, you reply “how interesting!!!” and do nothing.
    Part of this is to provide plausible deniability. If an official demands that you give a job to their son or daughter, you can bring this up to their superior, and they could end up in big trouble. If they just mention that they have a son or daughter in location X, they could just be making small talk, and sometimes they *are* just making small talk, although it’s usually obvious from the context what they are looking for.
    One point is that anti-corruption laws and procedures provide a wonderful “excuse” to not do something without anyone losing face. If some official insists that you give their kid a job, you can say that you’d personally love to, but those “damned lawyers” in compliance won’t let you do it. Clear written policies on gift-giving are very useful in these situations, because you can do the “I’d personally love to do this, but they won’t let me” excuse.
    There’s also an element of negotiation involved. If they demand a job for their kid, then that’s an ultimatum, and you either give in or call the whole deal off. If they hint something, then you can (and probably should) say no without causing everything to fall apart.
    It makes sense if you think of yourself on a first date with someone that you don’t know very well in which a lot of stuff happens through hints and suggestions.
    The interesting thing is that you play these sorts of hinting games with people that you aren’t very close with. If you are really close friends with someone in China, you end up being extremely blunt about things (i.e. compare how people talk with their spouses via how they talk with people on a first date).
    I should point out that I find that there are two cultural traits that American business people have that interact strangely with China. Personally, I don’t think these conflicts don’t provide any particular insight to the “Chinese mind” but rather to the “American mind.” Something about a lot of Chinese business practices is that I’ve found them to be similar to those in say Mexico or India which makes me suspect this isn’t a “Chinese thing” but an “American interacting with rapidly developed previously rural society” thing.
    One thing that tends to be true with American business people, is that they are transactional. I give you this, you give me that. We are done. Americans are a very blunt and impatient people. I think this has something to do with the fact that the US has such a mix of people that’s it’s difficult to impossible to do things via “hints.” One thing that I’ve seen in the New York is you have two people from two different countries and they are talking in very, very blunt terms (you give me this, I give you that, no this product is no good, if you don’t want it then go), because they *can’t* talk to each other in hints.
    The second thing that I think gets Americans in trouble particular in China is that Americans for some reason have difficulty with relationships that are neither friend nor enemy. Americans seem to think that a person is either their close life long friend or their bitter enemy, and there isn’t this space for complex relationships that are either undying friendship nor total enemies. In the American mind, everyone seems to be either evil or good. I think this comes from religious roots in which people are either saved or damned, and that you are either working for God or Satan.
    This is a particular problem with dealing with Chinese officials, because you have to remember that with very, very rare exceptions, Chinese officials are not your friends. They may act friendly to you, but they are not your friend. However, they are not your enemy either. They just are people. I think that part of it is that Americans are “friends” with everyone, because friendship is free. However, in most of the world, friendship imposes costs, and you want to be careful who your friends are.

  • Twofish

    One other thing about why it’s a particularly bad idea to hire the sons and daughters of officials that you have business relations with.
    You have lunch with an official, and then afterwards you and your co-workers gather in the conference room and have a strategy session. What does the official *really* want? Do we want to do business with this official? What are our alternatives? So you have a meeting, make a decision, and then get back to the official and continue the negotiations.
    If your official has people on the inside, it becomes impossible to have that meeting.