December Insight-New Diplomacy for a New China

There is growing recognition that companies should practice corporate diplomacy worldwide. How does this translate for foreign companies in China?

China’s Tenth year of accession to WTO is being marked this month in China and around the world. The China that joined WTO has changed internally and externally. The era of bi-lateral trade diplomacy under WTO is by and large coming to an end from its nadir in the nineties. There are many reasons for this but the key ones are (1) that WTO prescribes equal treatment to all countries, (2) the Chinese government’s direct influence at a Ministry level is now mitigated due to the insertion of SASAC (State Asset Supervisory Administrative Committee) between line Ministries and State Owned Enterprises, (3) the rise of the private sector, and (4) a profit oriented management focus that overrides politics.

The speed of growth of the domestic economy, the multitude of international players in each sector and state protectionism mean that the traditional intervention by an OECD country Embassy on behalf of one of its country’s commercial players in China is often now ineffective. There is also a growing reluctance by western governments, with the exception of the United States, to fight with the Chinese government on behalf of a single company. On top of this, the Chinese administrative bureaucracy is more nationalistic, overworked and reluctant to fight for an international company in China.

This means, that the days of the foreign multinational company being able to operate in a semi-concessional mentality are over.

To compensate for this shift companies need to develop a strategy to build up public good will, execute an effective government relations strategy and crisis management strategies. To cultivate goodwill requires a commitment to a fully funded and creative Corporate and Social Relations program, social responsibility in advertising, effective employer branding practices and a reasonable public relations strategy that incorporates traditional media work into modern multimedia and social networking strategies. Foreign companies must also work to strengthen their Chambers of Commerce and sector or industry associations.  For companies with significant investments or revenues in China it is recommended that they consider adding a Board member at the parent level with solid reputation and experience in China.  Companies should also have a crisis management team selected, briefed and ready to engage quickly should a serious government or media relations crisis evolve.

Deng Xiaoping commented that the start of the Open Door was comparable to feeling the stones across the bottom of the river to get across. The stones are now removed and it is unfortunately time to swim or drown in China.  The companies that understand this now will, metaphorically speaking, develop a life guard to survive in the new waters by having a systematic approach to corporate diplomacy.

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