How Policies Are “Made In China” - Facing China

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How Policies are “Made in China”Kreab Gavin Anderson is aleading communicationsconsultancy with a globalreach.We help our clients solvecomplicated and demandingcommunications issues thatcan have an impact on theirfutures.With operations in 25countries and over 400experienced consultants,we provide independentand strategic advice onhigh-stakes financial,corporate and publicaffairs communications.We base our advice on asolid history of serving bothprivate and public clients infinancial and professionalservices, energy, mining,manufacturing, healthcare,technology and many otherindustries.For more information onChina’s regulatory landscapeand how it may impact yourbusiness, contact us today.To many foreign enterprises, China’s policymaking environment seemsimpervious to influence. In fact, while foreign firms have little ability to setthe national leadership’s priorities or control the policymaking process,with the proper assistance, they may still find ways to apply influence andfacilitate positive policy outcomes.Systemic OverviewIn many ways, policymaking in China is similar to that in other large countries. Newpolicies are proposed, drafted, distributed for consultation and vetted beforeimplementation.Additionally, central-government policy initiatives frequently take on differentcharacteristics at sub-national levels, where local conditions and interest groupsresult in the creation of unique policy environments. Nevertheless, policymaking inChina has several special characteristics: Full control of the Communist Partybureaucracy, which overlaps with thegovernment bureaucracy; The leadership’s tendencyto take a back seat inpolicymaking and focuson decision making; A policy deliberation andconsultation process thatfrequently lacks in transparency; A strong focus on achieving consensusbefore making policy announcements;and Continued reliance on official planningdocuments, such as five-year plans forpolicy guidance and benchmarking.Contacts:Robyn Joseph – Partner, Hong KongEmail: [email protected] Patterson – Executive Associate, Hong KongEmail: [email protected] is a unitary state that frequentlytolerates variations in local policyenvironments

Plans and BenchmarkingDespite decades of reform, China retains many features of acommand economy. One of the most prominent is thegovernment’s reliance on five-year plans to guide policymaking andmeasure the effectiveness of implementation.Plans may cover economy-wide, sector-wide, industry-wide or subindustry topics. They may also be issued at the national level or atlocal levels, with the details of local plans being tailored to matchconditions in the jurisdiction. They are frequently general andcontain few if any measures to penalize non-compliance. In general,specificity increases as: The seniority of the issuing office decreases; andThe scope of the plan is narrowed.Nevertheless, the process of creating plans is similar to thatundergone by other major policy documents.A local plan with a tight scope, such as asub-sectoral one, will be more specificthan a national plan with a broad scopePrincipal Policymaking Actors and their Roles in the ProcessPolitburo Standing Committee (PSC) The ultimate decision-making body within the CommunistParty of China (CPC) Includes the President, the Premier, the Chairman of theNational People’s Congress (NPC), the head of Partydiscipline and other senior CPC officials Technically not part of the government, although, throughthe Premier, it holds sway over the government bureaucracy,which is made up almost entirely of CPC members subject toParty discipline May set policy directions as well as debate and decide on keypolicy initiatives proposed by the government Makes consensus-based, non-transparent decisions2

State Council The highest body in the governmentbureaucracy Includes the Premier, Vice-Premiers,State Councilors, and the heads ofChina’s ministries and commissions Initiates important policies and decideson key policy objectives, a power itshares with the NPC May create Leading Small Groups (LSG)to coordinate drafting among ministries Assesses the consistency of policies withnational priorities and their adherence tothe Chinese constitution through itsLegislative Affairs Office (SCLAO)National People’s Congress (NPC) China’s highest legislative body Votes on important policy initiatives,such as government restructurings andnational five-year plans Frequently overshadowed by the StateCouncil in the policy-approval processMinistries Draft and implement policies Initiate policies of a more limited scope Submit policies to the State Council forapproval May coordinate work through a StateCouncil-formed LSG Frequently disagree with each other,lengthening the drafting process3

Other Policy ContributorsThe Public May play consultative roles during drafting, draw officials’attention to policy flaws, or suggest policies Not a policy actor but may have a strong indirectinfluence over policymaking May include: Sentiment is frequently taken into consideration byleaders, who wish to maintain social and politicalstability May be highly critical of policies that are perceivedto worsen social problems such as inequality andabuses of power Opinions may be channeled and magnified by socialmedia -Academics or specialists working alone, throughuniversities or through government think tanks-Representatives of state-owned enterprises andprivate firms-Business associations and chambers of commerceMay provide conflicting advice, complicating andlengthening the drafting processLocal Policymaking and Policy VariationsBelow the national government are local governments at the provincial,prefectural, county, township and village levels. Here, the policymakinginfrastructure resembles that of the national level, with the local Party,governments, and people’s congresses playing analogous roles.In the process of implementing national policies, localgovernments may craft policies that are tailored to conditions intheir jurisdictions, provided that the policies do not contravenenational laws or regulations. Extensive leeway often exists inthe following areas: Industrial development; Urban planning; Land use and planning; Public safety; and Social policies, such as education and housing.This flexibility, when combined with the influence of localstakeholders, often produces significant differences between localregulatory environments.Map of Zhejiang and its prefectural divisions;Source: d.maps.com4

A famous example of local policy discrepancies was theadoption of contrasting economic reform models inJiangsu and Zhejiang provinces during the early years ofChina’s economic reforms:2.43%3.08%Sunan Model (Jiangsu) Government-sponsored and operated enterprisemanagement, including limits on management pay andstrict official supervision More support for collective “township and villageenterprises” (TVEs), including penalties for workerswho left TVEs Stricter legal and financial constraints on private firmsWenzhou Model (Zhejiang) Less government intervention in enterprisemanagement More support for private enterprises Greater access to credit for private firmsBy 2000, the gap between the economies of theneighboring provinces as a percentage of national GDPhad narrowed, prompting some economists to call theWenzhou model a success; Source: NBSThe text of China’s 2003 Administrative Licensing Law presents a more common, although less-far-reaching example of thenational government’s allowance for local policymaking differences.Article 12 of the law lists matters for which administrative licenses may be issued. However, Article 15 states that localgovernments may create licensing regulations “in the absence of any law or administrative regulation on the matter listedin Article 12” provided that local licensing regulations do not limit the production, operation or provision of servicesperformed by individuals or firms from another area, or limit market access for goods made elsewhere.There are advantages and disadvantages to policy variations between jurisdictions:Advantages:Disadvantages: More opportunities for the central governmentto learn from experimentation National authorities must be vigilant to prevent theadoption of local policies that weaken national policies Policies may be better tailored to match localrealities Steeper market learning curve for firms that wish toexpand nationally5

Influencing the ProcessForeign enterprises who wish to reach out to and influence Chinese government stakeholders must develop anunderstanding of a complicated and unfamiliar policymaking context. These firms may confront a steep learning curve.However, with the assistance of a communications consultancy that knows the ropes, they can significantly speed up theprocess. At the national level, a communications consultancy can apply influence during the consultation process by securingthe support of academics or policy experts who can advocate a position to policy drafters. At the local level, a consultancy can help firms build relationships with officials and other local stakeholders whosesupport will be required for short-, medium-, and long-term success in the target jurisdiction. These relationshipsmay help provide access to decision makers during the local policy implementation process. Frequently, it is thisimplementation process that has the biggest commercial impact for businesses. Finally, at any level of government, a consultancy can provide ongoing research into and advice on the policyenvironment so as to provide firms with the context they need to interpret regulatory developments as they happen.Cover image by Thomas Fanghaenel. For image licensing information, please click here.6