In 2012, at least a dozen of China’s top leaders, including President Hu Jintao and Premier Wen Jiabao, are likely to retire, making way for the next generation of political leadership. The time is right to assess some of the different views on the vision for future development of the Chinese economy. For US companies, especially now, ignoring those different views could be a costly mistake.
While China is a market prized above all, more and more US companies are perplexed by its increasingly unpredictable business environment. In particular, understanding and predicting China’s policy shifts and resulting changes in the commercial, regulatory, legal, and business landscapes can pose significant challenges to US companies seeking to develop a China strategy that will be properly aligned and reconciled with those changes.
But how can we achieve that understanding? Some say the answer lies in revisiting our assumptions about China’s government. While still clearly a one-party system, China’s government is no longer a monolithic entity charting a linear course of economic development. Specifically, while China’s political leadership may agree in principle on the need to reform various parts of the economy, there isn’t always agreement on the process, timing, and degree of change needed to realize that vision of reform.
Are US companies, then, at the mercy of unpredictable policy twists and turns in China? There’s certainly guesswork involved, but some companies are better at it than others. These companies are beginning to understand the different views within China’s leadership. By better understanding the different views, one can gain insights into China’s leadership and their decision-making processes. Of course, dividing China neatly into two categories is as much an oversimplification as dividing America into red states and blue states. But doing so is a way of beginning to understand the policy differences within the Chinese political leadership.
More important, in the absence of a clear direction regarding exactly how the Chinese will reshape their economy, global businesses should know the differences and the commonalities in the points of view of Chinese leadership and develop strategies that can quickly adapt to this dynamic environment. While most of the differences discussed in the following chart are subtle and may appear to be even minor, they can have significant impact on businesses operating in China.
|Seeking comprehensive reform||Promoting the tried and tested|
|Industrial and trade policy||
|How they will boost domestic demand||
“The political landscape in China today cannot be defined by any ideology or the policies of a strong leader like Chairman Mao or Deng Xiaoping. The leadership is becoming increasingly diversified, and the leaders’ views are also becoming more transparent. There is some public debate going on.”
Cheng Li, Director of Research, John L. Thornton China Center of the Brookings Institution and author of China’s Leaders
“There is tension over how you build the society. Do you continue to focus on the wealthy areas to generate higher efficiencies, or do you do it in the rural and inland areas to avoid the instability that comes from greater and greater income disparity? The answer is, you do both in some combination, but they are arguing over the specifics on how to do it.”
Robert Lawrence Kuhn, advisor to the Chinese government and author of How China’s Leaders Think