September Edition 2019

23 Recent Market Trends The Government's Influence in China Government Statements: Hands down the most important factor for a successful Chinese market strategy By: Laura Otterpohl, Founder Lohtsman Business Intelligence Just when you thought a deal was on its way to closing, suddenly your counterparts disappear. Just when you thought an MOU was ready for signature the other party makes sweeping changes, adding yet more months of negotiations. In many ways the Chinese market is a mystery. Chinese business practices are oftentimes opaque, the culture is different, there are language barriers, and we could go on and on. However one very simple key factor gets overlooked by foreign companies wishing to enter the Chinese market (and their advisors), and this key factor is much more powerful than any cultural difference or language misinterpretation. It is the Chinese government and their policy statements. If you learn one thing today, learn this: Chinese government policy statements are hands down the most important element to any business development plan in China. Whatever the government focuses on is what Chinese business focuses on. Whatever the government says becomes reality. The greatest business plan in the world means very little in China unless you align it with government policy. This is not an exaggeration. Chinese companies, if they want to stay in the good graces of whatever government department they answer to, must live and breathe government policy. If you look around you’ll see government policy echoed in annual reports, in chairman messages on company websites, and in corporate mission statements.When those same companies are looking to partner with or invest in overseas companies, a major criterion is that through the partnership or investment the company will still uphold current government policy. Plus, many of those partnership and investment opportunities will slide across a government official’s desk at some point. Once an overseas opportunity reaches the government level, how do we convince a government official to OK a deal? Guanxi helps but it’s not a guarantee. Guanxi might get the opportunity to the top of a pile, but it doesn’t necessarily get a stamp of approval. Instead, the way to get in the good graces of a government official is to give them some face. Make