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CHINA GOVERNMENT RELATIONS BEST PRACTICESJim McGregorJuly 2016
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Since Xi Jinping’s rise to power in 2012, China’s business environment has become increasingly regulated and complex. This is particularly true for MNCs operating in China, which are confronted with new policies that favor domestic competitors, laws that threaten intellectual property rights, and rising anti-foreign sentiment among officials. Amid this increasingly strained “new normal” for foreign businesses, developing a flexible, comprehensive GR function has become crucial for long-term success and survival.
In a presentation on July 13, 2016 to the American Chamber of Commerce in Shanghai, APCO Worldwide Greater China Chairman Jim McGregor drew on his decades of China business experience to share personal insights into successful GR capacity building and management. If you missed the event, what follows is APCO’s recap of Jim’s GR best practices.
A flexible, comprehensive GR function is crucial for success and survival.
— Jim McGregor
In China, where building relationships with government stakeholders is critical to long-term growth, maintaining strategic alignment between local business units and corporate GR is paramount. Government affairs cannot merely be handled by a separate committee at the top of a corporate structure, but must be structurally integrated within local business units. Close communication between business development and GR will facilitate the creation and maintenance of a corporate strategy primed to account for shifts in central and local government priorities.
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1. Integrate GR with Local Teams
In Xi Jinping’s China, MNCs are no longer special; in fact, government officials today want to know what foreign businesses can do for them.Boasting an enormous, rapidly growing consumer market, China has the policy power to demand that foreign MNCs help China accomplish its goals in exchange for market access. Chinese officials often lack the expertise necessary to create policies that effectively address the problems they face. Foreign businesses must prove their value by educating the political ecosystem, introducing constructive ideas that align with government priorities while also seeking to align with international standards. By providing thought leadership and practical expertise to government and key stakeholders, foreign businesses show they are doing their part to help China respond to its most pressing challenges.
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2. Educate the Political Ecosystem
Miscommunication between headquarters and local teams is a frequent barrier to success faced by MNCs. This issue is particularly salient among GR teams in China, which must reconcile ambitious corporate agendas with local realities. It is crucial to select a GR Head who fits your company’s needs. Large, well-known MNCs have often been successful employing a long-time company executive who can act as a trusted ambassador and direct conduit to the HQ C-Suite. However, companies large and small have also done well with experienced Chinese GR professionals who have a deep understanding of government, a global perspective, and relationships across many government agencies – not just a few friends in one department. As complex situations and crises emerge, a GR Head must draw on these unique resources to enable swift, effective responses that mitigate risks and open doors to new opportunities.
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3. Hire Talent that Fits Your Needs
EXAMPLES OF GR STRUCTURES FROM REAL MNCS IN CHINA
Hierarchical Structure
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One vice president and general counsel oversees the entire practice, but the GR department is connected to neither business units nor business development.
China VP and General Counsel
Public Affairs(In charge of community
engagement: CSR & image
marketing)
Legal Technical Policy
Government Affairs
(In charge of government and policy tracking)
• Concentrated decision-making power: One person oversees everything.
• Not integrated into business units.• VP is in charge of many functions,
can’t prioritize GR.• Hard to adjust to local
circumstances.
PRO
CON
Integrated GR Structure
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Global Government Relations (GR) VP
China President & CEO
Greater China VP of GR
Head of Business Units
Head of GR at each Business
Unit
Legal Affairs Government Affairs Public Policy Compliance Business
Development
China GR VP wears many hats at once, has lots of responsibility.• Reports to China CEO, but also works with Global GR VP.• Directs GR for all business units, with GR Heads in each individual business unit.
Direct reportSoft report
• Integrated lines of communication• Considerable autonomy for China
team• GR Head in every BU
• Conflicting priorities may emerge• Convoluted structure• Requires strong VP
PRO
CON
Semi-Autonomous China Head
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Executive Vice President,
Head of Corporate Affairs China
Global Corporate Headquarters
Liaison with Industry Groups
Head of China Business Units
NGO & Functional Agencies
Coordination
Central Ministries
Coordination
Local GR and JV
Coordination
Industrial Intelligence
and Analysis
Technical lobby, finance services,
JV coordination and others
• The China Head of Corporate Affairs is given lots of independence regarding management. • China Head is connected to business units. • Head of business units maintains good communication with GR team, but stays separate.
Direct reportSoft report
• Integrated: GR functions report directly to the China Head
• China Head able to act according to deep understanding of China.
• China Head can integrate strategies with GR work.
• Less vertical integration with headquarters.
• Relies on a truly superb China Head.
PRO
CON
BUILDING THE RIGHT GR TEAM
Successful China GR Requires the Right Talent and the Right Structure
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• Comprised of individuals who report directly to the China GR head.
• Specializes in coordinating GR efforts among various stakeholders, including industry, NGOs, agencies, local GR, and joint ventures.
THE TEAM
• A long-time executive trusted at the top who can act as a company ambassador; or
• An experienced Chinese GR professional with deep connections across multiple government agencies
• The resume and gravitas to command respect in government circles.
• Ability to cultivate relationships with key government officials in variety of agencies.
CHINA GR HEAD
The China GR team should be empowered to handle local issues, requiring a high level of trust, experience, and capability.
The Right Team The Right Structure
• China GR team reports directly to the China Head, with simultaneous or “soft” reporting lines to HQ GR leaders.
• HQ gives the China team autonomy to formulate strategies that work for China, and HQ GR leaders provide support the China team as needed when engaging with various HQ personnel.
RELATIONSHIP WITH HEADQUARTERS
• Local GR personnel report directly to the local business units, but also work closely with the global GR head.
RELATIONSHIP WITH BUSINESS UNITS
• China GR Head has influence at the top of and across the China management structure, including with business development, communications, and business unit leaders.
CHINA GR HEAD HAS BROAD INFLUENCE
ABOUT US
Jim McGregor
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Jim McGregor is Greater China Chairman for APCO Worldwide, and author of two highly regarded books: No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism, published in October 2012, and One Billion Customers: Lessons from the Front Lines of Doing Business in China, published in 2005. He was a veteran reporter for The Wall Street Journal, and prior to joining APCO he was founder and CEO of a China-focused consulting and research firm for hedge funds. He also held previous roles as a senior advisor for Ogilvy Public Relations China and the China managing partner for GIV Venture Partners, a venture capital fund that focused on technology and Internet investments in China and India.
Mr. McGregor is a professional speaker, regular television and radio commentator and a contributor of essays and opinion articles for a variety of publications. He has lived in China for more than two decades, and can speak and read Chinese. He was an active member of the Board of Governors of the American Chamber of Commerce in China (AmCham) for nearly a decade and served as chairman in 1996, and formerly served as chairman of the U.S. Government Relations Committee for AmCham. He is also a member of the Council on Foreign Relations, the Atlantic Council, a Global Council member of the Asia Society, a board member of the U.S.-China Education Trust and a member of the National Committee on U.S.-China Relations.
APCO Worldwide
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Founded in 1984, APCO Worldwide is an independent global communication, stakeholder engagement and business strategy firm with offices in more than 30 major cities throughout the world, including in Beijing, Shanghai, and Hong Kong. To find out how APCO’s integrated services can help your company, visit apcoworldwide.com
Jin LingDirector
1102 Prosperity Millennia Plaza,663 King’s Road,Quarry Bay,Hong KongPhone [email protected]
Jim McGregorChairman, Greater China
Unit 301-303, Platinum Tower233 Tai Cang RoadShanghai 200020People’s Republic of ChinaPhone: [email protected]
Anne WangSenior Director
Suite 903, Tower COffice Park No.5Jinghua South StreetChaoyang DistrictBeijing 100020People’s Republic of ChinaPhone: [email protected]
James RobinsonManaging Director
Unit 301-303, Platinum Tower233 Tai Cang RoadShanghai 200020People’s Republic of ChinaPhone [email protected]
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