3 Political Environment
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3.1 Political environment
- who are the decision makers?
3.2 Exploring the market: means of
Political Environment - who are the decision makers?
China is moving towards
a fully established market economy. But it is the state
that is responsible for guiding the transition. As a result,
economic decision making in China can look to the outsider
like a confusing patchwork of competing geographical and
sectoral authorities, each claiming "stakeholder"
status in different business activities, imposing taxes,
rents and regulations or requiring consultation before or
during the life of a project.
Broadly speaking there are two key trends in economic decision-making.
At central government level, the main tendency is a gradual
withdrawal by the state from direct control of business
and a greater willingness to free business activity from
wider policy objectives. This is combined with an increasingly
laissez faire approach to foreign involvement in the economy.
Additionally, there is a growing willingness by central
government to devolve executive powers down the administrative
chain, granting ever-greater powers to local authorities.
The overall effect of this process is to increase the number
of opportunities in the market and to lighten the bureaucratic
burden on foreign businesses that wish to take advantage
of these opportunities. However, the foreign investor is
still confronted with a seemingly daunting array of officials
and agencies to work through.
China's government is a pyramid shaped structure, at the
top of which sits the President, currently Hu Jintao. The
role of the Presidency is essentially to provide vision
- to set the general course for the country as a whole.
Each of China's leaders since Mao has marked his role with
a body of thought which all those below are supposed to
turn to as general guidance in policymaking.
Below the Presidency is the State Council - China's cabinet
- headed by the Premier, currently Wen Jiabao. This eleven
member body is the key national policy making group in China.
Its laws are passed by the National People's Congress, commonly
known as China's parliament, a three thousand member delegate
body whose membership is drawn from across the PRC. It meets
in general session for two weeks every year.
As in the UK, the day to day administration of government
policy is carried out by Ministries, the heads of which
report directly to the State Council. One tendency in recent
years as the economy has liberalized has been to dissolve
or downgrade Ministries, which directly administer industrial
sectors and replace these with bodies with a more general
State-level bureaus and agencies play an important and evolving
role in administering and enforcing China's growing body
of commercial and industrial law, along with its regulations
on imports and exports, financial matters and in sensitive
areas like intellectual property and environmental protection.
Formerly, state level trading companies had a monopoly on
import and export activity in different sectors. As their
core functions have been opened up to competition, many
of these groups have diversified their range of activities,
becoming holding companies or conglomerates, joint venture
partners or investment groups. They are still often regarded
as the natural partner for multinational groups planning
major joint venture projects in the PRC.
Below state level, economic decision-making is carried out
by the following groups.
Shi are unitary metropolitan authorities for China's four
largest cities - Beijing, Shanghai, Tianjin and Chongqing.
These have a very great level of autonomy in economic decision
making, including exemptions from national level economic
Provincial level authorities or Sheng are responsible for
the administration of each of China's Provinces and "Autonomous
Regions" (i.e., areas with large non-Chinese populations
such as Tibet and Inner Mongolia). Nominally beneath them
are City governments, responsible for China's second tier
of cities (which nonetheless can have populations running
into millions). Cities are headed by mayors, who in the
American style have a great deal of individual power. Traditionally,
there has been a good deal of rivalry between Provincial
and City level administrations, with Cities looking to maximise
their autonomy at the expense of provincial level government
and Provinces jealously guarding their prerogatives. This
has lessened somewhat in recent years, as the tendency has
been to grant more devolved powers to both governments while
loosening the strict reporting structure by which many decisions
at lower levels had to go upwards for approval.
Tiers of government below city level include counties (Xian),
townships (Zhen) and - at the bottom of the chain –
Even in the most liberalized business sector in China, foreign
investors entering the market will find themselves dealing
with representatives from one or more sections of China's
administrative hierarchy. How many of these representatives
the incoming businessperson meets depends on the type of
activity undertaken, the sector it is in and the level of
commitment involved. Investments above a set amount in certain
sectors require higher-level permissions, which can take
longer to obtain. All activities in other sectors are closely
supervised. Business in special zones may be free of nearly
all administrative drag.
More detailed research into the laws and procedures covering
the relevant business sector and the planned activities
within it should enable the foreign investor to calibrate
his or her plans to minimise bureaucratic complication.
Please see section 3 for more details.
Exploring the market: means of entry
Many cities in the UK are
twinned with major metropolitan areas in China. In the North
West, there are successful ongoing relationships between
• Manchester and Wuhan (Hubei province capital)
• Liverpool and Shanghai
• Salford and Chengdu (Sichuan province capital)
• Bury and Datong (Shanxi Province)
• Halton and Tongling (Anhui Province)
• Tameside and Bengbu (Anhui Province)
• Oldham and Xishan (Jiangsu Province)
• North West Region of England and Guangxi Province
Relationships such as these are specifically tasked with
cementing economic links between the respective cities and
on the UK side often have the involvement of relevant Chambers
of Commerce and Business Links organisations. In practical
terms, they enable UK businesses to establish the first
links between themselves and potential partners, explore
opportunities and develop the necessary contacts with administrators
Many companies first explore the market through taking part
in delegations visiting China. These are commonly organised
on a sectoral basis and involve a week or more spent touring
companies, meeting counterparts and potential partners and
hearing more about the sector as a whole and the specific
opportunities within it at seminars and similar events.
Sectoral delegations are commonly organised directly by
the Department of Trade and Industry, through groups representing
industrial and commercial sectors or by organisations like
the China Britain Business Council and the 48 Group Club
whose aim is to promote Sino-British economic links.
As in other markets, trade fairs are widely used in China
as a means of promoting business. In fact, for those entering
the market, the main problem is finding which of the many
hundreds that take place each year offers the best chance
to identify the relevant opportunities. The China Council
for the Promotion of International Trade is the main clearing
house for trade and investment opportunities in China. It
provides comprehensive information on trade fairs direct
from its website at www.ccpit.org/infosystem/index_en.jsp.
Some trade fairs are sector-specific. Others are more general
and organised on a regional basis.