Doing Business in China - Making the most of the free trade agreement

In this section:

› How to find and meet decision makers in government
› Dealing with government-owned businesses

Most officials simply require basic respect — you will need to visit them out of courtesy and be honest about your company's intentions. The straightforward, honest and low key approach is best.

Stay in regular contact with key officials, pay them visits on special occasions or in times of success and don't just turn up when you need them for something. Many officials are in office for only three to four years so do not expect any cultivated influence to last past then.

Chinese government officials have a high social status based on their place in the hierarchy, so interaction with government officials tends to be more formal.

Mayors and other local officials in China often have far more power than we are used to in New Zealand. The majority of local officials are parochial and where they can, they will use the lack of clarity of in laws and regulations to further local ends.

The Chinese deference to hierarchy can mean that lower ranked officials are reluctant to speak up, particularly if they are in the company of their superiors.

If they do not directly answer a question after repeated attempts, and it seems they do not know, do not push the point and potentially embarrass them. Back off and ask for the answer to come later.

Time estimates for how long something will take can be very difficult - often they are highly under estimated, though in some cases approvals can arrive far quicker than anyone expected.

When interacting with government officials, be careful about what you say.

Chinese officials often show respect to guests through special treatment. This may include queue-jumping, over-riding a long series of traffic lights, or moving around major cities in motorcades, headed by a police car with lights and siren.

Be wary of matchmaking activities with local Chinese companies provided for you by local authorities. Often local authority sponsored events, such as trade missions, are more about what is good for the politicians, their region and its businesses than what is in your company's best interests.

Remember there are lots of alternative ways of entering China other than getting into bed with local authorities. For information on these options, see Setting up local offices.

For more information on the influence of government officials, see Building and maintaining relationships.

How to find and meet decision makers in government

Finding the actual decision maker in a government agency can be difficult for an outsider.

There are consultants who can play matchmaker between you and officials in your region or industry. Be wary that some people may talk up their networks and level of influence. Every local has a friend, relative or classmate in a high place.

One way to meet government officials is to network. Be on the look out for New Zealand Government, New Zealand Trade and Enterprise and Embassy events where Chinese officials will be attending. Also consider participating in events organised by other countries such as Australia, Britain and the US, especially the American Chamber of Commerce.

Dealing with government-owned businesses

It can be easy to forget, but China is a communist country and the government plays a direct hand in all key parts of the economy and in strategic enterprises. There are still over 1,400 “listed” State Owned Enterprises and the Chinese Communist Party is involved at all levels in their corporate governance.

The more sensitive the industry, the more important the government's role. Most heavy and infrastructural industries are still government/state-owned enterprise dominated (for example, energy, telecoms, transport). This can mean unwieldy but well resourced competitors and much interference. In contrast, consumer goods tend to be left much more to the open market.

There are also regional variations in the degree of government involvement or interest you will have to deal with. In general, on the east coast your interactions with government officials will be at a lower level than you can expect in central and western areas.

Finding out if there is a government connection with prospective partners is an important part of doing due diligence. Such a connection is not necessarily a bad thing, but it pays to understand a company's ownership structure and choose localities with care. For information on how to do due diligence, see Doing due diligence and avoiding scams.

Party officials still frequently retain a majority of the seats on strategic company boards of directors. Its military enterprises have also established wide trade connections and technical cooperation agreements with thousands of companies and manufacturers.

However, direct government influence in businesses themselves is being rolled back. The military has sold off its assets, however it still has some influence without having direct ownership or control.