For a business person interested in China or doing business in China, a good place to start is to read and study the Chinese government’s ‘business plan’. Those working in a business space aligned with said plan will find the slogging much easier than those who never read it or who are not aligned with the plan.
We know there are pros and cons to any political system. In America, we have on-paper democracy, yet our recent state and federal government officials on both sides of the isle can’t seem to succeed at one of their most basic and rudimentary tasks — agree on and pass an annual budget. There is also little medium or long range strategic planning that takes place in our government and system. We tend to flit from one two year mid-term election spear throwing cycle, and one Fox News vs. National Public Radio tit-for-tat, to the next.
China does not have an award winning form of western style political democracy, but you have to give them their chops in that they can get a budget passed and they are thinking in terms of five year windows (or trying to) for strategic planning purposes, to move the country forward.
If you spend enough time in China, you will run into more than a few foreigners who complain about how hard the business rowing has become there, how the playing field is not ‘fair’, how the local and national Chinese governments are not supportive of them, etc. To be fair, there is some truth to these complaints. On the other hand, when you ask them if they ever sat down and read China’s most current Five Year Plan and tell you how and why they are aligned with the letter and spirit of said business and political plan, you may see a number of them looking down at the ground, kicking the dirt with their boots while they do so, and giving you a long winded answer to the effect of “Shoooooottttt, Daawwwggg … you don’t really expect me to read that stuff do you?”.
In short, if one tries to succeed in a business space that can be scaled in China, and one where the Chinese government has not thrown its policy weight and resources behind, they do so at their peril.
The Chinese government is actually pretty good (note I did not type or say ‘perfect’) about telling businesses what its goals are and then sticking to those goals. If your business nicely lines up with those goals, good things may happen to you in China. If your business does not line up with those goals, bad things can happen.
The moral: One way to make business in China harder than it already is, is to not read the most recent friggin’ Five Year Plan before you get on the plane to see if what you are doing or want to do there makes sense.
This same advice can be said, really, for any emerging market one is trying to enter.
So let’s get started …
Preliminary and Required Reading:
Read Patrick Chovenac’s post (a professor at Tsinghau University in Beijing): Primer on China’s Leadership Transition. Professor Chovanec offers one of the most concise yet complete overviews I have read of this periodic political event in China, and this material is worth reading and absorbing.
Read David Wolf’s post at his always insightful Silicon Hutong blog: Beijing vs. the Provinces: A Rethink. Same goes for his post. Good stuff.
Read the following short posts from Dan Harris’ always excellent China Law Blog:
Then read the following Wall Street Journal article:
And finally, after doing the above background reading, I need you to invest and read the 12th Five Year Plan — the Chinese government’s most current ‘business plan’.
Here is some more background about that plan …
On March 14, 2011 China concluded the Fourth Session of the 11th National People’s Congress (â€œNPCâ€), while the National Committee of the Chinese People’s Political Consultative Congress (â€œCPPCCâ€) concluded one day earlier. These annual meetings, held in March of each year, are one of most important events on the Chinese political calendar.
The NPC is the highest legislative body in China and has the sole responsibility for enacting legislation in the country. The NPC is also responsible for electing and appointing members to central state organs — including the Standing Committee of the NPC, the President of the People’s Republic of China, and the Premier of the State Council. The CPPC is the nation’s key political body.
This most recent â€œlianghuiâ€, as these two sessions are commonly referred, brought together 2,981 members of the NPC, and 2,252 members of the CPPCC. As best I can tell, the vote to pass the 12th Five Year plan was 2,778 delegates in favor, 59 against and 38 abstentions. (To nobody’s surprise the CCP wins yet again in China in a landslide victory!).
Here are a few things Premier Wen Jiabo had to say about the plan:
â€œThe lowering of the (GDP) target (to 7%) not only demonstrates the government’s determination but also indicates a major move to transform the country’s economic growth pattern.â€
â€œWe should make full use of this opportunity to adjust the economic growth pattern and address the unbalanced, uncoordinated, and unsustainable factors that have existed in China’s economy for a long time.â€
â€œThe more the economy develops, the more attention we need to pay to strengthen social development and ensuring and improving people’s well being.” – Premier Wen Jiabao
Now, please click HERE, to access and read the full translated version of the 12th Five Year Plan, in English.
Questions and Assignment:
1. After reading the above, analyze and answer the below primary question on your own blog. You are free to consult and cite additional and other relevant resources in your response:
Primary Question: What are some of the main overarching implications of the most current Five Year Plan that are likely to affect businesses operating in China (both domestic and Western)?
2. After reading the above, the secondary questions to also answer on your own blog (again, feel free to consult and cite additional relevant resources in your response):
- What are some of your key observations and takeaways from the 12th Five Year Plan?
- Some economists argue that 8% GDP is the minimum growth floor China needs achieve to create enough jobs for its market and stability. The most recent plan appears to shoot for growth for most of 2011-2015 at 7%. Can China achieve such 7% growth over the next four or five years? What may happen for them, and for us/the USA, if they come in lower than that number?
- What are some of this plan’s targets and longer-term priorities? How do these differ from our priorities in the USA, and why?
- What were some of the accomplishments (and failures) from some of China’s previous Five Year Plans?
- Do you think this type of strategic planning is possible in the USA? Would the pros outweigh the cons, and what would be some of the pros and cons of a Five Year Plan in the USA? If a Five Year Plan option was presented to American voters as a constitutional amendment, would you vote for or against it, and why?