What China Policy?

Does your company have a China non-strategy?

Now that the election is over many international observers are sighing with relief that the United States’ China Policy will remain on an even keel. During the campaign there was a lot of anxious speculation about what the new China Policy might look like, and how it would differ from the existing China Policy.

My question is, “What China Policy?”

Wishing and hoping for a new reality, posturing for domestic stakeholders, making threats you have neither the means nor the intention to follow through on and reacting to the Chinese side’s initiatives is NOT a policy. And for all of Romney/Ryan’s tough rhetoric, there was nothing even close to a comprehensive policy from the Republican side of the aisle either. The fact is that the US doesn’t really have a coherent, over-arching China policy. Maybe it can’t, or shouldn’t attempt to have one. But pretending we have a grand plan and then over-reacting to every international incident is a recipe for negative unforeseen consequences.

Are you “geithnering” your company’s China strategy?

To “geithner” your China strategy means to threaten China in public for the benefit domestic stakeholders and then look weak and ineffectual to Beijing by failing to act – thereby undermining your negotiating position and  empowering China’s trade hawks to harden their stance.
If you are operating in a policy vacuum, then nature will fill it with a never-ending string of half-measures and “least-worst” decisions that leave you reacting to events and other people’s decisions. The US engaged, threatened, backed-down, back-burnered, pivoted and ultimately struggled to react to China’s rise – not just for the past four years, but since 1989.
For the US government, this may be OK. After all, we have the reserve currency and the US Navy to help us paper over our little “oops” moments. But if you are responsible for making China decisions at your company, you may not have that kind of safety net.

Who is driving your China decisions?

For business the issue isn’t policy, but rather strategy. Who are you developing your China strategy to address – bosses, board members, accountants, marketers, or Chinese partners? Who is driving your China decisions?

  • Bosses – You are reacting and trying to execute on someone else’s objectives – whether or not they are appropriate. You are making great time, but have no idea where you are going. Secretaries Clinton, Geithner and Panetta were all trying to please a boss with plans that contradicted one another. It’s not necessarily a problem – unless they are operating under the assumption that theirs is the only dog in the fight. What’s the situation in your shop – are you a decider, an executor or an advisor? None of these roles is wrong, but you have to behave appropriately for each.
  • Board members – You are appealing to internal stakeholders about external affairs. In US policy terms, the board of directors are the voters. They are busy, distracted and ill-informed. If you are letting them call the shots you will either get to stay in the job or be a success in China – probably not both.
  • Accountants – There’s nothing wrong with a bottom-line approach. Regulators and commercial officers play an important role in US-China relation. If you are all about profits then that’s great – so long as you understand that this is a short-term operational approach. If you are buying containers of material or partially finished goods, then your accountant may indeed be your primary stakeholder. But if you think you are building a strategic relationship with a long-term Chinese partner, then your accountant (and other short-term profit seekers) is the wrong stakeholder to try to please.
  • Marketers – These are your long term policy guys. They are lobbyists, state governments looking for overseas investment, and the State Department in DC, but in your company they are the marketing department – and maybe the CEO. They have the vision. They want to do it all – pivot and embrace, lead and engage. The only problem with visionaries is, well, that they are visionaries. They’ll be right in 10 years and 100 million dollars – but you probably don’t have the time, funds or managerial resources to execute on their grand strategy.
  • Chinese partners – Why would your company develop a China strategy to please your Chinese partners? Ask your China country head. This is your Ambassador – your Huntsman, your Gary Locke. It may be the big guy posted over there – or it may be someone in your HQ. But they are distorting your China policy to make peace with their direct counterparty. The good news is that they really know what’s going on. The bad news is that they think they are the ONLY ones in the company who do. Maybe this guy is reporting to you – or maybe this guy is you. Either way, you have to remember ChinaSolved’s golden rule of success in China:

Your most important Chinese negotiation doesn’t take place in China – it takes place in your own company headquarters. 

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