No news will be the best news for international managers in China
Even optimistic predictions about the upcoming 3rd Plenum are pretty downbeat for the foreign business community – which has not been enjoying Xi JinPing’s administration as much as they had hoped. Headlines about scandals, corruption charges and villifications by the official press have been bad news for individual MNCs like Starbucks and GlaxoSmithKline. Worse news lurks beneath the surface in a series of trends that have the potential to tip the financial balance against a China investment. Regulatory mechanisms that are unfair and worse – unpredictable, visa policy that is restrictive and cumbersome, inflation, hyper-competition and HR bottlenecks are the biggest complaints.
A big party meet-up like the upcoming 3rd Plenum has talking heads chattering about past game-changing events like Deng Xiaoping’s embrace of economic reform in 1978 or SOE reform of 1993. It’s unlikely that the Party conference will produce anything too dramatic this time around – and there’s certainly no guarantee that the news will be good for the overseas community.
The good: There may be some talk about far-ranging economic reforms and rationalizing the structure of China’s economy, which will generate a lot of positive headlines and support those who view China as a worthwhile investment. There will probably be a mention of SOE reform – though on a small, gradual scale that is unlikely to shake up day-to-day operations in any noticeable way. We may also hear some pleasant sounding news on land and property reform. Look for positive generalities that will be a lot more beneficial in 2024 than 2014.
The bad: Xi has been guiding China back to a more insular, isolationist (at least from the West), inward-looking state – and we may see more of that. Recent anti-Party acts of terrorism (Tiananmen, Shanxi) will contribute to China charting a more conservative, leftist course. When Beijing starts circling the wagons, Westerners get shut out. China’s policy strategists used to view western involvement in the PRC economy as a necessary evil – but since 2008 they’ve been focusing on the “evil” and wavering on the “necessary”.
The missing: Probably nothing on some big issues that impact international managers, like uniform rules for approvals and business licenses, relaxed visa regulations or access to pillar industries. Nothing on IP protection, tariffs or open markets. Remedies for provincial and municipal balance-sheet weakness will also be absent.
The climate for western investment in China has been cooling off since 2008, and the most you can hope from the upcoming 3rd Plenum is that it doesn’t make things worse. There aren’t too many scenarios for an immediate warming of relations between China Inc. and the MNC set, but Chinese consumers are still buying what you’re selling.
If you’ve got the stomach to ride out the long winter, then you can probably count on the competitive environment getting friendlier at some point (at least as far as regulations and bureaucracy are concerned). But if your pockets are empty and your patience easily tested, this is not the best time to be scouting for that new China office.
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