China Enters a New Era
By Meng Liu and Kevin Kwok | For full report click here.
BACKGROUND
Sometimes referred to as China’s parliament, the “two sessions” (or Lianghui) sit yearly to debate and approve legislation and issues (which have often been pre-determined by the Communist Party of China). The two sessions are separate meetings held annually by China’s legislature, the National People’s Congress (NPC), and the top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC). The NPC is composed of 2,980 members, or “deputies”, representing the country’s regions. The CPPCC is composed of 2,158 members, many of whom are appointed from non-political backgrounds.
This year’s two sessions lasted from March 3rd to 20th, making it the longest in history.
KEY TAKEAWAYS
Xi’s political dominance is now firmly entrenched: The NPC approved the removal of a presidential term limit of two five-year terms that had been in place for over 35 years. The change cements President Xi Jinping’s total dominance of China’s political system.
Xi elevated his key advisors: The NPC confirmed China’s leaders and officials for Xi’s second term, including the Vice President, Premier, and four Vice Premiers. Premiers include leaders in anti-corruption, economic affairs and addressing poverty and pollution.
The NPC approved sweeping institutional reforms: The reforms cover party, government and military institutions, and aim to enhance state supervision of financial regulation, market supervision and environmental protection
IMPLICATIONS FOR MULTINATIONAL CORPORATIONS (MNCs)
For the first time in decades, the macro environment of China is undergoing profound changes. While the centralization of power will provide the political continuity necessary to push forward some tough reforms, the enhanced state control and supervision will likely give rise to new challenges and opportunities. MNCs are advised to keep a close eye on the changes pertaining to their sector especially in the finance, manufacturing, energy, technology, healthcare, environment and poverty alleviation areas.
§ MNCs should be on the look-out for opportunities to align with China’s national priorities and highlight their commitment to local communities.
§ MNCs should prepare for increasingly politicized business conditions and less tolerance for “irresponsible remarks and behavior” as brands will be increasingly scrutinized for political correctness and conformity to “socialist values,” which will apply to content generated in and outside China.
§ Brands should sharpen their executives’ awareness of sensitive topics in China and consider reviewing media and protocol training for key public figures to emphasize vigilance over words and actions, even when not directly interacting with a Chinese audience or medium
§ A thorough audit of global websites and social media platforms is recommended for brands with global visibility.
§ In response to the sweeping institutional reforms, MNCs are advised to review their China strategy, update stakeholder maps and cultivate new relationships where necessary.
§ International companies working with Chinese partners should be mindful of the risks brought by China’s long-standing anti-corruption campaign and recent financial austerity on overseas acquisitions, which together brought down several prominent Chinese conglomerates.
§ MNCs selling consumer goods in China should expect an increasingly nationalist consumer base that has embraced the Xi administration and its vision of a strong and rejuvenated China.
§ MNCs that have not already referenced Chinese cultural elements, or otherwise localized the aesthetics of their products, should consider doing so.
9 MAJOR WORK AREAS FOR THE NEXT FIVE YEARS
To focus the government’s work over the next five years, the report identified key principles that would guide the implementation of Xi’s economic thinking, as presented in his guiding ideology “Xi Jinping Thought”:
1
Deepen supply-side structural reforms such as big data, AI applications and Internet, and cut overcapacity of coal-fired power
2
Accelerate to build an innovative nation by increasing research and encouraging entrepreneurship
3
Deepen the reforms on fundamental and critical areas such as in the pension system, public hospitals, education, culture and sports, and promote the ecological damage compensation for conservation purposes
4
Lower debt risk, reduce poverty, and prevent pollution by cracking down on illegal finance activities, reducing rural population in poverty by 10 million and cutting sulfur dioxide and nitrogen oxide emissions by 3 percent
5
Implement the strategy of rural rejuvenation by accelerating agricultural supply structural reform, improving water & electric supply and roads & information networks
6
Implement the balanced regional development strategy by promoting settlement in urban areas
7
Increase consumption and promote effective investment by expanding new energy vehicles and public transportation
8
Promote the formation of China’s all-around opening-up by expanding imports, cutting import tariffs on cars, and increasing foreign investment in manufacturing and telecom.
9
Improve people’s livelihood including encouraging employment, entrepreneurship and increasing affordable housing
To increase awareness of sensitive topics and to prepare your brand for an increasingly politicized business environment in China, click here for our full report on China’s Two Sessions
For new business inquiries, please contact Meng Liu at meliu@webershandwick.com
