What is a GOOD company in the eyes of Chinese government? --Some thoughts on Government Affairs in China (article 2)

Speaking of maintaining good reputation to the government, here is the question conversely:

What is a GOOD company in the eyes of Chinese government?

1.In the eyes of central government, enterprises are the main participants of economic activities. Enterprises are labelled and categorized respectively. For single company, it’s JUST an integral part of the economy, no matter how big the company is. For instance, even if the company is one of the Fortune World Top 500, it is still a company, governed by and at the level BELOW the government.

In China, enterprises are roughly divided into three types: state-owned/central enterprise, foreign invested enterprises and private enterprises. Foreign invested enterprises are often labeled by Fortune World Top 500 (indicating scale and influence), ones with technologies or products that China relies on, and other types. Enterprises could also be categorized by its scale: super big, big, medium-and-small sized. In most cases, they’re also labeled by its sector: sectors that Central government encourages and support, i.e. strategic and new emerging sectors, and sectors with outdated production and capacity to be closed down or upgraded. These classifications are not only in the government’s statistics and assessment system, but the ministries correspondingly set up specific departments to manage them, for instance, Ministry of Industry and Information Technology (MIIT) has the department for medium-and-small companies, and it also has departments for specific sectors.

State-owned and central enterprises are not in private sector. In central level, some sectors for instance, aerospace, aviation, grid, railway equipment, and so on, only SOEs could enter. In local governments, officials would be of less political risks or suspected of corruption if SOEs win the bid of some government-led projects. These sort of things does happen nowadays and people don’t feel surprised.

Speaking of the entrepreneurs, they’re also labeled and with political identity. There are foreign entrepreneurs who’re China’s Old Good Friend, and those are hostile. In Chinese entrepreneurs, there are representatives in National People’s Congress/CPPCC to give advice and suggestions, and these to be further united.

Ministries, because of their different responsibility scopes, treat enterprises with different labels. Taking Daimler (Mercedes-Benz) for instance, as the luxury car manufacturer with over-100-year history, from the perspective of State Administration of Taxation and the General Administration of Customs, it’s a major importer and tariff contributor. From the perspective of Ministry of Foreign Affairs, it’s a German company which is able to influence the German Government’s attitude towards China. From Ministry of Industry and Information Technology, it’s an enterprise that can help drive the technology upgrading and development of domestic automobile industry through cooperation with local peers. From the perspective of Ministry of Ecology and Environment, it is obliged to control the emissions of the company’s products in order to achieve the national goal of atmospheric governance; in the eyes of Ministry of Public Security, the company’s product is closely related to road traffic safety, thus it should comply with technical standards.

2.In the eyes of local government, enterprises are the taxpayers and contributors to the local fiscal revenue which indirectly relate to the local officials’ income. Enterprises, especially those with big scale and tax payment, are more important to local governments. To central government, they’re merely a small particle, but to county government, they’re God of Wealth.

Enterprises create employment, pay taxes, bring in talents, and promote the local economy. But on the other hand, they may also make troubles in emission, environmental protection, fire protection risk, and market supervision issues. Local governments usually have KPI of attracting investment, and officials in investment promotion department often spare no effort in attracting good companies to invest and set up legal entities. Nevertheless, after the legal entity is set up, doing-business environment, policy stability and delivery of government’s promise vary greatly from province to province. Northeast China provinces are often criticized by enterprises for their lack of credibility, given local government officials in these areas sometimes don’t keep promises from their predecessors and enterprises have to spare a lot of efforts and financial resources to maintain relations with them.

In most cases, the relationship between government and enterprise is the core of doing-business environment. Governments in some developed provinces declare that they play the role of “bartender” to provide tailor-made services to enterprises, which to a certain extent reflects an advanced concept of serving enterprises. However, of course, government cannot only be just “bartender”. Everyone in China knows that.

3. Let’s return to the original question, which kind of company is GOOD from Chinese government’s perspective. In fact, Chinese government concern public opinions very much. If there is a negative public turmoil in media, government will come forward to formally interview the related enterprise, which is a serious action before administrative punishment. A good company should pay tax, create employment, lead the technical and industrial development, with enterprise’s social responsibility, “do not make troubles”, and more importantly, “obedient to the government”. In other words, “to obey and echo the government’s call”. During the procedure of policy formulation, companies are barely directly consulted, from the drafting to final release, despite that there is some window time to solicit opinions from public, it’s still the government’s decision to absorb advice or not. Enterprises could give suggestions, but their attitudes are expected be positive and obedient, especially shouldn’t turn into a negative and loud shout with resistance. Public confrontation or accusation is the worst. Enterprises must respect the management of government. In general, doing business in China, enterprises or entrepreneurs should have a sense of Awe to Chinese government.

--Nancy Cheng