Foreign companies are learning to influence the government
February 15th 2001
By Samuel Loewenberg
BEIJING - When China was ruled by emperors, a lobbyist, if such a person existed, would probably have been put to death.
It would have been a proper punishment for a mere mortal who dared to suggest policy to the Son of Heaven.
Lobbying, if no longer a capital offence, is still a tricky affair for the many foreign companies trying to make their
way in China. American lobbyists more familiar with plying their craft in a system where new legislation is
preceded by months of public debate say that in China they often do not hear about laws until they have already
been enacted. Even knowing whom to lobby is hard.
Foreign high-tech companies discovered to their dismay last year that China had passed a law that would severely restrict the use of encryption technology. The idea of encryption is to make a message unreadable, except to the receiver. It is an up-to-date form of telephone scrambling. Security forces hate it, and not only in China. The new law would have banned in China all products that made use of encryption, however innocently, among them Motorolas cellular telephones, Intels microprocessors, and Microsofts Outlook e-mail program. The anti-encryption law had originated with Chinas public-security ministry. But the American, European and Japanese companies whose products were threatened by the law decided to bypass the spooks and lobby the ministries of trade and economics. A big loss of foreign business, they reasoned, would matter more to the political leaders. William Daley, at the time American secretary of commerce, talked to Chinese officials at the World Economic Forum in Davos. The Chinese weighed things up, did some sums, took account of trade talks pending in the United States, and eventually relaxed the law, applying it only to products whose primary purpose was encryption.
So it can be done: even China will yield. But building up the contacts and influence to bring about change takes time. You dont start lobbying them the first time you meet them, or youd just run into a brick wall, says Brenda Chow, of British American Tobacco, who was born in the Chinese province of Guangdong. I have to show them my best Chinese self. She says it is expected that you get to know officials and their families, have dinner at each others homes, and remember their birthdays. Another lobbyist tells of taking the wives and children of Chinese officials to private swimming clubs.
Some firms ban such contacts. Doing personal favours for officials is a slippery slope, they say. Just being a good corporate citizen can gain a sympathetic ear with officials. Contributing to an educational foundation or flood relief wins bonus points. Most ministries have research centres run for profit. Hiring their researchers can make it easier to get a meeting with officials.
Protocol is important. A lobbyist will have a perceived rank when dealing with the government, equivalent to the level of the official he speaks to. Most American business lobbyists are considered senior enough to meet a deputy minister. A minister would probably be expected to see a chief executive. Such meetings, when they do happen, usually take place after months of informal negotiations between lower-level officials and lobbyists. By the time the formal meeting takes place, it is expected to be a choreographed event. The worst thing that can happen in a meeting with a senior official is to have topics come up that werent predetermined, says a veteran.
As in Washington, DC, companies in Beijing use the revolving door. One lobbying firm has eight former Chinese government officials on its staff. They have some competition: Chinese companies also devote plenty of staff, time and money to lobbying efforts of their own these days, often on the same issues as western companies, including encryption.
The big problem for many western companies in China is counterfeiting. The China Anti-Counterfeiting Coalition, set up in 1998, represents more than 30 companies. Todd Stellfox, a lobbyist for the coalition, strives for a light touch. You generally dont want to become too visible because then you create enemies, he says. Be nonconfrontational. You dont want them to lose face.
In the short term, the coalition seeks better enforcement of Chinas anti-piracy laws. In the long term, it wants more comprehensive legislation. Despite Chinas promises to outlaw the counterfeiters, it still has a long way to go to clamp down on, for example, pirated compact discs.
The coalitions main argument for a counterfeit clampdown is that its companies represent a lot of foreign investment, at least $6 billion. The implied threat is that these companies will withdraw their investment if these problems cannot be resolved, says Mr Stellfox. Sometimes that sort of argument produces results, as over encryption. But lobbyists sigh that China is still an authoritarian government, and economic clout remains limited.