Government Affairs

Managing Government Affairs

In China's rapidly evolving business environment, companies need an effective government affairs staff

by Julie Walton

Unlike the US government, which places few restrictions on business, the PRC government plays a significant role in business in China. Partners, customers, suppliers, competitors, service providers, and media are often directly or indirectly controlled by the Chinese Communist Party and China's parallel government bureaucracy. As US companies develop their China operations—whether by expanding existing facilities, building stronger brands, or entering entirely new markets—their need to review the range and scope of their government affairs operations has never been greater.

Rampant turnover of government affairs staff and misperceptions about how to conduct government affairs in China—particularly the belief that a company must rely on someone with connections to achieve its goals—make it difficult for companies to conduct government affairs effectively. As a result, many US companies are seeking more information about what the practice of "government affairs" means in China, where a developing, rapidly changing, and often opaque economic system make advocacy more challenging now than in the past.

Quick Glance

Government affairs is taking on a new importance for companies in China as the government rolls out new policies.
The most effective government affairs departments are well integrated into the company and interact regularly with business units and functional departments.
Successful government affairs staff regularly demonstrate their value to the rest of the company.

To meet this need for information, the US-China Business Council (USCBC), publisher of the CBR, unveiled the first half of a two-part report member survey in October 2007. The survey sought members' opinions on the structuring, hiring, and tasking responsibilities for managing government relationships in China (see Conducting Government Affairs in China). To delve more deeply into some of the survey's findings, the USCBC interviewed 26 China-based senior executives and government affairs practitioners in March 2008. Questions covered organizational structure as well as relationships with other business units and departments, interaction with industry associations, hiring practices, evaluation criteria, tasks and responsibilities, and perhaps most important, respondents' interactions with PRC government officials.

The purpose of government affairs

Because the PRC government is involved in nearly every step of doing business in China, the government affairs role encompasses a wide variety of tasks. Professionals devote the bulk of their time to analyzing policy and regulatory developments, conducting strategic advocacy, formulating company and industry positions and delivering these to the government, and building awareness within the PRC government of the company's brand. Central, provincial, and municipal PRC agencies rarely act in unison and often have conflicting goals that force government affairs professionals to tailor their strategies to each agency.

Government affairs involves internal company logistics and coordination, as well as relationship building with authorities. Successful government affairs professionals that are well integrated into their companies can build relationships with authorities and "sell" the company's perspective and experience to the PRC government.

Coordination

Effective government affairs professionals act as channels through which policy, regulatory, and corporate information flows from the company to the government and vice versa. Thus, government affairs staff in China facilitate communication among business units, local industry associations, government agencies, corporate leaders, and the state-owned enterprises that are the company's customers and partners. They also maintain open channels with entities involved in the policymaking process, including universities, national-level think tanks such as the Chinese Academy of Social Sciences, and ministerial-level think tanks such as the National Development and Reform Commission's Energy Research Institute. This allows companies not only to keep abreast of the latest policy ideas but also to express their views informally during the earliest stages of policy formulation.

By interacting with the government, government affairs staff gauge and communicate the mood and priorities of government agencies to the rest of the company. They also facilitate cooperation between the agencies that set and enforce standards and the technical experts in their company's relevant business units. This requires a great deal of internal coordination because it is sometimes unclear which company expert should be part of the discussion.

Internally, government affairs staff streamline and prioritize the business units' requests for various government agencies to prevent conflicting or confusing corporate messages that could derail a broader company initiative. They also help balance competing priorities within a company. Business units have short-term production and profitability goals that might appear distinct from broader, long-term corporate goals. Many government affairs executives in China see their job as making links among business units' short-term goals, the company's broader goals, and the government's policy and growth goals.

Government affairs staff frequently design and manage programs that support a particular corporate interest or priority with an association or government agency and write talking points for media or public relations staff. They are also involved in developing strategies to protect the company's intellectual property rights. Finally, they can help facilitate the licensing and approval process of new legal entities and participate in contractual negotiations, which often involve local government officials.

Relationship building

Once a company finishes internal communication and approves a final message, government affairs staff are responsible for building relationships with government officials across a variety of agencies and levels. Interviewees recommended that companies remember several points about building relationships with government officials.

First, only a small group of officials in any given industry can address a specific issue, and finding the right officials in any given agency, association, or think tank and ensuring that they have relevant information can be time-consuming. Few, if any, detailed agency organizational charts for PRC agencies are publicly available. Many government affairs executives in China believe that US headquarters place unrealistic expectations on government affairs work in China because they do not understand how hard it is to reach the right people.

Second, government affairs staff should find and develop relationships not only with the director general of a particular department, but also, and perhaps more important, with the division chiefs below that director general. A company needs to understand an official's relationship to the rest of the department and the agency to develop the most effective advocacy points. Moreover, developing good relationships with lower-level officials can help the company later on, when the officials are promoted.

PRC government officials have little incentive or obligation to share information across departments within an agency, let alone with other agencies. Therefore, the government affairs executive must have multiple meetings on the same topic within one agency. Agency reluctance to direct calls to the right person or even pass along contact information adds another layer of work for the China-based government affairs professional.

Structures

The reporting and organizational structures that companies adopt to manage government relations in China influence how their government affairs staff operate, as well as on what issues they focus. Companies use a wide range of reporting structures to manage links between senior government affairs staff in China and the rest of the company. Many interviewees noted that the better integrated a China-based government affairs executive is into the company's process of formulating broad strategies for business operations in China, the easier it is for the company to develop meaningful advocacy strategies, coordinate among business units, and raise awareness of the company's brand among PRC government agencies. Some common reporting structures include:

Direct report to the United States with dotted line to China In this structure—the most common among companies interviewed—the senior government affairs person in China reports directly to a more senior government affairs person in the United States or elsewhere, with a secondary report to the most senior person in China—often a country president. This structure is effective when companies want to ensure a unified government affairs message across global operations.
Direct report to China with dotted line to the United States In this structure, government affairs staff report directly to the senior in-country executive with a secondary report to US government affairs. Companies note that this structure gives the senior China-based executive greater authority over the local government affairs department. It is also helpful for companies whose China operations are functionally different or independent from their US or global operations.
Multiple direct reports The senior government affairs person reports directly to a senior US-based executive for government affairs and a senior China-based Asia-Pacific executive. Companies with this structure report that it works well in balancing the needs of the China-based entities and the company's overall policy interests.
Single direct report in China Some US companies established as holding companies in China have their in-country government affairs executive report only to the most senior China-based executive, which gives that executive great authority over setting government affairs priorities in China.

Less common structures include:

Lower-level reporting The senior government affairs person reports directly to a China-based corporate executive a few levels below the country president. Government affairs executives at companies with this structure reported that they were not part of strategic planning decisions for China and had difficulty getting support from business units.
Senior executive manages government affairs The senior corporate executive for China, usually the country president, is responsible for government affairs work. Companies with this structure tend to have a small in-country presence wherever they operate, or else their sectors are so restricted worldwide that top management has global experience handling government interaction.

Regardless of the structure companies use, they should institutionalize relationships with the government across the company so that they survive staff turnover.

Internal communication and interaction

An especially difficult challenge for the China-based government affairs professional is helping business units understand how they can benefit from the government affairs function. Government affairs staff cite several reasons for this difficulty. First, China-based business units are sometimes uncertain about what their government affairs colleagues do. The lack of tangible product makes communicating the value of government affairs work difficult. Second, many government affairs departments in China are new and have had few opportunities to demonstrate their value to the company. Third, until recently, some companies have not had a government affairs department, so a supportive corporate culture is lacking. Finally, in some companies, limited support from senior in-country management or the China strategy team has lowered the visibility of government affairs and made it more difficult to coordinate with business units. Consequently, business units appear to fall into three general categories: those that have little idea what government affairs does, those that are slowly engaging more with the China government affairs staff, and those that are integrated into China government affairs work.

Limited interaction model

A few large multinational companies report that their China business units and corporate functions, such as finance and human resources, have little or no contact with the corporate staff responsible for government affairs. A drawback of this model is the confusion that the system sometimes creates, not only within the company but also among government officials.

For example, one company interviewed has eight different business units in Shanghai, each with the same concern about local implementation of new environmental protection rules. The chief compliance officer of one business unit sought clarification from the local authorities. Two days later, the general manager of another business unit had the same question. The local government officials were perplexed because they had just met with the company on the same topic. In addition, the two business units could interpret the information received from government officials differently, which could lead to uneven—and potentially noncompliant—implementation across business units.

Emerging relationship model

Business units and functional departments are beginning to realize that a distinct government affairs function exists within the company to support growth plans and troubleshoot when problems arise, according to interviewees. Companies trying to improve internal communication report that they undertake several important exercises, sometimes simultaneously.

First, government affairs staff show other departments in their companies how their work benefits the company. Successful government affairs work is often measured by what does not happen; thus, it can be hard to demonstrate a need for an increased role for government relations, especially to technical or sales departments. To demonstrate their value, government affairs staff initiate conversations with business units and functional departments, learn about what they do, and recommend specific points of government interaction or advocacy tactics that might help the business unit achieve its goals. Government affairs staff can also contribute by thinking and acting ahead on an issue, even if it is not on the current list of business unit priorities.

In another company interviewed, senior corporate executives asked the government affairs director to support a business unit that had a staff shortage in the licensing and approval process for a new facility. The business unit leader was skeptical about the value a government affairs director could bring to a "business issue." The government affairs director spent time talking with all of the different partners in the licensing process and coordinated meetings with local officials in which potential problem areas could be discussed informally. After the licensing and approval process went more smoothly than any previous registration process, everyone in the business unit agreed that the government affairs director had prevented the usual delays, confusion, and cost increases.

Second, companies further define and clarify the role of government affairs staff by establishing guidelines and examples for reporting and interaction that can be communicated to all units and refined as the government affairs function becomes more integrated into the organization.

Third, companies foster integration from the top. Public support from senior country management about the role that government affairs can play in achieving business unit and corporate goals reinforces government affairs department efforts to build trust inside the company.

Fully integrated model

Several government affairs professionals reported having excellent working relationships with business units and functional departments. When the government affairs function is fully integrated into a company, other departments and units know what the government affairs department does and are active partners in policy advocacy development. In turn, government affairs staff are more involved in the work of business units or functional departments.

For instance, government affairs staff work closely with business units to recommend specific talking points to support a business unit priority. Because they are aware of the unit's priorities, they are better positioned to serve as an early warning voice for the unit when the government is considering policy changes. Government affairs staff can also facilitate introductions for heads of business units to key researchers to discuss a particular technology. This is especially important in China, where researchers at influential think tanks often play a role in the formulation of government policy.

When a business unit is involved in negotiations with the local government, government affairs staff sometimes help develop messages and smooth the process. They can also lobby central government officials to convince them of the policy rationale for including company products on approved "buy" lists at the same time that sales staff are talking to local officials about the merits of those products. Companies whose products are strictly regulated may want to consider assigning government affairs staff to particular agencies with oversight for those products. For instance, one company assigned a government affairs manager solely to the State Administration for Industry and Commerce because of its product lines and advertising expenditures.

Government affairs staff can also aid functional departments, for instance, by helping human resources staff troubleshoot problems with employee household registration, and inviting speakers to, or hosting local officials at, events organized by the business unit. One company has assigned a government affairs manager to track all PRC policy and regulatory developments that would affect corporate functions—human resources and finance, for example—to facilitate better interaction among its functional departments, its business units, and the government.

Government affairs staff can also help the finance department work out problems with profit repatriation or troubleshoot problems with local tax bureaus. For example, the decision to move a company from district A to district B within the same city would likely trigger a lengthy and contentious tax audit in tax district A, which would like to keep the company in its district. In this situation, government affairs staff can facilitate discussions with more senior municipal government officials to help them see the bigger picture about investment in their city and to secure their assistance in speeding up the necessary paperwork.

Emergence of the corporate lobbyist

Many companies are realizing that government affairs in China requires greater time commitment and internal organization than in the past. Information gathered through interviews seems to indicate that the reporting structure of the government affairs function, and how well it is integrated into the company, has a tremendous impact on the effectiveness of government affairs work. To get the most out of their government affairs staff in China, companies should clearly define the role and goals of each government affairs position and fully integrate staff into corporate strategy formulation.

Government Affairs at the Facility Level

Many respondents interviewed for the second phase of the US-China Business Council's government affairs survey noted that each of their company facilities in China has at least one person who manages local government relations as part of his or her responsibilities. This individual typically manages everything that happens outside of the facility, including media and broader community relations. This person reports directly to the head of the facility and coordinates messages and priorities with the corporate government affairs team. The local facility shoulders the costs associated with this work.

The size and age of the facility often determines who manages these tasks. Sometimes the general manager assumes some of these responsibilities, although it is more common to have human resources or compliance managers split their time between the local government affairs work and their departmental duties. Even so, interviewees noted that, in recent years, more of their facilities have created a local government affairs position to coordinate the facility's engagement with external actors. Reasons cited for the creation of a government affairs position at the facility level include the size of the facility (a larger facility draws more government attention), the importance of the facility in terms of employment and tax revenue to that locality, and the need to improve communication and management by alleviating the workloads of staff who split their time between government affairs and other responsibilities.

Government relations tasks at the facility level are often technical and can include managing inspections from the local office of the State Administration of Work Safety. Companies in the pharmaceutical industry observed that their local government affairs managers navigate local pricing and reimbursement issues that would overwhelm corporate-level staff with country-wide responsibilities.

—Julie Walton

Julie Walton is director, Business Advisory Services, at the US-China Business Council (USCBC) in Washington, DC. This article is adapted from a forthcoming USCBC report, which will be available at www.uschina.org.

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	Print Article Government Affairs Managing Government Affairs In China's rapidly evolving business environment, companies need an effective government affairs staff by Julie Walton Unlike the US government, which places few restrictions on business, the PRC government plays a significant role in business in China. Partners, customers, suppliers, competitors, service providers, and media are often directly or indirectly controlled by the Chinese Communist Party and China's parallel government bureaucracy. As US companies develop their China operations—whether by expanding existing facilities, building stronger brands, or entering entirely new markets—their need to review the range and scope of their government affairs operations has never been greater. Rampant turnover of government affairs staff and misperceptions about how to conduct government affairs in China—particularly the belief that a company must rely on someone with connections to achieve its goals—make it difficult for companies to conduct government affairs effectively. As a result, many US companies are seeking more information about what the practice of "government affairs" means in China, where a developing, rapidly changing, and often opaque economic system make advocacy more challenging now than in the past. Quick Glance Government affairs is taking on a new importance for companies in China as the government rolls out new policies. The most effective government affairs departments are well integrated into the company and interact regularly with business units and functional departments. Successful government affairs staff regularly demonstrate their value to the rest of the company. To meet this need for information, the US-China Business Council (USCBC), publisher of the CBR, unveiled the first half of a two-part report member survey in October 2007. The survey sought members' opinions on the structuring, hiring, and tasking responsibilities for managing government relationships in China (see Conducting Government Affairs in China). To delve more deeply into some of the survey's findings, the USCBC interviewed 26 China-based senior executives and government affairs practitioners in March 2008. Questions covered organizational structure as well as relationships with other business units and departments, interaction with industry associations, hiring practices, evaluation criteria, tasks and responsibilities, and perhaps most important, respondents' interactions with PRC government officials. The purpose of government affairs Because the PRC government is involved in nearly every step of doing business in China, the government affairs role encompasses a wide variety of tasks. Professionals devote the bulk of their time to analyzing policy and regulatory developments, conducting strategic advocacy, formulating company and industry positions and delivering these to the government, and building awareness within the PRC government of the company's brand. Central, provincial, and municipal PRC agencies rarely act in unison and often have conflicting goals that force government affairs professionals to tailor their strategies to each agency. Government affairs involves internal company logistics and coordination, as well as relationship building with authorities. Successful government affairs professionals that are well integrated into their companies can build relationships with authorities and "sell" the company's perspective and experience to the PRC government. Coordination Effective government affairs professionals act as channels through which policy, regulatory, and corporate information flows from the company to the government and vice versa. Thus, government affairs staff in China facilitate communication among business units, local industry associations, government agencies, corporate leaders, and the state-owned enterprises that are the company's customers and partners. They also maintain open channels with entities involved in the policymaking process, including universities, national-level think tanks such as the Chinese Academy of Social Sciences, and ministerial-level think tanks such as the National Development and Reform Commission's Energy Research Institute. This allows companies not only to keep abreast of the latest policy ideas but also to express their views informally during the earliest stages of policy formulation. By interacting with the government, government affairs staff gauge and communicate the mood and priorities of government agencies to the rest of the company. They also facilitate cooperation between the agencies that set and enforce standards and the technical experts in their company's relevant business units. This requires a great deal of internal coordination because it is sometimes unclear which company expert should be part of the discussion. Internally, government affairs staff streamline and prioritize the business units' requests for various government agencies to prevent conflicting or confusing corporate messages that could derail a broader company initiative. They also help balance competing priorities within a company. Business units have short-term production and profitability goals that might appear distinct from broader, long-term corporate goals. Many government affairs executives in China see their job as making links among business units' short-term goals, the company's broader goals, and the government's policy and growth goals. Government affairs staff frequently design and manage programs that support a particular corporate interest or priority with an association or government agency and write talking points for media or public relations staff. They are also involved in developing strategies to protect the company's intellectual property rights. Finally, they can help facilitate the licensing and approval process of new legal entities and participate in contractual negotiations, which often involve local government officials. Relationship building Once a company finishes internal communication and approves a final message, government affairs staff are responsible for building relationships with government officials across a variety of agencies and levels. Interviewees recommended that companies remember several points about building relationships with government officials. First, only a small group of officials in any given industry can address a specific issue, and finding the right officials in any given agency, association, or think tank and ensuring that they have relevant information can be time-consuming. Few, if any, detailed agency organizational charts for PRC agencies are publicly available. Many government affairs executives in China believe that US headquarters place unrealistic expectations on government affairs work in China because they do not understand how hard it is to reach the right people. Second, government affairs staff should find and develop relationships not only with the director general of a particular department, but also, and perhaps more important, with the division chiefs below that director general. A company needs to understand an official's relationship to the rest of the department and the agency to develop the most effective advocacy points. Moreover, developing good relationships with lower-level officials can help the company later on, when the officials are promoted. PRC government officials have little incentive or obligation to share information across departments within an agency, let alone with other agencies. Therefore, the government affairs executive must have multiple meetings on the same topic within one agency. Agency reluctance to direct calls to the right person or even pass along contact information adds another layer of work for the China-based government affairs professional. Structures The reporting and organizational structures that companies adopt to manage government relations in China influence how their government affairs staff operate, as well as on what issues they focus. Companies use a wide range of reporting structures to manage links between senior government affairs staff in China and the rest of the company. Many interviewees noted that the better integrated a China-based government affairs executive is into the company's process of formulating broad strategies for business operations in China, the easier it is for the company to develop meaningful advocacy strategies, coordinate among business units, and raise awareness of the company's brand among PRC government agencies. Some common reporting structures include: Direct report to the United States with dotted line to China In this structure—the most common among companies interviewed—the senior government affairs person in China reports directly to a more senior government affairs person in the United States or elsewhere, with a secondary report to the most senior person in China—often a country president. This structure is effective when companies want to ensure a unified government affairs message across global operations. Direct report to China with dotted line to the United States In this structure, government affairs staff report directly to the senior in-country executive with a secondary report to US government affairs. Companies note that this structure gives the senior China-based executive greater authority over the local government affairs department. It is also helpful for companies whose China operations are functionally different or independent from their US or global operations. Multiple direct reports The senior government affairs person reports directly to a senior US-based executive for government affairs and a senior China-based Asia-Pacific executive. Companies with this structure report that it works well in balancing the needs of the China-based entities and the company's overall policy interests. Single direct report in China Some US companies established as holding companies in China have their in-country government affairs executive report only to the most senior China-based executive, which gives that executive great authority over setting government affairs priorities in China. Less common structures include: Lower-level reporting The senior government affairs person reports directly to a China-based corporate executive a few levels below the country president. Government affairs executives at companies with this structure reported that they were not part of strategic planning decisions for China and had difficulty getting support from business units. Senior executive manages government affairs The senior corporate executive for China, usually the country president, is responsible for government affairs work. Companies with this structure tend to have a small in-country presence wherever they operate, or else their sectors are so restricted worldwide that top management has global experience handling government interaction. Regardless of the structure companies use, they should institutionalize relationships with the government across the company so that they survive staff turnover. Internal communication and interaction An especially difficult challenge for the China-based government affairs professional is helping business units understand how they can benefit from the government affairs function. Government affairs staff cite several reasons for this difficulty. First, China-based business units are sometimes uncertain about what their government affairs colleagues do. The lack of tangible product makes communicating the value of government affairs work difficult. Second, many government affairs departments in China are new and have had few opportunities to demonstrate their value to the company. Third, until recently, some companies have not had a government affairs department, so a supportive corporate culture is lacking. Finally, in some companies, limited support from senior in-country management or the China strategy team has lowered the visibility of government affairs and made it more difficult to coordinate with business units. Consequently, business units appear to fall into three general categories: those that have little idea what government affairs does, those that are slowly engaging more with the China government affairs staff, and those that are integrated into China government affairs work. Limited interaction model A few large multinational companies report that their China business units and corporate functions, such as finance and human resources, have little or no contact with the corporate staff responsible for government affairs. A drawback of this model is the confusion that the system sometimes creates, not only within the company but also among government officials. For example, one company interviewed has eight different business units in Shanghai, each with the same concern about local implementation of new environmental protection rules. The chief compliance officer of one business unit sought clarification from the local authorities. Two days later, the general manager of another business unit had the same question. The local government officials were perplexed because they had just met with the company on the same topic. In addition, the two business units could interpret the information received from government officials differently, which could lead to uneven—and potentially noncompliant—implementation across business units. Emerging relationship model Business units and functional departments are beginning to realize that a distinct government affairs function exists within the company to support growth plans and troubleshoot when problems arise, according to interviewees. Companies trying to improve internal communication report that they undertake several important exercises, sometimes simultaneously. First, government affairs staff show other departments in their companies how their work benefits the company. Successful government affairs work is often measured by what does not happen; thus, it can be hard to demonstrate a need for an increased role for government relations, especially to technical or sales departments. To demonstrate their value, government affairs staff initiate conversations with business units and functional departments, learn about what they do, and recommend specific points of government interaction or advocacy tactics that might help the business unit achieve its goals. Government affairs staff can also contribute by thinking and acting ahead on an issue, even if it is not on the current list of business unit priorities. In another company interviewed, senior corporate executives asked the government affairs director to support a business unit that had a staff shortage in the licensing and approval process for a new facility. The business unit leader was skeptical about the value a government affairs director could bring to a "business issue." The government affairs director spent time talking with all of the different partners in the licensing process and coordinated meetings with local officials in which potential problem areas could be discussed informally. After the licensing and approval process went more smoothly than any previous registration process, everyone in the business unit agreed that the government affairs director had prevented the usual delays, confusion, and cost increases. Second, companies further define and clarify the role of government affairs staff by establishing guidelines and examples for reporting and interaction that can be communicated to all units and refined as the government affairs function becomes more integrated into the organization. Third, companies foster integration from the top. Public support from senior country management about the role that government affairs can play in achieving business unit and corporate goals reinforces government affairs department efforts to build trust inside the company. Fully integrated model Several government affairs professionals reported having excellent working relationships with business units and functional departments. When the government affairs function is fully integrated into a company, other departments and units know what the government affairs department does and are active partners in policy advocacy development. In turn, government affairs staff are more involved in the work of business units or functional departments. For instance, government affairs staff work closely with business units to recommend specific talking points to support a business unit priority. Because they are aware of the unit's priorities, they are better positioned to serve as an early warning voice for the unit when the government is considering policy changes. Government affairs staff can also facilitate introductions for heads of business units to key researchers to discuss a particular technology. This is especially important in China, where researchers at influential think tanks often play a role in the formulation of government policy. When a business unit is involved in negotiations with the local government, government affairs staff sometimes help develop messages and smooth the process. They can also lobby central government officials to convince them of the policy rationale for including company products on approved "buy" lists at the same time that sales staff are talking to local officials about the merits of those products. Companies whose products are strictly regulated may want to consider assigning government affairs staff to particular agencies with oversight for those products. For instance, one company assigned a government affairs manager solely to the State Administration for Industry and Commerce because of its product lines and advertising expenditures. Government affairs staff can also aid functional departments, for instance, by helping human resources staff troubleshoot problems with employee household registration, and inviting speakers to, or hosting local officials at, events organized by the business unit. One company has assigned a government affairs manager to track all PRC policy and regulatory developments that would affect corporate functions—human resources and finance, for example—to facilitate better interaction among its functional departments, its business units, and the government. Government affairs staff can also help the finance department work out problems with profit repatriation or troubleshoot problems with local tax bureaus. For example, the decision to move a company from district A to district B within the same city would likely trigger a lengthy and contentious tax audit in tax district A, which would like to keep the company in its district. In this situation, government affairs staff can facilitate discussions with more senior municipal government officials to help them see the bigger picture about investment in their city and to secure their assistance in speeding up the necessary paperwork. Emergence of the corporate lobbyist Many companies are realizing that government affairs in China requires greater time commitment and internal organization than in the past. Information gathered through interviews seems to indicate that the reporting structure of the government affairs function, and how well it is integrated into the company, has a tremendous impact on the effectiveness of government affairs work. To get the most out of their government affairs staff in China, companies should clearly define the role and goals of each government affairs position and fully integrate staff into corporate strategy formulation. Government Affairs at the Facility Level Many respondents interviewed for the second phase of the US-China Business Council's government affairs survey noted that each of their company facilities in China has at least one person who manages local government relations as part of his or her responsibilities. This individual typically manages everything that happens outside of the facility, including media and broader community relations. This person reports directly to the head of the facility and coordinates messages and priorities with the corporate government affairs team. The local facility shoulders the costs associated with this work. The size and age of the facility often determines who manages these tasks. Sometimes the general manager assumes some of these responsibilities, although it is more common to have human resources or compliance managers split their time between the local government affairs work and their departmental duties. Even so, interviewees noted that, in recent years, more of their facilities have created a local government affairs position to coordinate the facility's engagement with external actors. Reasons cited for the creation of a government affairs position at the facility level include the size of the facility (a larger facility draws more government attention), the importance of the facility in terms of employment and tax revenue to that locality, and the need to improve communication and management by alleviating the workloads of staff who split their time between government affairs and other responsibilities. Government relations tasks at the facility level are often technical and can include managing inspections from the local office of the State Administration of Work Safety. Companies in the pharmaceutical industry observed that their local government affairs managers navigate local pricing and reimbursement issues that would overwhelm corporate-level staff with country-wide responsibilities. —Julie Walton Julie Walton is director, Business Advisory Services, at the US-China Business Council (USCBC) in Washington, DC. This article is adapted from a forthcoming USCBC report, which will be available at www.uschina.org. Further Reading Conducting Government Affairs in China Soft Sell: China Learns to Lobby Copyright 2008 US-China Business Council Top of Page Table of Contents
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