“Every time that I prepared for a battle I have found that plans a useless, but planning is indispensable” that was sort of the final say of a speaker who endorsed his own consulting services during a business breakfast of US and EU chambers of commerce a few months ago. He quoted Arthur D. Eisenhower. If I recall correctly, he thereby recommended to the listening company representatives to plan far ahead in regard to relationship building with the Chinese communist party. Or he complimented the communist party with a quote from one of the arguably greatest generals in US history. Either way, his keynote was a lengthy and I have to admit mostly interesting exploration of the power handover taking place within the communist party in 2012. I got the impression though that the speaker drew a purposely complex picture in order to get companies asking for his consulting services, but that again shall not be point of this essay.
The title of the presentation is “the rising stars of the 5th generation leaders” and aims at US and EU business executives who need to do some government networking in order to keep or get their business in China going. There are almost no chairs left in the meeting room in the Shanghai Nanjing East Road Sofitel. The event is definitely well attended. Closing his talk with a quote of an American, Mr Hoffmann, opens with a Chinese proverb sort of – I can’t find the Chinese version though: Riding six horses. It’s of course impossible to ride six horses at once, but that is what you need to do to keep pace with the changes at the centre of Chinese political power. Mr Hoffmann perceives 6 centres of power, which are diametrical forces:
- The 4th and the 5th generation of party leaders
- The provincial and the central government
- the two main party factions within the communist party
The provincial government has gained power, so Mr Hoffmann elaborates further, because it only requires permission from the central government (NDRC) for deals over USD 300 million. That’s a sixfold volume increase compared to USD 50 million deals that provinces were permitted to implement before.
Mr Hoffmann draws up a for lobbyists rather complex formula: MRDM = | L*T* C²*F*D translated into multi relationship development management negates lying*theft*corruption²*fraud*deceit. The bottom line is that in China relationships supplement law. More than in other countries, I would add to that. Even in legally and politically developed countries like Sweden it is usually not to one’s disadvantage to know decision makers.
Businesses as well as foreign government executives must be aware that the utility of top party relationships is limited to 11 years, because that's the life time cycle of a leader generation. Take the current 4th generation for example: in 1997/98 Mr Hu Jintao, Mr Wen Jiabao and their generation comrades were in assigned junior power positions, 2002/03 they had their first 5 year turn in senior power, 2007/08 their second 5 year turn, 2012/13 they will retire and give up power to the fifth generation, which by then has already served 5 years in junior positions. Insofar the communist party has developed a modern mechanism of dynastic continuum, which also gave stability to China during the more successful periods of the Tang, Ming or Qing Empire.
The fifth generation of party leaders will retire in 2022/23; and Mr Hoffmann emphasizes that until they have vested their power only some months remain. Business executives should seize this last opportunity to connect to the 5th generation, because it will certainly be more difficult or even impossible to know on the Emperor’s door when in office. The Emperor as juxtaposed to the ancient concept is in modern China a multi personal entity, consisting of 204 decision makers, i.e. the nine members of the politburo standing committee, 24 members of the politburo and 169 full members of the central communist party committee.
I can’t repeat Mr Hoffmann’s calculation here, but in either way of calculating, I do not reach 204 decision makers. The central committee of the communist party is made up of approximately 350 persons, so that's more, 169+24+9 would be 202, that's too few and the politburo standing committee members would be counted twice. It does make no difference though, because the conclusion still is: there are many powerful people one should work his or her relationships with, e.g. Mr Zhang Dejiang, who owns a PhD in Marxism from Pyongyang University. According to the 12th 5 year plan he is lord over USD 2.13 trillion in new investments. Or the future premier Mr Li Keqiang, who will take over all important position in regard to environmental protection from Mr Wen, like the presidency of the National Energy Council.
To make things a little bit more complicated, we have to talk about the factions within the party. According to Mr Hoffmann’s explanation there are three factions, others see only two: The populist faction, with prominent adherents like Mr Wen and Mr Hu, the elitist faction with followers like Mr Xi Jinping and Mr Bo Xilai, and in between the backbone of the nation, the neutral faction, the People’s Liberation Army (PLA).
Foreign businesses have to ask themselves many questions, when they venture out to build relationships in China. Who are the key persons for my industry? Do I need government back up on provincial and/or national level? Is our company elitist or populist? And above all, how much can we spend on government relationship building, and will our investment pay off within only 11 years? The emperor might well be indifferent to such foreign musing, no matter if he is one or 204 persons.
The title of the presentation is “the rising stars of the 5th generation leaders” and aims at US and EU business executives who need to do some government networking in order to keep or get their business in China going. There are almost no chairs left in the meeting room in the Shanghai Nanjing East Road Sofitel. The event is definitely well attended. Closing his talk with a quote of an American, Mr Hoffmann, opens with a Chinese proverb sort of – I can’t find the Chinese version though: Riding six horses. It’s of course impossible to ride six horses at once, but that is what you need to do to keep pace with the changes at the centre of Chinese political power. Mr Hoffmann perceives 6 centres of power, which are diametrical forces:
- The 4th and the 5th generation of party leaders
- The provincial and the central government
- the two main party factions within the communist party
The provincial government has gained power, so Mr Hoffmann elaborates further, because it only requires permission from the central government (NDRC) for deals over USD 300 million. That’s a sixfold volume increase compared to USD 50 million deals that provinces were permitted to implement before.
Mr Hoffmann draws up a for lobbyists rather complex formula: MRDM = | L*T* C²*F*D translated into multi relationship development management negates lying*theft*corruption²*fraud*deceit. The bottom line is that in China relationships supplement law. More than in other countries, I would add to that. Even in legally and politically developed countries like Sweden it is usually not to one’s disadvantage to know decision makers.
Businesses as well as foreign government executives must be aware that the utility of top party relationships is limited to 11 years, because that's the life time cycle of a leader generation. Take the current 4th generation for example: in 1997/98 Mr Hu Jintao, Mr Wen Jiabao and their generation comrades were in assigned junior power positions, 2002/03 they had their first 5 year turn in senior power, 2007/08 their second 5 year turn, 2012/13 they will retire and give up power to the fifth generation, which by then has already served 5 years in junior positions. Insofar the communist party has developed a modern mechanism of dynastic continuum, which also gave stability to China during the more successful periods of the Tang, Ming or Qing Empire.
The fifth generation of party leaders will retire in 2022/23; and Mr Hoffmann emphasizes that until they have vested their power only some months remain. Business executives should seize this last opportunity to connect to the 5th generation, because it will certainly be more difficult or even impossible to know on the Emperor’s door when in office. The Emperor as juxtaposed to the ancient concept is in modern China a multi personal entity, consisting of 204 decision makers, i.e. the nine members of the politburo standing committee, 24 members of the politburo and 169 full members of the central communist party committee.
I can’t repeat Mr Hoffmann’s calculation here, but in either way of calculating, I do not reach 204 decision makers. The central committee of the communist party is made up of approximately 350 persons, so that's more, 169+24+9 would be 202, that's too few and the politburo standing committee members would be counted twice. It does make no difference though, because the conclusion still is: there are many powerful people one should work his or her relationships with, e.g. Mr Zhang Dejiang, who owns a PhD in Marxism from Pyongyang University. According to the 12th 5 year plan he is lord over USD 2.13 trillion in new investments. Or the future premier Mr Li Keqiang, who will take over all important position in regard to environmental protection from Mr Wen, like the presidency of the National Energy Council.
To make things a little bit more complicated, we have to talk about the factions within the party. According to Mr Hoffmann’s explanation there are three factions, others see only two: The populist faction, with prominent adherents like Mr Wen and Mr Hu, the elitist faction with followers like Mr Xi Jinping and Mr Bo Xilai, and in between the backbone of the nation, the neutral faction, the People’s Liberation Army (PLA).
Foreign businesses have to ask themselves many questions, when they venture out to build relationships in China. Who are the key persons for my industry? Do I need government back up on provincial and/or national level? Is our company elitist or populist? And above all, how much can we spend on government relationship building, and will our investment pay off within only 11 years? The emperor might well be indifferent to such foreign musing, no matter if he is one or 204 persons.
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