China has undergone significant and far-reaching changes in the decade since President Xi Jinping came to power, influenced by a variety of internal and external factors. Many aspects of those changes have been accelerated by the outbreak of and response to Covid. For multinational companies operating in the world’s second-largest economy, it is no longer prudent to rely on their past understanding of China to accurately guide their future China strategy.
As Xi Jinping enters his third term following the 20th Party Congress in October, a new five-year chapter opens for global firms in China. The congress laid out the broad development direction, and we can expect further clarification of key policies — as well as the official conferring of senior government roles including President and Premier of China — at the Two Sessions meetings in March 2023. Until then, C-suite and boardroom-level executives must debate and align on new commercial strategies that can respond to these new complexities, and either recommit to China, diversify and pivot towards “safer” markets or, in some cases, even consider total withdrawal.
Understanding the policy direction is one important factor in stakeholder engagement for the coming year. However, there are other issues at play that will also impact relations for multinationals in China. Another is the deterioration in geopolitical relations on a range of issues including human rights, Taiwan, and the perceived threat of Chinese investments in strategic assets in the US and Europe.
While many multinationals rightly see that the Chinese market still offers sizeable opportunities, in this volatile and challenging environment businesses need to pay extra attention when charting their path forward. They must carefully identify and mitigate the growing risks associated with doing business in/with China.
2023 will serve as a crucial window to engage or re-engage key stakeholders and communicate with the new political leadership at the national, regional and local levels via new and existing channels. To find out what this means for your strategic communications in China, read this advisory article prepared by our China experts for the American Chamber of Commerce Shanghai’s Insight magazine.