Change of Leadership in China – What Does It Mean For Doing Business In China?

by Fisher Phillips
Contact

When I visited Spain last year, a local Spaniard talked with me about his thoughts as he watched coverage of the presidential election in the United States. The U.S. presidential election received worldwide attention as a game changer with far-reaching implications for other nations. However, as the U.S. was embroiled in its own elections, less attention was paid to the perhaps equally significant transition of leadership in China. On November 8, 2012, two days after the presidential election in the U.S., the 18th National Congress in China selected its own new group of leaders.

Let’s start with a broad overview of the political leadership in China. The Chinese Communist Party (CCP) – the ruling political party in China, is comprised of the General Secretary, the Poltiburo Standing Committee – consisting of 7-9 members, the Poltiburo – consisting of 25 members, and the Central Committee – consisting of 205 members. The Poltiburo Standing Committee is essentially the ultimate decision making body in China.

Change to the leadership of the CCP does not come often and does not occur widely. Therefore, when seven of the nine members of the Poltiburo Standing Committee are slated to depart (due to the CCP’s term limits and unofficial retirement age of 68), it’s a very significant change. In November 2012, the CCP completed a sweeping transfer of power, to be helmed by the new General Secretary, Xi Jinping and the new Prime Minister, Li Keqiang. While this transfer is not technically official until the annual session in March 2013 of China’s parliament, for all intents and purposes, this new leadership is in place.

What will this change likely mean for the nations outside of China? While China’s economy has thrived in recent years on a diet of infrastructure investment and exports, its growth has inevitably waned due to weaker global demand. The new Chinese leaders have already spoken of reform, including rising labor costs in China in the coming years and a direction towards a more sustainable growth model that relies on domestic consumption. Considering that China represents about 20% of the world’s population with its 1.3 billion people, an economic plan based on domestic consumption is likely to greatly impact the international economy (i.e. countries who rely heavily on manufacturing items for import to China).

Coupled with these economic reforms, the new leadership also seeks to campaign against the reportedly widespread corruption among officials and State Owned Enterprises (SOEs). For those not familiar with the concept of SOEs, they are government-owned companies (either fully or partially) that are major employers, pay very little for land rent, enjoy preferential policies, and have easy access to capital from China’s state-owned banks. Most of the Chinese companies on the Fortune Global 500 are state-owned. However, SOEs are often accused of rampant corruption and inefficiency. Suffice to say, reforms dealing with SOEs will be of great interest to foreign companies who partner with or are involved in joint-ventures with SOEs.

While the new leaders are mindful of the needed reforms, these reforms come with obstacles and risks. Potential changes won’t be quick or sweeping in the near future. If anything, Chinese leaders value stability. However, reforms that do eventually come will impact the way foreign companies do business with China in the form of both challenges and opportunities, so pay close attention.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips
Contact
more
less

Fisher Phillips on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.