Think Local, Act Local: Easing Chinese Government Approvals

An American manager in a city near Shanghai was having difficulty gaining the approvals necessary to start the construction of his new factory. In particular, the Planning and Construction Bureau and the Land Bureau were changing the terms of the contract the manager’s company had signed a year before. Further, the manager was also having difficulty negotiating electricity rates with the power bureau. Originally, the contract the manager’s company had signed with the industrial park promised “the most favorable” rates. Now, the Power Bureau was denying any association with the government agency with which the Western company had signed the contract.

In most of China – especially when it comes to dealing with government – relationships, or guanxi in Chinese, are paramount. Even within the Chinese government, personal relationships between individuals that bridge departmental lines are of utmost importance. So, the manager was consistently hearing from the three uncooperative departments that whatever terms and rates the economic development zone administrators had offered the American company did not apply to the departments; they were not part of the industrial park’s government structure. Instead, each of the departments belonged to the municipal government, which ultimately reported to a different vice mayor that headed the economic development zone in which the investment was based. In other words, the guanxi the manager had developed with industrial park officials had run its course in most ways; not even the Zone’s officials could influence the city bureaucrats.

The first impasse involved the Land Bureau. The Land Bureau was charged with approving the designs for the manufacturing facility the company wanted to build. And as long as the designs were not approved, the Planning and Construction bureau was not going to extend the building permits to get the project started.

Silk Road Advisors (SRA) staff tasked with supporting the manager and the China investment set to devise a multiple-pronged approach to developing deeper relationships between the manager and the local government – beyond the administrative staff of the economic development zone. The strategy included identifying Chinese friends with friends in the local city government with influence; getting a personal-interest piece about the manager in the local city newspaper; and identifying and working with a local city government professional journal to provide greater exposure to the investment at a city level.

All the activities were geared toward giving the manager Face in the local community. Face is the perception – high or low – others have about one’s image. Without local exposure and personal relationships with local Chinese, Westerners are viewed as targets for price gouging and fall low on the priorities of government officials: meeting the requests of their friends comes first.

SRA arranged through a Chinese friend of another Chinese friend who worked in local government a meeting with the Director of the Land Bureau: the two were classmates. SRA invited a Chinese manager from the American company to sit in the luncheon, while SRA staff delicately probed for answers about its client’s design approval process.

Meanwhile, SRA had also just finished arranging an interview between a journalist for the local public newspaper and the Manager and his wife. The article was a human interest story that featured the couple as new neighbors who enjoyed the town very much. The article described the Manager’s business.

One week after SRA met the Land Bureau Director and two days after the newspaper published the interview, the Manager walked into the office of the Land Bureau Director. “You’re very famous!” the Director exclaimed, and gladly approved the troubled drawings within minutes of the start of the meeting. The approval sped up the construction approvals process with Planning and Construction Bureau.

Within a month of the Land Bureau meeting SRA had published in a local government Human Resources magazine a profile of the Manager’s company. The article discussed how the company was integrating the company’s values with “the Chinese Way,” and how the company was committed to contributing to the local talent pool. Local government agencies circulated the article throughout the bureaucracies.

The articles and relationship-development contributed greatly to the American manager’s month’s later being made an honorary citizen of the city. Within days of the honor, the Power Company granted the Manager the right to do all its own procurement without the Company’s direct involvement ( or paying a fee for this “service”). Then, the Planning and Construction Bureau issued the Manager an M&E Construction Permit, which the Bureau had been claiming for months the city did not even have (even though the Manager’s project required just such to ensure its project adequately met with local land and construction standards).

Dealing with the Chinese bureaucracy at the local level can be a difficult and laborious process fraught with frustration. However, knowing with whom in government to make sincere connections, as well as local media coverage to attain a kind of “star” quality greatly facilitate the approvals process.

For more information about this case or to contact Silk Road Advisors, email us at sradvisors@gmail.com .