By Ariana Eunjung Cha
Washington Post Foreign Service
Tuesday, October 2, 2007
BEIJING -- It's almost 8 a.m., and former U.S. commerce secretary Donald L. Evans and his team are standing in front of the St. Regis Hotel, preparing for their day of meetings with Chinese finance officials.
Small but meaningful gifts in Tiffany's signature baby-blue boxes? Check. Briefing books with the pronunciation of everyone's names? Check. Black Audi A6s to whisk the group to the meetings? Check.
Evans was in town representing the Financial Services Forum, which is made up of chief executives of 20 multinational banks. His goal was to convince Chinese regulators that opening their financial sector to more foreign investment would be good for China's economy.
Armies of lobbyists are descending on the Chinese capital in anticipation of the 17th Communist Party Congress beginning in mid-October. The gathering will choose a new generation of leaders, setting the political agenda for the next five years.
But the dark-suited Western lobbyists are an odd spectacle given that in China, policy and legislative decisions are still made behind closed doors. Lobbying exists in a gray area; because there are no laws specifically pertaining to it, it isn't even supposed to exist.
Nevertheless, some of Washington's marquee lobbying firms -- including Jones Day, Hogan & Hartson, DLA Piper and Akin Gump Strauss Hauer & Feld -- have set up offices in China. Officially, they are just investment advisory and communications firms. Chinese companies mostly work through government-affiliated industry associations, although some have also hired Western-style lobbying firms.
In June, foreign companies successfully lobbied Chinese officials to remove conditions on hiring temporary workers in a new labor law that they said would make it prohibitively expensive to do business in China. Likewise in August, they were able persuade China to remove some language in early drafts of the anti-monopoly law that seemed to discriminate against foreign companies, according to Chinese and foreign academics.
The Chinese government has said it took input from domestic and foreign interests into account but has not been specific.
Foreign companies are interested in what happens in China, as its economy is becoming the world's third-largest as well as a capitalist instead of planned one. There's concern that the legal framework for business that China's legislators are writing today could affect the fate of multinational businesses for decades.
Evans said that the degree to which Chinese officials are interested in hearing foreign perspectives on business issues has increased dramatically. In the past, he said, he would go into government meetings and recite a set of bullet points, and the meeting would end. These days, he said, there's real discussion and debate.
"They are very proactive in wanting to engage and share with the business community," Evans said.
Scott Kennedy, director of the Research Center for Chinese Politics and Business at Indiana University and author of "The Business of Lobbying in China," said that as recently as a few years ago foreign companies would grumble that they heard about new policies only after they were announced.
"That is increasingly no longer the case. Today, even if they don't agree with the final result, they know it's on the horizon," Kennedy said.
But China's laws have been slow to respond to the influx of lobbyists seeking to take advantage of the closer ties. Zhao Kejin, an associate professor at Shanghai's Fudan University who studies government-business relations and has written a book on lobbying in China, argues that because lobbyists do not need to register or file disclosure forms, the system is vulnerable to abuse.
"There is lots of lobbying money flowing to individual officials' pockets," Zhao said. In addition to straight-up bribery, some lobbying firms keep friends of high-placed officials on the payroll or pay for officials to take luxury "training" trips abroad.
In 2004, Lucent Technologies fired four executives who were part of its Chinese operations for violating the U.S. Foreign Corrupt Practices Act, which prohibits bribing foreign government officials and politicians. Last November, a U.S. software maker, Fidelity National Information Services, was accused of paying for luxury vacations for Chinese banking officials and their families in places such as Rome and Las Vegas. Fidelity has denied the charges.
Lobbying is not only less of an institution in China than it is in the United States, but the people being lobbied are different.
For instance, Murray King, head of the Shanghai office of APCO Worldwide, one of the oldest government relations firms operating in China, said that Chinese academics are among the key players that companies should reach out to. The most important members of that group are those who work with the think tanks affiliated with various state ministries, because they play an important role in the drafting of legislation.
Another crucial part of high-profile lobbying efforts are "guanxi brokers," well-connected individuals who can give introductions to important officials, or "rainmakers," people who are so famous that many Chinese officials might be happy to meet and shake hands.
"Because China is a country that respects authority, former politicians of the United States, when they come to China, can always play a very important role," said Steven Dong, a Tsinghua University public relations professor who studies the reputations of corporations.
A former U.S. official will almost always be greeted by a Chinese official of the same rank, Dong said.
Former officials with star power in China include Henry Kissinger, probably the most sought-after because of the role he played in establishing diplomatic relations with the Communist Party during the Nixon administration. Former Federal Communications Commission chairman Reed Hundt, who routinely visits China on behalf of Silicon Valley companies to talk about opening up China's Internet and telecommunications sector, is also a regular in the halls of Chinese ministries. Gary Locke, a former governor of Washington whose consulting firm represents Microsoft and Starbucks, is celebrated for being the first Chinese American governor and is so well known that school girls run up to him to take his picture.
Evans, who was commerce secretary from 2001 to 2004, has been working for the Financial Services Forum since 2005. This was his second trip to China on behalf of the group.
Evans was received by the Chinese government this month with all the pomp and circumstance of a state visit.
His schedule, which included all key financial ministries and regulators, was almost identical to that of Treasury Secretary Henry M. Paulson Jr. during his visit in July. Evans even had a private diner with Vice Premier Wu Yi.
There was lobbying on both sides.
Jiang Jianqing, chairman of the state-owned Industrial and Commercial Bank of China, a rank similar to that of minister, pummeled Evans with questions about the subprime lending crisis and trade protectionism in Congress. ICBC has recently been ranked the second- or third-largest bank in the world by market capitalization.
Evans said the Chinese must make sure that U.S. legislators understand they are open to foreign investment. He said it's important for the Chinese to make sure the U.S. government understands "your view as an important trader, to make sure they understand your commitment to moving your economy toward an ultimate market economy."
The total foreign ownership in a Chinese bank cannot exceed 25 percent. But even as Evans began to lay out his case for why China should raise or do away with foreign ownership caps for banking, securities and insurance firms, Jiang took the opportunity to point out his frustration that his bank's application to open a single branch in the United States has not been approved, while U.S. banks, including some that Evans represents, already have significant operations in China.
Evans said he'd be happy to look into the holdup.
Near the end of the one-hour meeting, the two turned to a less-tense topic: the development of China's countryside. Evans talked about his visits to western China, where he met two blind brothers with whom he has kept in touch, and how much their lives had changed over the years. Jiang said he, too, was concerned about bridging the gap between the rich and the poor in China.
The two men smiled and shook hands. That was considered progress.
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