Big-Ticket Events Create Big-Time Headaches for Businesses
Inspiration for this week’s column comes from the “Two Sessions” that kicked off over the weekend and will drag on for the next three weeks in Beijing. For the uninitiated, the sessions are an annual rite of late winter, and consist of concurrent meetings of China’s legislature, the National People’s Congress, and its main consultative body, the Chinese People’s Political Consultative Conference (CPPCC).
Anyone hoping for discussion of politics here will be disappointed to learn my focus this week has nothing to do with the content of these annual meetings, and instead lies in the logistical nightmare such big-scale events create for businesses. That’s because Beijing and local governments see such events as showcases for China to impress domestic and increasingly international audiences.
Such mentality means that host cities for such events take just about every precaution under the sun, and then add on a few more for good measure, to ensure that everything runs smoothly and observers come away with the right impression. That results in things like street closures and heightened security, which are also quite common in the West during such big events.
But such acts get taken to extremes here in China, with things like extra screening in subways and even road checks for people entering a host city becoming the norm during these periods. What’s more, workers at local government agencies and big state-run companies often get compulsory holidays during these events to ease road congestion, making life difficult for anyone who does business with these folks.
In the last few years an environmental angle has also entered the equation, as host cities try to put on their best face by restricting polluting activities. That can result in anything from restrictions on driving, to more targeted measures like forcing heavily polluting factories in all surrounding areas to shut down completely during the period.
Many of these measures would be unheard of in the West, where businesses and residents would protest loudly if a government tried to take such actions. But this is China, where the government wields huge influence over businesses and everyday life in general, including the ability to shut down entire sectors for extended periods. We saw such policies in action over the past winter, when draconian shutdowns of coal-burning factories and home furnaces helped to significantly improve the air quality in Beijing.
It’s certainly hard to complain when you’re the beneficiary of such actions, and I heard few protests from people in Beijing this past winter over our cleaner air. But it’s another story when you’re trying to run a business, and it was quite easy to get all kinds of gripes from my contacts in the foreign and Chinese business communities about the disruptions that come with this kind of big event.
Focused on Beijing, Shanghai
Unfortunately for most foreign businesses, the big majority of such big-name events occur in Beijing and Shanghai, the two most favored cities for such companies. But the big events are increasingly spilling out to second-tier cities like Hangzhou and Xiamen in the east, and Chengdu and Chongqing in the west, meaning it’s increasingly impossible to avoid the big disruptions.
Luckily most such events usually last just a few days. But then there are ones like the Two Sessions that can go on for weeks. And of course the granddaddy of such disruptions is the Olympics, which caused massive headaches for businesses in Beijing back in the summer of 2008, and will probably cause similar problems for the next Beijing winter games in 2022.
I’ll close with some specific views from business leaders I polled, nearly all expressing a big degree of frustration. But I’ll start with a contrarian view from one of the oldest China hands I know, an American executive who worked here from the 1990s until recently, and remarked he couldn’t recall a single instance of such inconveniences in all those years. He thought about it some more, and said his experience probably speaks less to the fact that no such disruptions occurred, and more to a “roll with the punches” mentality he has developed after doing business in China for so many years.
Such a mentality is a good one in general for China, but is one that takes time to learn and is still difficult to accept for more recent arrivals who expect a more modern business climate.
The most common complaint I heard was from people who were cut off from suppliers that were forced to shut down during such big events. That plays to a bigger theme that manufacturers and businesses such as restaurants or decorators that rely on suppliers are some of the most affected by these big events. Anyone who requires lots of contact with government officials is also subject to disruptions, since many of those may become unavailable during such periods.
One contact at a drug manufacturer recalled how one of his company’s factories was forced to halt production for an entire month after one of its key suppliers in Beijing was forced to cease operations during an Asia-Pacific Economic Cooperation meeting a few years back. Another remarked how traffic checks for vehicles entering Beijing around one event added about an hour to the trip from nearby Tianjin. Another common beef among several people was the relative short notice often given before such draconian measures, giving people little time to prepare.
People said businesses can do a few things to protect themselves when these events occur. One said he avoids all travel to any areas west of Beijing’s central business district during the Two Sessions or other major events. Others said they try to find alternates who can pick up the slack when they lose access to key suppliers. But my old timer contact probably provided the best advice of all, namely that anyone doing business in China should maintain a certain degree of flexibility. That means being able to roll with the wide array of offbeat and unexpected punches that anyone will inevitably encounter here sooner or later in the course of doing business.
Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com
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