Chinese language corporations can not affect the federal government like US corporations do

Beijing office towers, including that of Alibaba, will be lit with Chinese characters that read “Blessings to China” to celebrate the national holiday in October 2020.

Zang Zhihao | Visual China Group | Getty Images

BEIJING – The shock of American investors over continued crackdown on regulators in China points to a fundamental difference between the two countries that many don’t seem to understand: When it comes to setting the rules, companies in China don’t have as much leverage as they do they do in america.

US investors in Chinese companies were surprised this summer by a number of measures Beijing took against domestic tech companies, including several whose shares are traded in the US. One of the surprises was an order that app stores should remove the Chinese ride-hailing app Didi just days after its massive US IPO. End of June.

Authorities then suspended new user registrations for the Chinese job search app Boss Zhipin and subsidiaries of the Full Truck Alliance, both of which were listed in the United States in June. In late July, two US-listed post-school tutoring companies crashed after the industry was given a mandate to restructure its businesses and remove foreign investment through a widely used foreign listing structure.

Behind the dramatic change lies an emerging political rhetoric about “shared prosperity,” which analysts say means companies are being screened for their contribution to the wider population, rather than quickly creating wealth for a select few.

Large corporations in both countries are working to build political connections and influence government policy. But while the US system is designed to help businesses influence government, China’s system is designed to align businesses with government goals. Recent government campaigns have focused on protecting Chinese data and curbing monopoly practices – even increase the birth rate.

In China, the party state wants the economy to serve its development goals and is ready to sacrifice corporate profits for this.

Gabriel Wildau

Senior Vice President, Teneo

“In the US, the government often acts as a servant of business interests, be it technology or other sectors,” said Gabriel Wildau, senior vice president at Teneo, a company that advises corporate clients. “In China, the party state wants the business world to serve its development goals and is ready to sacrifice corporate profits for it.”

Political risk for Chinese companies has risen dramatically, according to Zeren Li, whose PhD at Duke University focused on China’s much more limited version of the “revolving door” – the American practice of letting regulators and lawmakers switch between working for the government and back and forth change her position for the lobby industry.

Chinese entrepreneurs found it easier to get subsidies, cheap land, or other benefits from local governments in an earlier era when China’s central government assessed these officials on their ability to generate GDP growth, Li said.

But since Chinese President Xi Jinping took office in 2013, local officials have been judged more by how well they are contributing to Beijing’s goals: contributing to what it calls “shared prosperity,” meeting pollution targets, and the like.

“Now officials are reluctant to work with local entrepreneurs,” Li said, adding that it is more difficult for companies to do business.

Influence of buying: this is how lobbying works in the US

In contrast, companies in the United States regularly hire former lawmakers or former regulators who have switched to the lobbying industry so they can get paid to help corporate clients shape government policy.

Most often lobbyists gain leverage by buying it – pumping money into MPs’ re-election campaigns or throwing money into a MP’s favorite project in the congressional district.

Foreign governments are also buying influence over American lawmakers through lobbyists. Lobbyists are increasingly exerting influence over federal agencies.

You could say that the US government is a one-way street to business.

Isaac stonefish

Founders, strategy risks

Total lobbying spending in the United States skyrocketed from $ 1.56 billion in 2000 to $ 3.53 billion last year, according to Senate Public Records Bureau data compiled by Organization that tracks corporate spending for government decision makers.

That’s not how it works in China.

“You could say the US government is a one-way street to corporations,” said Isaac Stone Fish, founder of Strategy Risks, a New York-based firm that studies corporate exposure to China.

“China for Chinese companies is a 1.5-way road,” he said. “It’s not that easy [a situation where] the party tells companies what to do and companies listen. Companies provide feedback. They just have a lot less opportunity to put pressure on them than US companies in America. “

Chinese lobbying in the US and Facebook are among the top 10 largest lobbying firms in the United States by spending, according to OpenSecrets.

Chinese companies, including Jack Ma’s listed e-commerce giant Alibaba and TikTok owner ByteDance, have spent far less in the US, but have stepped up their lobbying efforts in recent years, according to OpenSecrets.

Read more about China from CNBC Pro

Alibaba, the figurehead of both China’s tech boom and recent crackdown, spent a record $ 3.16 million lobbying the U.S. government last year, the data shows.

It is unclear how effective these efforts were. A characteristic of American lobbying is that while spending is openly tracked, success is not.

“I am not aware of many examples of successful lobbying by Chinese companies in the US,” said Wildau. “Lobbying usually works better on obscure issues that don’t get a lot of attention from politicians and the media. On an issue like US-China relations, where Washington takes center stage and everyone has an opinion, lobbying cannot overcome the big ones. “Political forces at work.”

“Chinese companies have had better luck in court,” said Wildau.

Earlier this year, Chinese smartphone maker Xiaomi received approval from a US court to stay clear of a blacklist introduced by the Trump administration that linked companies with the Chinese military.

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