Bureaucratic Decision-Making

The decision-making process within the Chinese-bureaucracy place considerable emphasis on achieving a consensus among all the interested parties. A deal may of the be discussed at national, provincial and local levels before a consensus is achieved.

The Chinese “end-user” is the key to the foreign firm’s success. The end-user must first be convinced of the usefulness of the product or service. The operations of an end-user, say, a factor, may be monitored by one of the Chinese industrial corporations. Moreover, the end-user may draw upon the advice and recommendations of one or mote internal advisory groups, associated research institutions, or scientific societies. So when you are engaged in negotiations or technical discussions the agenda is usually detailed and long, simply because of the large number of “technical’ people from different agencies that need to be consulted by the end-user convince a number of Chinese planning and coordinating agencies that the purchase from the foreign firm is consistent with China’s overall economic and import needs. The factory would have to demonstrate that no domestic substitute is available and that the proposed purchase is commercially Sound.

If the factory plans a large-scale purchase, then the potential con tract must be approved by the State Planning Commission. If it is a Large-scale joint venture, then the potential contract would need to be reviewed by MOFERT. If the factory is purchasing technology or is about to engage in manufacture-under-license, then the contract may need to be reviewed by CITIC or other agencies to determine that the terms of the deal are consistent with China’s overall policy on the acquisition of technology. Even after the commercial and technical details of the contract have been concluded, the factory- if it does not possess its own foreign Exchange-must apply to purchase hard currency from the Bank of China or arrange for a loan from the bank, usually through one of the Chinese corporations.

At preset the great majority of China’s foreign trade is channeled through the Chinese FTC. The FTCs are mainly concerned with the commercial terms any contract for, as purchasing agents, they rely on technical advice from the actual end-user. However, the current trend is to “free up” the system and allow end-users to negotiate directly with foreign firms. So when you are in China negotiating a deal and the discussions appear to stall, it is probably because the proforma contract is being passed up or down (or sideway) along the decision-making line~of- command for advice or approval. Awareness of the way bureaucratic decisions are made in China should help you to understand why negotiations can be broken off for one or two days for no apparent reason.