2012 Association International Conference

Chinese Government: Pathways to Gaining Market Access & Building Demand

May 2, 2012

Maria Tong

1

Agenda

• Importance of building relations with Chinese government

• Function of Chinese government• The recent government’s focus• Means of engagement • Things you must know • Experience sharing from guest panelists

2

Importance of building relations with Chinese government

3

The evolving role of Chinese government

1949 - 1978 Planned Economy

Planned Economy; Single Public Ownership;

Government Dominant model

1978 – 1992Reform: Goal Exploring

Transition to Market Economy; Encourage private economy and foreign investment;

Government guided & market regulated model

1992 – 2002 Reform: Framework Building

Market Economy goal established Modern limited government model

2002 -Reform: Complete System

Perfect Socialist Economy System; deeper market economic reform with open policy, multi types of economic components

2002 onward: Efficient government model

4

Policy maker

Industry Gov

ernm

ent

Public Opinion

Policy Making

Project Approval

Think TanksChinese

Associations

Academic

Institutions

The Government controls the market entrance for foreign investors and the market permission for products as well.

The government is the policy maker and the main driver for law-making and industry development.

The think tanks, associations and academic institutions attached to the government have tremendous impact on business activities and industry development.

Media

International Society

NGO

5

The Five Year Plan

• The vision for China national economy and social development

• Each industry develops its own Five Year Plan based on the country’s Five Year Plan

1st. 5 1953~1957

2nd. 51958~1962

3rd. 51966~1970

4th. 51971~1975

5th. 51976~1980

6th. 51981~1985

7th. 51986~1990

8th. 51991~1996

9th. 51996~2000

10th. 52001~2005

11th. 52006~2010

12th 52011~2015

6

Influence on your stakeholders

Company

Individual

Partners-Government- Association- Institutions- Academic- Media Suppliers

International

Association

How to influence?• Giving recognition means you are allowed to access to the market• Approve association/public institution for collaboration or refer you to associations

and institutions for partnership• Access to the State Own Enterprises, large private enterprises, academic groups

and individuals working for the above• Drive industry demand by making policy and “government call”• Build your brand awareness through government events

7

Trust on government

Source: 2012 Edelman Trust Barometer: Global Deck 8

Expectation for the government

Source: “Managing government relations for the future: McKinsey Global Survey results” Mckinsey Survey Feb, 2011 9

Function of Chinese government

10

Chinese government structure

State Council

Ministry/Bureau(e.g. SFDA)

Government Office(e.g.

International Affairs

Department.)

Association(e.g. China

Pharmaceutical

Association)

Public Institution(e.g. CCPIE)

11

What does association do in China? • Promote policy• Train industry people• Issue professional certification on behalf of

government• Publish academic journals/publications• Create industry standard• Organize trade shows and meetings• Organize domestic and international exchange• Government research project 12

What does public institutiondo in China?Type of Public Institutions:• Training Centers (e.g. Training Center of SAFEA)

• Foundations (e.g. China International Talents Exchange Foundation)

• Research Institute (e.g. China Academy of Medical Science)

• Media (e.g. China Pharmaceutical News)

• International Exchange/Cooperation Center (e.g. China Center for Pharmaceutical Exchange Center)

13

The recent Government’s focus:12th Five Year Plan

14

• “Surface” Level Challenges: Housing, healthcare, education, inflation, corruption, and food safety

• Deep Challenges:Growth model -imbalanced, uncoordinated, and unsustainable

• Deeper Challenges:Economic vs. political reform -political reform continues to trail economic reform

Faced with these challenges,China has developed its 12th FYP

The Challenges China is Facing

15

Main Content of the 12th. FYP

Theme: Re-balancing Economic Growth

Primary Goal: Improving People’s Livelihoods

GDP Growth at 7- 8%

Domestic Consumption

Oriented

Develop New Industries

Government Administrative

Reform

CPI Lower than 4%

16

What we need to know about the Five Year Plan• Fast economic growth is no longer the

goal, increasing domestic need is a new goal

• Growth will rely more on science and technology than on capital, natural resources, and cheap labor.

• Rebalancing, stability, and people’s livelihood are the 3 keywords.

• Operating costs are climbing, and competition is becoming increasingly intense, especially with SOE.

17

Specific Industries impacted

Source: The Economic Impact of China 12th Five-year Plan, Mckinsey Survey 201118

Means of engagement

19

Case Study of ISPE China(1)International Society for Pharmaceutical Engineering (ISPE)

Challenges:• Membership was small;• Participation of Chinese volunteers

was not active;• Relationship with the government

need to be developed; Objectives:• Grow membership• Improve relationship with the

government• Understand local market better• Enhance brand awareness 20

Case Study of ISPE China (2)Solutions:• Collaborated with China Center for Pharmaceutical International Exchange

(CCPIE), an institution of SFDA to organize joint Conference and SFDA official to speak

• Invite SFDA and provincial FDA officials to join the complimentary ISPE regulatory membership

• Assist SFDA officials to attend the ISPE Annual Conference in the US• Support Chinese government on translation of new China GMP• Organize Inspector Training Programs for the government inspectors• Expose in the official industry media affiliated to SFDA to promote brand

awareness• Form a Regulatory Committee to monitor policy and build regular

communication with government

21

Case Study of ISPE China(3)Outcomes: • Membership increases from less than 100 to around 1000,

nearly 900% within 3 years;• 1/3 of the new members was generated from the Conference• Closer relationship was established with SFDA through the

partnership on the Conference • Contacts (members & potentials) number has grown over

700%;

22

Relation building

How to build relations

Policy Monitoro Country’s 5

Year Plano Industry

policyo Media

Newso Industry

Trend

Engagemento Invite to

meetings and speech

o Co-host event

o Partner on Projects

o CSR Campaign

o Road Showo Media

interviewo Position

Paper

Review /Evaluationo Adjust

your plan according to new change

o Evaluate hurdle and success factors

Researcho Govern-

ment Mapping

o Attitude Analysis

o Policy analysis

o

Plano Goalso Who to

focuso How to

accesso What to doo Timeline

23

Principal 1: Win-Win China’s Current Priorities

Foreign Associations’ Strengths

Harmonious regional development

Reform and opening-upAdjustments to industry structure

Energy saving & emission reducing

Advanced body of knowledge

International standardization

Win-Win Points

Global networking and insightsSustainable business/finance model

Indigenous innovation

Advanced managerial experience

24

Principal 2: Proactive communications• Top to down• You need “local support” to read

government correctly and overcome cultural difference

• Follow foreign affairs procedure• Build personal relations helps

25

Principal 3: Establish trust

CSR necessity in China

26

Project negotiation & approval

• Annual budget is usually approved in Q3 or early Q4 and can hardly be changed

• Going abroad as government official status is restricted(1~2 times a year)

• Negotiation process is lengthy and complicated

27

Things you must know

28

Things you must know• Working with government doesn’t necessarily

means business profit, but it will help you enhance influence and allow you access to the market

• Show your attitude of “Contribution” to the Chinese government rather than “long for money”

• Be patient and persistent • Clear about your goal

29

Things you must know

• Provide market research data to show your strength

• Finding the right person in the government is important

• Establish local presence • Localize your product (local language/content

with local relevance is a must)

30

Things you must know

• Ready to handle administrative affairs• Sign agreement carefully to protect your

benefit• Be flexible

31

Panel DiscussionExperience Sharing and Q&A

Guest panelists:Abe Eshkenazi, Chief Executive Officer, APICS

Greta Kotler, Chief Global Development Officer, ASAE

32

Contact InformationSpeaker Name (1)Maria TongTitle: Senior Account DirectorOrganization: MCI ChinaPhone: 86-10-52061077Email: maria.tong@mci-group.comWebsite: www.mci-group.com

Speaker Name (2)Abe EshkenaziTitle: Chief Executive OfficerOrganization: APICS Association for Operations ManagementPhone:773.867.1779Email:aeshkenazi@apics.orgWebsite: www.apics.org

Speaker Name (3) Greta KotlerTitle: Chief Global Development OfficerOrganization: ASAE: the Center for Association LeadershipPhone: 202.326.9506Email: gkotler@asaecenter.orgWebsite: www.asaecenter.org

33