st john mooreOn the heels of President Xi Jinping’s trip to the United States, the topic of managing crisis and business uncertainty in China is a timely one -- particularly given the recent changes the country has undergone.

While global headlines proclaim the “Great Fall of China” and predictions abound about the collapse of the Chinese economy, the fundamental issues facing China’s economic policymakers are not new. The ripple effects across markets beyond China indicate that international perceptions have caught up with the reality of slowing growth, which China has been experiencing for some time. Viewed from within mainland China, the stock market volatility seems less important than the structural challenges the wider economy faces.

With this in mind, it is important that companies reevaluate their communications to ensure that how and what they say has a positive impact in this new environment. This is where global communications advisory firms, like Brunswick, play a pivotal role.

The ‘New Normal’

These new structural challenges in China are part of the ‘new normal,’ a concept that has dominated much of President Xi’s time in office. This new normal encompasses not only the reality of slower growth but also the expectation that organizations operating in China—be they foreign or Chinese—will all be held to a higher standard. The government’s anti-corruption campaign is just one example of this expectation.

This ‘new normal’ also entails shifts in the way issues and crises are managed in China. Multinational companies that have established successful and thriving businesses are actively readjusting their plans and projections for the new economic environment. Consumers are still spending, but their increased selectivity requires companies to focus more on the unique features of their products or services.

The View from the Ground: Managing Communications Challenges in the ‘New Normal’

As China transforms, the environment for foreign companies is becoming more complex. From the perspective of someone who deals with crisis and issues management in China, positive signals as well as signs of strain are visible.

Here is a look at the ‘new normal’ through a communications lens:

  • The crackdown on corruption is changing behaviors for the better, although it remains unpredictable. There is a renewed set of expectations for how a company must operate in China. On a positive note, these expectations are increasingly in line with the core values of Western companies.
  • Regulators are getting tougher, and multinational corporations are more vulnerable to high-profile investigations. Corporate governance matters more than ever.
  • National interests, as ever, overshadow the reform agenda. To successfully operate in China, a multinational company must clearly demonstrate the value it brings to the country. This involves building goodwill and relationships with stakeholders and demonstrating strong corporate citizenship—and doing this before an issue strikes.
  • Stakeholder management is increasingly complex and important. It is no longer possible to rely on a single relationship. While guanxi, or relationships, remain important, it is critical to build a broad stakeholder engagement program across government and beyond. Closer to home, companies are investing more in communicating effectively with their internal teams to ensure that they are aligned with global values.
  • Chinese consumers are an impassioned group when it comes to corporate issues and play an active role on digital and social media to demand and effect real change. Consumers often leverage social media to put pressure and public shame on companies when they are perceived to have done something wrong. Companies must be prepared to address this consumer landscape and own up to issues in the most public way.
  • Companies must take ownership of issues and decide when senior executives need to apologize or play a role. Because the consumer public is so engaged when something goes wrong—a product recall, for example—executives need to be smart in terms of how they engage and take ownership of the situation. Furthermore, Chinese consumers are sensitive to discrepancies in the way they are treated versus consumers in other markets. When something goes wrong, publicly apologizing and owning up to the issue is critical.
  • Slowing growth isn’t all bad for business. Companies that have experienced slowing growth have been forced to rectify inefficiencies in their businesses that had been invisible in the heady growth of the past. This is an opportunity to communicate improvements to customers and stakeholders.

Issues on the Horizon: What’s Next?

We remain cautiously optimistic about the long-term direction of policy as the government tries to provide institutional solutions to issues that may derail China’s development. In the coming months and years, China’s expectations of those operating in China—whether they be foreign investors or local Chinese companies—will continue to shift profoundly. This will mean new challenges and new ways of conducting business and navigating communications issues.

The leaders of corporate multinationals face a long list of challenges in relation to China. Successful companies of tomorrow will be those that take the time today to carefully review their operations and approach to engagement. Brunswick works with many companies facing significant reputational challenges. As we’ve seen, the best companies are investing heavily in this to align with the ‘new normal.’

Nothing takes place in isolation in today’s world. Managing a crisis in China is no longer just about China. These issues often cascade across the world, affecting companies’ reputations in other markets. For a communications advisory firm, the challenge is crafting a globally-aligned strategy that also adopts tactics specific to China’s unique and dynamic environment.

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St. John Moore is a partner for The Brunswick Group, Beijing.