Overview of Chinese Power Structure

People’s Republic of China (PRC) has a very high ranking of Power Distance Index (PDI), which indicates the hierarchical culture existing between subordinates and superiors. People get used to the power distance, and there is no defense against the abuse of power by superiors. Additionally, the Chinese Government plays an essential role in the economic activities. It is the most powerful player in the market. To further understand the business environment in China, it is necessary to understand the Chinese power structure.

China is a socialist republic run by a single party, Communist Party of China (CPC). It represents the combined leadership of the Party and the Government. Besides, China has a multi-party, consultative system of Government that operates under the leadership of CPC. However, the ranking of the officials depends on the ranking within the CPC but not within the Government. The Chinese power structure consists of the PRC government and the CPC, while CPC executes authority by controlling the State Council and National Party Congress. The Chinese military takes instructions from the CPC and thus, is controlled by senior party leaders to ensure its loyalty to the CPC.

On the Government side, National People’s Congress (NPC) is the highest level of state power. It consists of about 3,000 delegates elected via a multi-tiered electoral system from around 90 million members. It is a powerful law-making body and meets for two weeks each spring. Between two NPC meetings, NPC Standing Committee, which includes 160 members of NPC, works as constitutional authority to exercise Legislative Power. NPC elects the Chinese President, and then President nominates the Premier who has to be approved by NPC before being appointed officially. Premier is the head of State Council which also includes four vice premiers, five state councilors, and twenty-five Ministry and Commission head. These heads of State Council are usually also the high-level members within CPC.

NPC also elects the head of Supreme People’s Court and the head of Supreme People’s Procuratorate. Both Supreme People’s Court and Supreme People’s Procuratorate have no relationship with State Council, but within CPC, the Premier is a member of Politburo Standing Committee while the heads of Supreme People’s Court and Supreme People’s Procuratorate are only the members of Central Committee which is two levels lower than Politburo Standing Committee.

On the Party side, National Congress of the Communist Party of China (NCCPC), with about 2,000 delegates, is responsible for electing party Central Committee and reviewing the Party Constitution. NCCPC holds meeting every five years, and the latest meeting was held on October 18, 2017. Between two NCCPC meetings, Central Committee executes the authority of NCCPC. It also appoints the most powerful leaders in the CPC, which is Politburo Standing Committee and Politburo. The General Secretary is the highest ranking official of CPC and the de facto leader of PRC.

The administrative divisions are responsible for carrying out the State affairs. All the officials on a lower level are appointed by the officials on the higher level. Here are some bullet points for an official to get a promotion:

  • Gross Domestic Product (GDP) within the area he/she manages grows fast.
  • Environment protection result ranks well.
  • Has good reputation among the officials on the higher one level as well as among his/her colleagues.

Because GDP plays an essential role in the officials’ promotion, the officials have incentives to develop the economics in the area under his/her management. Here are some suggestions for investors to deal with the relationship with the government in China:

  • Make sure you know who is the decision maker. Due to the hierarchy culture, your counterparty who is sitting at the table usually is not the decision maker, except he/she told you he/she is the one can make the final decision.
  • Try to learn how to judge who is the leader in a meeting room from the order of seats. When you participate a meeting hosted by your partner or the government, you should be able to recognize who is the leader in the meeting room. Thus, you get the information which person is the “key person” for your business. Usually, the leader sits in the seat facing the door, in the middle of the table, so that he/she knows everything is happening in the room.
  • Keep attention on the policies or industry development plans issued by the central government related to your industry. Though everything can be changed in future, you can still get information about the government’s thought. Furthermore, the governments of the provinces or cities level will follow those policies or plans quickly. At this time, you should know how you should position your company in your industry in your location.
  • Cooperate with some local agents who are good at dealing with the relationship with the government. The local agents have more and stronger networking. It is a good idea for you to take advantage of them though you may need to pay some fees.
  • Try to understand what your partners want. Most of the state-owned companies in China have a very close relationship with the government, and they are regulated by the State-owned Assets Supervision and Administration Commission. If you can help them achieve their performance goal, you would get more benefit from them.

Of course, all these works should not violate the laws in China. Otherwise, you might lose the business opportunity in China.