The Pubic Affairs Dialogues survey - The Three Pillars of Modern Public Affairs in China, reveals emerging trends in the areas of government relations, CSR, and social media for public affairs in China.

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November 2, Beijing

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Agenda
 Welcome, Decentralization
Alan VanderMolen, Asia Pacific President, Edelman
 Overview of Survey:
Three Pillars of Modern Public Affairs in China
Mark O’Brien, Vice President, PAA
 Government Relations
Frank Lavin, Public Affairs Chairman, Edelman
Yuan Haiying, President, Yuan & Associates
 CSR & Corporate Ethics
Steven Cao, Founder, Pegasus Communications
 Digital Dialogue
Mark Hass, President, Edelman China
 Conclusion: Looking forward on
complexity & decentralization
Alan VanderMolen
 Cocktail Reception

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DECENTRALIZATION

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Decentralization
 Economic growth
– Drives strengthening of Provincial and Municipal governments
– Ability/need for Central Government to delegate authority
 Web and mobile technologies
– Flood of sources and channels for consumers of news and
information
– Domestic voices and foreign sources
 Legal compliance complemented by social compliance
– Changing legal and regulatory environment
– Great social expectations

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Pyramid Model of Authority
Organization
Mass Audience

6. Traditional Influencing Model
Your Name
Here

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A new model has
emerged: Public
Engagement Cloud
Your
Name
Here
A New Era Of Public Engagement

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ABOUT THE SURVEY

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About the Survey
 Aims and Objectives of the 2nd Dialogue
- Research and benchmark
- Debate and challenge
- Distil into white paper
 Three Pillars of Public Affairs in China
- Government Relations: Tough and getting tougher
- CSR: Social license to operate
- Social Media: The digital citizen
 Methodology
- 104 respondents
- Online between October 1-28
* Chatham House rules – open debate
* White paper: answers and
questions…and more questions

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GOVERNMENT RELATIONS

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Government Relations: Tough and Getting Tougher
76% believe GR is more difficult in China
than in the West
0%
10%
20%
30%
40%
50%
60%
70%
80%
More challenging Less challenging
68% feel GR will be even more challenging in
the future
Q 14. Practicing government relations in China is: Net top & bottom 2 box
Q15. The government relations landscape confronting Western MNCs
in China is becoming: Net top & Bottom 2 box
0%
10%
20%
30%
40%
50%
60%
70%
80%
More difficult Less difficult

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Decentralizing Government Relations Practices
Agree Disagree Neutral
Local government in China is
rapidly rising in importance as it
takes on a greater role in
economic development and
commercial investment issues
78% 2% 20%
The rise of second tier cities
means government relations and
public relations strategies must be
devolved from national to local
levels
70% 8% 22%
Q16. State your levels of agreement/disagreement with the statement (Net top & bottom 2 box)

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Government Relations:
Tough and Getting Tougher
 More potential for
change in China’s business
environment than any
other major economy
 Strong positive
commercial prospects for
most MNCs, balanced
against more difficult
regulatory environment.
 Ongoing debate in China
between economic
rationalism and economic
nationalism
 Provincial and municipal
decision-makers
increasingly involved in
operating decisions
 Even at Central level,
diffusion of decision-
making authority requires
MNCs to help shape a
consensus across multiple
institutions
– Bloomberg

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Government Relations: Tough and Getting Tougher
 Sustained over-performance of China’s
economy contributes to nationalism,
protectionism and creates local champions
 Increasingly open architecture and
multiple decision-makers and regulators
heightens the complexity for MNCs
 Opportunities in China have never been
greater; risks have never been higher
– US exports to France vs China

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Implications for Government Relations
1. Are your PA-PR-CSR functions coordinated?
2. Do you just monitor/consult in GA or do you try
to influence government activity/policy?
3. How do you tackle challenges at the provincial
and local level?
4. How is your PA budget in China set?
5. How do you build-up PA operations, including
head office calling schedule?

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CSR & CORPORATE ETHICS

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Impact of Rapid GDP Growth
0% 10% 20% 30% 40% 50% 60%
Higher
Same
Lower
35%
54%
Q12. The development of GDP-focused growth in China means that companies will face (Net top & bottom box)
China’s GDP growth is set to place higher explicit and implicit
obligations as companies are expected to address societal needs
11%

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A View on Social Responsibility
Agree Disagree Neutral
Chinese government expects foreign MNCs to have a
higher standard of CSR than domestic operations & SOEs
72% 7% 21%
CSR in China is more central to our overall corporate
strategy than it is in the West
21% 47% 32%
CSR in China is more closely aligned with government
strategy than in the West
61% 18% 21%
The government in China is committed to ensuring that
companies treat workers better
48% 11% 41%
Q13. State your levels of agreement/disagreement with the following statement (Net top & bottom box)

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CSR and Corporate Ethics: Social License to Operate
 Greater number of participants in the debate
about a corporation’s responsibility to society
 All corporations are exposed to pressures to be
“good”, with social media used when they fall
short.
- Trust Barometer: 75% in China more likely to trust a
corporation that partners with an NGO to battle global
issues
 Citizens and competitors will fact-check and
expose corporate wrong-doing in a continuous
cycle of finger-pointing
 Implicit and explicit obligations for MNCs
– Audit to preserve and enhance license to operate in
China’s increasingly crowded and complex markets
 The ‘citizen consumer’ is rising leading to
Governments responding to increased call for
action

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To answer government’s new call, the
upcoming 2010 Summer Davos in Tianjing
takes the theme of
Promoting Sustainable Growth
Three Key Reflections of Central Leadership’s Attitude:
 Harmonious Society
 Scientific Development
 Sustainable Development
Sustainable Development has become a high-priority state policy,
expected to guide the current transition in industrial restructure and
upgrade – while China is gaining its economic strength and quickly
converging with the world in all aspects.
CSR and Corporate Ethics: The New Government Decree

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CSR and Corporate Ethics: Social License to Operate
 Environment continues to be a key issue,
leading to the creation of relationships
between government, NGOs and
corporations
 Edelman’s 2010 goodpurpose study:
- 84% in China expect corporations to take action to
preserve and sustain the environment
- 82% in China agree government and business need
to work together more closely to ensure the
environment is protected
- 80% in China would support legislation that
requires government to fund partnerships between
public and private organizations to help protect the
environment
 Labor laws: CSR and stakeholder
engagement are being fused
- Employees are rapidly becoming one of the
most significant stakeholder groups

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Government Expectations
Looking to Business Leaders to Participate in Public and Social Management as Pioneers and Thinkers
 Investment, advanced products & technologies
and contribution to the GDP are still important.
More important is your role in helping China
solve social and environmental issues that
impede its sustainable development.
 Chinese mainstream media are seeking out
those who set good examples which promote
China’s sustainability in social, economic and
environmental arenas.

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Implications for CSR & Corporate Ethics
1. How do you comprehensively integrate CSR into
corporate strategy for business in China?
2. How do you align CSR strategy with government
concerns and policies?
3. How can you achieve the step change from CSR to
sustainability?
4. Government expects more of MNCs than local
companies, but strategy doesn’t match up. Why?
5. To what extent do Chinese country managers have the
ability to determine CSR priorities?

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SOCIAL MEDIA

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Digital is More Important, but Companies Are Engaging Less
0% 20% 40% 60% 80% 100%
We fully utilize social media platforms as part of
public affairs strategy
Opinions expressed in online and social media
are more influential than other channels
Social media is important to public affairs
strategy in China
2010
2009
67%
79%
74%
10%
17%
Q7. Top 3 Box Important; Q9. Top 2 Box Influential; Q8 Top Box Utilize
54%

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The Role of Social Media
Agree Disagree Neutral
Social media is beyond my company’s control 39% 38% 23%
Social media is beyond the government’s control 27% 40% 33%
Social media is a form of digital democratization 66% 25% 9%
The Chinese government is responding to
representations made via digital platforms
58% 35% 7%
Social media is presenting increased challenges to the
traditional mode of corporate communications and
government relations
87% 6% 7%
Q10. State agreement/disagreement with the statement (Net top 2 box)

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The Digital Citizen: A Populist Force
Internet is a broad public forum in China, both
a source of public opinion information for
companies and the government, and a force
for shaping policy and news
Rapid user growth to continue: 380 million
(2010); 840 million (2013)
Urban, young, educated: Half the nation’s
population is urban; 75% of its internet users
live in cities
Internet landscape is fragmented, but
increasingly oriented toward social
networks, mobile access

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The Digital Citizen: Government vs. Community
The Government
 The internet, once a force to control, must
now be viewed as a release valve for social
pressure and a portal into grassroots emotions
 Substantial, but declining control of content
Wumao Dang: The 50 Cent Party
The Golden Shield: Blocked searches,
vanishing social media posts
• Growth of online community makes long-term, real-
time control technically unfeasible
The Social Media Community
 The community exerts pressure on
government because of its sheer size
• Social media are part of the news cycle
• Mainstream media quote social media and vice
versa in an “internet amplification cycle”
• Eruptions of nationalism online are disruptive
and troubling to Chinese policy
 Growing importance of online
influencers creates new, populist sources
of information
• 60% of Sina Weibo’s 20m users follow top 10
bloggers

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The Digital Citizen: Protesters, Vigilantes, Nationalists
 Large Scale Internet Protests against corruption, unfair actions and
“enemies” of China are a unique and powerful phenomenon of the
Chinese digital community
 2 large-scale protests targeted government in 2003; 12 in 2009
 Typically aimed at local government officials, rather than national
leaders or policies (with exceptions)
- July 2010: Internet community on behalf of Qiu Ziming vs. Zhejiang
province paper company and police
- July 2009: Internet community vs. Ministry of Industry and Information
Technology Green Dam software initiative
- July 2009: Online community vs. Hubei party and police officials over
Shishou incident
 Protests aimed at companies can be “scandals for hire”
 Protests often reflect strong nationalist themes
- Japan, Nobel Prize

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Implications of Digital for Public Affairs
1. Why have companies been unable to engage fully
in social media for PA programs?
2. How do companies monitor and analyze the
voice of the Digital Citizen?
3. How can companies prevent competitors from
exploiting Digital Citizens for negative attacks?
4. Can corporate GA and CSR programs be positively
aligned with the power of Digital Citizens?

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Where from here?