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Under the apparent strongman-ship of Chinese President Xi Jinping, there’s been a clear reallocation of policy formulation and implementation--and regulatory authority in general--away from the civil government apparatus (i.e., the state) and into the elite echelons of the Communist Party. For MNCs, the consequences of this shift are many:
- Less access to policy makers--by design, the party is inherently less accessible than the state government.
- Less transparency in policy making--by design, the party is inherently secretive.
- More propensities for policy error--the decreased use of expert opinion, and the more constrained external information and data environment, make for more politicized and error-prone decision making.
- Regulatory engagement that is more ideologically campaign-based and less rules-based, which means less bureaucratic protection for MNCs.
We’re calling this new paradigm, “dangjin zhengtui” or “party over state,” which we believe will likely persist until a correction is forced or a new leader with a different vision takes the helm in 2022.