Longtime Xi loyalist Liu He was recently promoted to vice premier; Liu now leads trade negotiations with the United States, and he also helped formally integrate “Xi Jinping thought” into China’s economic plans. As Xi’s consolidation of power continues, China’s domestic policy world is signaling that Made in China 2025 is about what Xi wants, with little wriggle room for any deviation.





Further down the political food chain, think tank and private-sector interlocutors frustrate foreign scholars by refusing to deviate from rote party-line responses that allow no room for the interests of foreign firms. In summer 2016, Scott Kennedy, the deputy director of the Center for Strategic International Studies’ China program, attended an innovation dialogue affiliated with the then-prominent U.S.-China Strategic & Economic Dialogue. After a tense exchange, Kennedy characterized his Chinese dialogue counterparts as “unapologetically” offering defenses of market protections for electric vehicle batteries, a critical industrial sector for China. They insisted that if foreign firms wanted in, the cost was investing in China with domestic joint venture partners. There has been no indication that China is willing to yield on opening markets to sectors it deems strategically important or that it believes could be a potential security risk.





Ambitious foreign corporations should look to the experiences of Chinese firms, which act as canaries in the coal mine. The United Front Work Department, a key party body mostly known for its work funding influence operations outside of China, also works domestically to manage private-sector behavior. The United Front’s commercial oversight has traditionally provided incentives, technical support, and networking opportunities for Chinese entrepreneurs. These umbrella organizations have been key to how Chinese industries network, receive resources, and speed through regulatory processes. Growing a supply chain or larger corporation without connections to United Front organizations is impossible.





So far, China’s carrot-and-stick industrial drive is earning the government significant buy-in from the private sector, well beyond simple compliance with its broadening security law. Ruan posits that “many of [China’s private sector companies]—including the industry leaders—are building their business model predominantly around the needs of the state.” In turn, it is likely that China’s trade and industrial policies, from data rules to technology transfers, will be built to benefit the domestic firms that it intends to boost.





The message sent to domestic firms has been clear: Cooperate, and your organization can prosper. Operate outside of the government’s standards, and you’ll find operations more difficult—as Wang Xiaochuan, the CEO of Sogou, a Chinese search engine, has described. There’s no escaping the new political agenda in the Chinese market.





When China sees business as politics, business leaders need to start approaching their meetings with the same mindset and with a realistic understanding of what’s possible. It’s never savvy to be rude to your hosts, but effusive comments of the kind offered by Musk will be read by China’s leadership as a sign that they can act as they like toward multinational firms.





Taking precautions against potential changes in the treatment of foreign firms is an essential operational reality for executives. The Chinese government may cut the ribbon on a Tesla factory one day and send in inspectors for strict crackdowns the next. Shorter leashes and less leeway for foreign firms are on the agenda, and America’s corporate soft power in China is set to come up against plans and institutions determined to erode it.















































