By Geoffrey (Kok Heng) See
China's biggest telecommunications firm, China Mobile, issued its first corporate social responsibility report this year. CSR is a relatively new concept in China, and with few organized groups of stakeholders demanding accountability, this comes as a surprise. What explains this change?

Just last year, the Central Committee of the Communist Party of China published a resolution on the "Building of a Harmonious Socialist Society", building on President Hu's "Harmonious Society" vision announced in 2005. This is now the driving ideology behind China's policy, with the deadline for achievement set at 2020. The Plenum even enshrined this policy as the "intrinsic nature of socialism with Chinese characteristics", giving it historical backing as a social aim pursued since the founding of the Chinese Communist Party. This is bound to change China's business environment, and executives who wish to prosper in China will now need to consider their stance on corporate citizenship.

The "Harmonious Society" policy will eventually affect businesses in China in the guise of a variant of corporate citizenship concepts. Building a Harmonious Society comprises many aims: President Hu Jintao described the outcome broadly as achieving "democracy, the rule of law, equity, justice, sincerity, amity and vitality." This policy is understood to mean a renewed focus on extra-economic challenges such as in tackling rural poverty, income inequality, and environmental degradation. This national policy elevates these concerns to the same level of importance as economic growth, reflecting the priority the CPC attach to the threat posed to China's stability by these extra-economic concerns. The goals sought after by President Hu's call for a "Harmonious Society" echoes the objective of corporate citizenship. A stronger focus on the impact of on extra-economic concerns can be seen as a parallel objective in corporate citizenship where companies are exhorted to consider the broader impact of their economic activities on stakeholders.

The role of the business community in contributing to a "Harmonious Society" has yet to be clearly defined, limiting the impact of the changes so far. Building a "Harmonious Society" is still seen as the primary responsibility of the government, and an official high-level promulgation linking corporations and "Harmonious Society" has yet to be made. The specific actions that the business community should take to contribute to this vision have yet to be agreed upon and made public by the government. Chinese executives have mentioned that the lack of measurement tools tracking their contributions, or clearer guidelines about their roles, result in limited actions on their part. In the confusion, companies have taken to labelling any corporate action as contributing to a "Harmonious Society." Charity is still confused as comprising the entirety of CSR.

This will change as "Harmonious Society" is further debated and the role of business in contributing to it is clarified. Business executives have already started recognizing the potential impact of this policy change. Delegates to the 27th China Daily CEO Roundtable luncheon recognized building a "Harmonious Society" as the driving force behind the growing interest in CSR in China. China Mobile not only published a major CSR report, its subsidiary, Jiangxi Mobile, published the first CSR report by a Chinese firm. China Mobile's CEO has close ties with senior government official, and the company's direction can be a leading indicator of politically-induced changes to China's business environment. Major government-led engineering projects, such as the Three Gorges Dam and Qinghai-Tibet railway, require social and environmental impact analysis before approval, and could become forerunners of a corporate standard.

Corporate citizenship is a useful concept helping business leaders understand their future extra-economic obligations in China's evolving business environment. By understanding corporate citizenship and taking action based on its principles, business leaders can stay ahead of the changes required in building a "Harmonious Society" and even shape these changes to their competitive advantage. A corporate citizenship platform provides a headstart in understanding the future Chinese business environment, and allows firms to shape future guidelines. A domestic insurance company has started collaborating with the government to provide rural insurance to at-risk farmers. China Construction Bank and China Mobile have begun examining their CSR platform. Companies take notice! 2020 is not that far away.

About the author:
Geoffrey (Kok Heng) See is a Wharton Research Scholar studying in the Huntsman Program for International Studies & Business at the Wharton School. He has strong interests in finance and the role of business in development. He previously co-founded two non-profits dealing with education, healthcare, and youth employment, presenting ideas on private-public partnerships gained from his non-profit experiences at the World Bank Annual Bank Conference on Development Economics in Japan and the 11th World Business Dialogue in Germany as an award winner. One of these non-profits, ArtIntern, was also cited as a "Best Practice" in a World Bank Study on Youth Employment. He is currently in Beijing working with the World Economic Forum on a research project. This article is based on a larger study by the author funded by the Zicklin Center for Business Ethics Research, Huntsman Program, and the Penn Program for Democracy, Constituitionalism, and Citizenship.

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One Response to “Will "Harmonious Society" Herald A New Chinese Business Environment?”

1. By Brian – January 23rd, 2008 at 7:45 pm

   I am an MBA student writing a thesis that relates to the topic of Mr. See's article. Would he or Mr. Valentino be able to contact me to discuss my research? Thanks - keep up the excellent work with the site!

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