China’s delinking effect

The Chinese Ministry of Civil Affairs has set in motion the delinking of local chambers of commerce, trade associations and professional bodies from their ministries, impacting the way these organisations function, as well as the meetings supply chain.

Seventy-thousand chambers of commerce, trade associations and professional bodies across China will be delinked from their reporting line ministries or administrations starting this year. Although the industry has braced for this since the announcement was made by the Chinese Ministry of Civil Affairs in 2015, many association managers have not gotten ready for this change and are unable to capture the opportunities or at least soften the impact to their organisations.

I support this policy as it will fundamentally change the way Chinese association managers approach their jobs in the future. In the past, Chinese associations acted like a regulator for the industry they represent. Association leaders were often retired government officials and funding was guaranteed from the government. As such, these associations had little to worry about in terms of financing or membership. In some cases, being a member of an association meant getting a license to operate and therefore membership is almost mandatory.

Not entirely out on their own
It is important to understand that this does not mean that Chinese industry associations are no longer related to the ministries. The delinking policy changes associations’ financing as it terminates funding or the transfer of public assets from government agencies.
Chinese associations must operate on commercial terms going forward, while still having the remit of regulating the industry. They will have to continue to raise professional standards, provide technical training, and ensure compliance and ethics.

Association leaders may continue to be retiring government officials who possess extensive personal network. As such, the associations should still have a fairly good competitive advantage when it comes to organising major conferences and training because they will retain access to high-level government officials as speakers and, because their events are usually closely linked to future government policies or directives, will continue to attract a sizeable audience.

Mandatory membership vs membership value
With the delinking policy, Chinese associations are no longer considered the regulatory agency and membership is no longer mandatory. They now need to create value for their members who will look for satisfactory service and value to justify the annual subscription. Members now have a choice to attend events and training based on their needs instead of being told to do so.

Many Chinese business chambers and associations are undergoing structural evolution. Many are seeking alternative revenue streams through events as well. A number of them will struggle but those that are taking advantage of the government’s grace period to improve their service will certainly have a better chance of survival. In fact, some have succeeded by setting up an internal team of professional event management staff while others have chosen to outsource this function to Professional Conference Organisers (PCOs).

However, not all 70,000 Chinese associations are on track, and there will be association managers who will be faced with the nightmare of diminishing funds. I expect this struggle to be a short-term effect of the delinking policy, as I foresee a higher level of professional event services resulting from collaboration between local and foreign business chambers, and between local industry associations and global professional bodies.

The impact on the supply chain
Exhibition and convention venues could expect a small drop in demand from Chinese associations. Without the ability to make event attendance compulsory, many associations may opt to scale-down the size of their events to ensure a break-even event budget.
For PCOs, however, the outlook is rosier as there could now be a vast pool of prospective customers. But first, PCOs will need to invest in education and communication with Chinese association chiefs to convince them that they need professional help in running successful events.

In the past, most Chinese associations were only willing to pay for tangible event services such as venue rental, F&B, AV equipment, transportation and hotel guestrooms for participants. Association leaders knew that the audience would have to attend even though they had only done a half decent job. There was little motivation on the part of the Chinese association to pay for a PCO’s event planning, content strategy and marketing expertise.
Moving forward, Chinese associations will realise that they lack the capacity to deliver professional events on their own and will open up to the idea of engaging PCOs. But a result of this is the serious shortage of qualified PCOs in China.

The tides are turning for PCOs in China, and those that are most prepared and committed to working with their clients in delivering quality events will reap the biggest rewards.

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