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Villains, Villas and Mistresses. Corruption in China

Corruption is often raised in discussions about doing business in China, and a couple of recent stories have brought the issue into focus…

These are important people, and they are being used to deliver an important message. But the arrests are only the latest action to be taken in what Reuters describes as “a huge anti-corruption drive over the last two-and-a-half years with nearly 50,000 officials prosecuted and punished up to the end of 2005”.

The fact that senior people are being arrested is a sign that even strong political connections may no longer provide protection, and that the anti-corruption drive still has gas in the tank. China Knowledge reports that China has also recently started on the second phase of its programme to implement the United Nations Convention Against Corruption, to which it signed up in 2003 (as also noted in our post “As Lobbyists Target The NPC, the Government Targets Corruption [1]”). The report notes: “The second phase will focus mainly on international cooperation and legislation”.

Corruption, of course, is not the sole domain of powerful, but poorly-paid, officials. Ernst & Young have recently reported (via the Standard) that:

What about the scale of corruption? It is hard to get any clear figures (for obvious reasons!). However, the following items give some indication:

The scale is obviously large (as is everything in China), but it would be wrong to think that corruption is everywhere – it is not, and I know many people doing business in China who have not had to deal with it. Then again, there is the thorny issue of definitions…where is the line between “corruption” and “guanxi”? When is a gift more than just a token? Is paying a good salary to the son of an official sufficiently different from paying the official directly? Is the “fee” that has been requested by a local government department really a bribe? Should that business trip really have included a visit to Disneyland? And what about all those “commissions” paid to intermediaries?

Ultimately these are questions of individual and corporate ethics, and of degree (and, in some cases, law). But they are questions that all businesses should ask themselves at the outset – and the answer should be effectively communicated throughout the organisation.

On one issue though, there is a clear answer. Corruption is bad for business in the long term, and it is bad for China. It can also be very, very bad for anyone who gets caught. As with managing other risk issues in China, the main message is – don’t leave your head (or your morals) on the plane.

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