In an emerging economy like China where who you know matters so greatly to business relationships, the line between connections and corruption is simultaneously a broad and a fine one. The latest annual report by the anti-corruption group Transparency International illustrates that well, and also China’s rather ambiguous relationship with corruption.
China is a signatory to the UN Convention Against Corruption, but has not enacted the consequent required domestic legislation prohibiting foreign bribery. Where Chinese companies and individuals have been charged and convicted of bribery and corruption, it has been under other countries’ law. Even multinationals operating in China such as Siemens, UTStarcom, Lucent Technologies and Daimler, to name five over the past five years, have been involved in China-related bribery cases brought under U.S. law.
However, China does have provisions in a range of domestic legislation relating from accountancy to taxation designed to reduce corruption at home, and it has generally been tightening the reins on domestic corruption, resulting in some high-profile cases such as the one in Chongqing as well as regulations aimed at preventing senior officials in state-owned companies enriching themselves at their companies’ expense. And accepting bribes was one of the charges brought against the Rio 4, of course.
What is missing, Transparency International suggests, is a centralized legal framework and enforcement system that embraces corruption at home and abroad. For example, China does not require companies to show that they have effective anti-bribery compliance programs or to report on compensation for agents as a condition for export credit eligibility. Nor does China have mutual legal assistance treaties and other cooperation with OECD countries in anti-bribery matters. Beijing’s periodic anti-corruption drives shows it recognizes the corrosive effects of bribery and corruption in politics; dong the same for business is part of the necessary development of the economy.