Corruption in China is endemic within both the public and the private sector, despite the fact that both passive and active bribery are considered a serious crime, which can lead to life imprisonment and, in the most serious cases, the death penalty. According to a 2008 article from Far Eastern Economic Review, hidden costs and unofficial payments continue to inhibit Chinese business. Corrupt officials appropriate public funds for their own benefit and many companies engage in corruption and pay bribes in order to maintain their place in the market. Business executives surveyed by the World Economic Forum Global Competitiveness Report 2011-2012 report that public funds are sometimes diverted to companies, individuals or groups due to corruption and that the lack of ethical behaviour of companies in their interactions with public officials, politicians and other companies, represents a competitive business disadvantage for China. Kickbacks in the pharmaceutical industry alone, according to Transparency International's Global Corruption Report 2009, amount to USD 110 million every year. The practise of making facilitation payments to get things done is also common as, according to Trace International 2008, more than 54% of the demands for bribes in business transactions reported by individuals were related to such payments. The US Department of State 2011 reports that the sectors most affected by corruption are banking, financial services and the construction sector.

Public sector corruption is found in economic sectors where the state is deeply entrenched. According to a China Information journal article, Management Corruption in China's Industrial Restructuring 2009, and to Carnegie Endowment 2007, the ongoing reorganisation of government at various levels has paved the way toward new opportunities for corruption, for example, in connection with the reorganisation and appraisal of state assets. Other new areas of public power have also become sources for corruption. These include decisions on and allocation of public investment funds, assignment and pricing of land resources, regulations of levies and taxes, selection and financing of infrastructure projects, business regulation, labour, trade and commercial disputes, and provision of social welfare in an expanding market economy. According to a February 2010 article by China Daily, the National Audit Office announced in January 2010, that nearly USD 40 million of reconstruction funds have been misused. China's anti-corruption campaign targets bribe receivers, but also bribe payers, in particular private sector corruption, i.e. companies bribing public officials as well as other companies. Business-to-business corruption is a common occurrence in China, but, according to China's Unfair Competition Law 1993, acts that give companies an undue advantage are illegal. According to Transparency International Global Corruption Report 2009, China completed investigating more than 31,000 cases of business bribery in 2007, representing more than USD 7 billion in bribes. Foreign companies should be aware that when conducting business in China, the state and CCP are frequently key stakeholders, and companies will invariably be in contact with the authorities, either central or local, at every phase of the business process. Companies are strongly recommended to develop, implement and strengthen integrity systems when planning to do and when already doing business in China.

Third parties, such as agents and distributors, are commonly used in China as a way of lowering transaction costs and thus generating higher profits. However, companies should consider that corruption prevention controls are difficult to enforce when dealing with Chinese agents and distributors. Some companies have been known to use these kinds of intermediaries as a useful channel for outsourcing corruption, so as to avoid direct involvement with corrupt activities. These agent companies are often one-man companies that are extremely difficult to control and that need to be checked thoroughly, as companies can be held legally responsible for bribes paid by their agents. Companies should also pay close attention to people's credentials, as there is a widespread use of false degrees and titles. Thus, it is highly recommended that a thorough screening of agents and potential partners is conducted. For further information, see this portal's due diligence tools.

China's anti-corruption activities were in the past largely targeted towards all-Chinese settings. Today, the campaign is more comprehensive and an increasing number of foreign and multinational companies have come under scrutiny and have been accused of corrupt practices by the authorities. This trend signals an end to the common belief that corrupt activities are found mostly in the interaction between Chinese companies and government offices and do not involve foreign investors. This is also supported by an August 2009 article by People's Daily, which reports that of the more than 500,000 corruption cases China has investigated over the past 10 years, 64% have involved commercial bribery in relation to international and foreign companies. Chinese companies' ethical track record when operating abroad is questionable, which is evidenced in the Transparency International Bribe Payers Index 2011, in which Chinese companies are perceived by the surveyed business executives to be the second most likely to engage in bribery abroad, after Russia.

With China's entrance into the WTO, many laws and regulations are being harmonised to meet WTO requirements. By the end of 2007, China had applied to join the Agreement on Government Procurement (GPA), which should boost transparency within government procurement and tendering. However, according to the US-China Business Council PRC Government Procurement Policy 2009, China's proposal was considered very limited and insufficient by the current signatories, and negotiations continue. Although much progress can be witnessed, according to the US Department of State 2011, China is still trying to protect its ‘vital industries and key fields’, which is defined as ‘industries concerning national security, major infrastructure and important mineral resources, industries that provide essential public goods and services, and key enterprises in pillar industries and high-tech industries’. According to a July 2011 article by Reuters, China may cut down investment spending, which was originally planned to be up to USD 1.5 trillion over the next 5 years, in the seven new strategic industries suffering from problems such as corruption and overcapacity.

China is constantly enacting new laws and regulations and revising existing ones and, according to the World Economic Forum Global Competitiveness Report 2011-2012, the surveyed business executives give a score of 3.9 on a 7-point scale to the burden of government regulation, (1 being 'extremely burdensome' and 7 'not burdensome'), representing a competitive advantage for doing business in China (see also this country profile's special page on Regulatory Environment in Hong Kong). However, the 2011 Business Confidence Survey conducted by the European Union Chamber of Commerce in China, reveals that 43% of the surveyed European businesses perceived Chinese government policies to have become less fair to them over the past two years, and 46% of respondents expect this trend to continue for the next two years. The same survey also shows that the most significant regulatory obstacle perceived by the business respondents is discretionary enforcement of broadly drafted laws and regulations. According to the Heritage Foundation 2011, foreign investors continue to face non-transparent, complex laws and regulations, which are not always enforced uniformly and without discrimination. Figures from the World Bank & IFC Doing Business 2012 show that to start a business in China, companies need to spend an average of 38 days and go through 14 administrative procedures at a cost of 3.5% of the GNI per capita, which is more complicated and time-consuming than the OECD average. According to the US Department of State 2011, the government owns all land in the country; however, individuals and companies can own and transfer long-term leases, as well as structures and personal property. Under the China’s Property Law, residential property rights will be renewed automatically, while commercial and industrial grants shall be renewed if it is not conflicting with the public interest. To register a property is relatively simple, since it only takes 4 procedures and takes an average of 29 days at a cost of 3.6% of the property value, according to the World Bank & IFC Doing Business 2012.

Commercial disputes are heard in the economic courts that, like other Chinese courts, are not considered independent of the government. Corruption is also found within the judicial system and may influence court decisions. There are examples of local officials ignoring court rulings, making enforcement of court decisions an area requiring improvement. Although there has been an increase in the use of litigation to settle disputes, according to the US Department of State 2011, Chinese authorities usually encourage companies to resolve disputes through informal conciliation. Otherwise, arbitration is encouraged when mediation is called for, typically through the China International Economic and Trade Arbitration Commission (CIETAC). Many foreign companies hesitate to settle through arbitration because it is a very time-consuming and unreliable process in China. The US Department of State 2011 further reports that although a few foreign companies have received a favourable ruling from CIETAC, many still question its reliability. Companies should note that foreign arbitration is a possibility and provisions for it can be included in their contracts; China is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and has ratified the New York Convention 1958. However, companies should not expect foreign court decisions to be enforced in China, as this rarely occurs. Companies can also access the Lexadin World Law Guide for a collection of legislation in China.

Situated on the southeast coast of China, Hong Kong was under British rule for over 150 years before the sovereignty over Hong Kong was transferred from the United Kingdom to the People’s Republic of China on 1 July 1997. According to the Heritage Foundation 2011, Hong Kong remains one of the most competitive financial and business centres in the world, and the second largest FDI destination in Asia. Hong Kong is a duty-free port except for four types of commodities, which are liquor, tobacco, hydrocarbon oil and methyl alcohol. The services sector in Hong Kong has grown rapidly over the past two decades and in 2009, the sector contributed to over 90% of Hong Kong’s GDP. The four traditional pillars of the Hong Kong economy, according to the UK Trade and Investment Doing Business in Hong Kong 2011, are trade & logistics, financial services, tourism and professional services. Overall, bureaucratic procedures and red tape are minor and are equally transparent to local and foreign investors, as reported in the US Department of State 2010. According to the World Economic Forum Global Competitiveness Report 2011-2012, the surveyed business executives give a score of 5 on a 7-point scale to the burden of government regulations, (1 being ‘extremely burdensome’ and 7 ‘not burdensome’), representing a competitive advantage for doing business in Hong Kong. Business executives from the same survey also rank the property rights in Hong Kong as strong, and the legal framework in settling disputes and in challenging the legality of government actions as highly efficient.

Corruption does not seem to be an impediment to foreign investors, and according to the US Department of State 2010, Hong Kong has an excellent track record in fighting corruption. Business executives in the World Economic Forum Global Competitiveness Report 2011-2012 rank corruption as the second least problematic factor for conducting a business in Hong Kong, while inflation, inadequately educated workforce and inefficient government bureaucracy are ranked as the top three most problematic factors. Furthermore, Transparency International’s Bribe Payers Index 2011 ranks 28 economies by the likelihood that their companies will pay bribes abroad; Hong Kong ranks 15th out of 28 economies. According to the World Bank & IFC Doing Business 2012, starting a business in Hong Kong requires only 3 days and 3 procedures at a cost of 1.9% of GNI per capita, which is less complicated, less time-consuming and less costly compared to the East Asia & Pacific region’s and the OECD’s averages.

The Basic Law of Hong Kong was adopted in 1990 and came into effect on 1 July 1997. The most prominent feature of the Law is the underlying principle of 'one country, two systems', meaning that Hong Kong has its own legal and judicial systems, which are based on the common law. Separate trade and customs territory, amongst others, remain unchanged until 2047. According to the US Department of State 2010, the legal system in Hong Kong is firmly based on the rule of law and the independence of the judiciary. The local court system provides for effective enforcement of contracts, dispute settlement and protection of rights. The Government of Hong Kong accepts international arbitration of investment disputes between itself and investors, and the government also applies provisions of the International Center for Settlement of Investment Dispute (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Furthermore, Hong Kong has also adopted the United Nations Commission on International Trade Law (UNCITRAL) model law for international commercial arbitration. Access the Lexadin World Law Guide for a collection of laws in Hong Kong.

Individual Corruption

There are still incidents where citizens who had contact with the judiciary report to having paid a bribe, as confirmed in Transparency International’s Global Corruption Barometer 2010. According to the same report, the surveyed households perceive the judiciary to be corrupt, while more than one-tenth perceive it to be ‘extremely corrupt’.

Business Corruption

According to the US Department of State 2010, companies have experienced irregularities in dispute settlement in China, both in the form of corruption and in the form of government interference. Companies should be aware that well-connected local businesspeople are often favoured by the courts over foreign investors, and can use their connections to evade prosecution for illegal acts committed against their former foreign partners. Furthermore, the US Department of State 2011 also reports that corruption may influence local court decisions and local officials may disregard the judgments of domestic courts. 

Political Corruption

There are numerous corruption cases which implicate the judiciary. For example, the former head of Chongqing’s justice department, Wen Qiang, was accused of taking bribes of more than CNY 12 million, in return for shielding criminals. In July 2010, Wen was executed after being found guilty of several charges, including bribery. Several other high ranking corrupt judges were arrested in Chongqing, as part of the city campaign in cleaning up organised crime, according to two 2010 news articles by The Wall Street Journal and Financial Times.

The prosecution of the former Vice President of China's Supreme People's Court (SPC, in Chinese) is said to be the highest ranking judge to be convicted for corruption since 1949, according to a 2010 news article by BBC News. Huang Songyu was convicted of accepting bribes amounting to approximately USD 570,000 during his tenure as the SPC’s vice president. He was also convicted of embezzling CNY 1.2 million in government funds during his tenure as president of a lower-level court in Guangdong. Huang received a life sentence as a consequence of his crimes.

Frequency

The World Bank & IFC: Doing Business 2012:
- To enforce a commercial contract by filing a lawsuit, companies need to go through 34 procedures, while the process takes 406 days at a cost of 11% of the claim's value.

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the Chinese judiciary's level of independence from influences of members of government, citizens, or companies a score of 3.9 on a 7-point scale (1 'heavily influenced' and 7 'entirely independent').

- Business executives give the efficiency of the legal framework for private companies to settle disputes and to challenge the legality of government actions and/or regulations a score of 4.3 and 4.0 respectively on a 7-point scale (1 being 'extremely inefficient' and 7 'highly efficient').

Transparency International: Global Corruption Barometer 2010:
- 13.5% of households surveyed consider the judiciary to be 'extremely corrupt'.

- 13.9% of households who had contact with the judiciary in 2009 report to have paid a bribe.

- Citizens give the judiciary a score of 3.0 on a 5-point scale (1 'not at all corrupt' and 5 'extremely corrupt').

Individual Corruption

It is commonly known that Chinese traffic police extort fines and impose illegal registration fees. According to BBC News, in 2006, a newspaper editor was reportedly attacked by about 50 traffic police officers after his paper reported that illegal fees had been charged by the police for the registration of electric bicycles. The editor later died from his injuries amidst continuing reports of reporters being physically harmed and coerced. Senior traffic police officer Li Xiaoguo was fired for his role in the affair.

The general public seems to have a low regard of the integrity of the police. This is illustrated in Transparency International’s Global Corruption Barometer 2010, in which the surveyed households perceive the police to be one of the most corrupt institutions in the country, while a substantial number of households perceive the police to be ‘extremely corrupt’.

Business Corruption

Extortion and illegal fees demanded by police are frequently mentioned in the media, an example is a February 2009 news article by China Daily. The article describes a former senior police officer, who was also a former director of the Chongqing Municipal Judicial Bureau, accused of receiving bribes totalling more than USD 2.4 million between 1996 and 2009, in return for protecting gangs, favouritism and allowing companies access to police investigations.

According to Global Integrity 2009, although formal processes exist for citizens and companies to complain about police activities, none of them can be considered truly independent mechanisms.

Political Corruption

According to Global Integrity 2009, despite law enforcement agencies such as the police receiving a relatively sufficient budget each year, they enrich themselves through other channels such as extortion and corruption. Moreover, it is difficult to assess whether some law enforcement agencies are in fact underfunded, or whether funds are just allocated to provide extra benefits for employees instead of improving law enforcement.

According to a 2010 news article by The Associated Press, an assistant Minister of Public Security, Zheng Shaodong, was given a two year suspended death sentence, for accepting more than USD 1 million in bribes and abuse of power between 2001 and 2007.

Another corruption case that led to a capital punishment, according to 2010 news articles by China Daily and AFP, was when deputy police chief, Wen Qiang, was found guilty of accepting more than USD 2 million in bribes and participation in other corrupt activities. As a consequence, Wen Qiang was executed in July 2010.

Frequency

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the reliability of Chinese police services to enforce law and order a score of 4.6 on a 7-point scale (1 being 'cannot be relied upon at all' and 7 'can always be relied upon').

Transparency International: Global Corruption Barometer 2010:
- 23% of households surveyed consider the police to be 'extremely corrupt'.

- 9.4% of households who had contact with the police in 2009 report to have paid a bribe.

- Citizens give the police a score of 3.4 on a 5-point scale (1 'not at all corrupt' and 5 'extremely corrupt')

Individual Corruption

According to Transparency International’s Global Corruption Barometer 2010, a substantial number of the responding households who had contact with the medical services in 2009 report to have paid a bribe. On the other hand, only a small percentage of the surveyed households report to have paid a bribe in order to obtain utility services such as telephone, electricity and water in the same year.

A May 2009 news article by The Independent reports that the Sichuan earthquake in spring 2008, which killed more than 80,000 people, laid bare the devastating results that corruption has on local citizens, especially when disaster hits. Many homes, schools, and hospitals were levelled by the earthquake due to shoddy construction work with substandard material that was a direct consequence of corruption and ignoring building codes. Based on the same source, many of the victims' families who are seeking justice are reportedly facing harassment.

Business Corruption

There are numerous examples of corruption in construction projects that lead to low quality and unsafe construction. In July 2011 alone, four bridges crumpled in China, and explanations for such accidents, according to an August 2011 article by The Wall Street Journal, tend to focus on the non-transparent way of distributing the contracts via virtually non-existent tender processes, where local governments grant projects to companies that are owned by high level local government employees, and the work is then further sub-contracted to a long chain of smaller companies, with bribes paid at each level and successive layers of cash creamed from each level. In the end, the actual budget left, only allows for the cheapest labour and often inferior materials, according to the same article.

Another example was a fire accident in Shanghai in November 2010, which took the lives of 58 people. According to two 2010 news articles by BBC News and Shanghai Daily, the accident was caused by the ‘alliance of interests’ between high ranking officials in the Jing’an District construction department and its affiliate companies. The latter reportedly paid bribes to the construction department in return for it turning a blind eye on safety regulations. According to an August article by BBC News, four former officials, including the head of the construction department, have been given prison sentences ranging from 5 to 16 years.

Political Corruption

According to the US Department of State 2011, the construction sector is considered a sector prone to corruption, regularly causing large amounts of funds to be lost. Similarly, an October 2011 article by Xinhua News also reports that corruption in infrastructure projects remains rife despite persistent anti-graft campaigns in recent years and severe penalties. According to the Central Commission for Discipline Inspection (CCDI), as cited in the news article, more than 6,800 officials have been prosecuted for corruption in infrastructure projects within the first eight months of 2011. Often bribery occurs in many areas related to infrastructure projects, such as land-use approval, public bidding and the purchase of construction related goods. The article further states that apart from accepting cash, officials also receive bribes in the form of gift cards, dividends, overseas tour packages, school tuition for their children, houses and luxury goods.

Zhang Chunjiang and Li Hua, both former executives of China Mobile, the world’s largest phone company by subscribers, were each sentenced to death with a two year reprieve, after being convicted of accepting more than USD 1.5 million and USD 2.5 million in bribes, respectively. According to an August 2011 article by The New York Times, at least six other executives from the same company are currently being investigated in corruption scandals.

Prior to the fatal train collision in July 2011, the former deputy chief engineer of China’s railways, Zhang Shuguang, and the railways minister, Liu Zhijun, had both been arrested in February 2011. According to several 2011 newspaper articles, such as The Independent and The Telegraph, Zhang was accused of stealing USD 2.8 billion and depositing the money in foreign accounts, while Liu reportedly receiving kickbacks linked to contracts for high-speed rail expansion. Three senior railway officials were dismissed following the collision. China has also suspended all high-speed rail projects until a safety review is completed. 

The State Food and Drug Administration (SFDA), which administers and approves medicine and health care supplies in China, was under investigation in connection with bribes by pharmaceutical companies that tried to avoid having their products properly tested. Incidents occurred in which people died due to fraudulently approved drugs. According to Global Integrity 2009, the former head of the SFDA was sentenced to death and was executed in July 2007 for accepting more than USD 860,000 in bribes in return for approving licenses for 170,000 medicines.

Frequency

The World Bank & IFC: Doing Business 2012:
- Dealing with a construction permit requires a company to go through 33 procedures and spend 311 days to obtain the required licences and permits, incurring an average cost of 444% of per capita income.

- Starting a company requires the entrepreneur to go through 14 procedures, taking 38 days at a cost of 3.5% of income per capita.

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give government administrative requirements (permits, regulations, reporting) in China a score of 3.9 on a 7-point scale (1 being 'extremely burdensome' and 7 'not burdensome at all'), representing a competitive business advantage for the country.

Transparency International: Global Corruption Barometer 2010:
- Nearly 10% of households who had contact with registry and permit services in 2009 report to have paid a bribe.

- 5.6% of households who had contact with the utilities services in 2009 report to having paid a bribe.

- 44.8% of households who had contact with medical services in 2009 report to have paid a bribe.

Carnegie Endowment: Corruption Threatens China's Future 2007:
- A 2006 review of 3,067 corruption cases revealed that approximately half were related to infrastructure projects or land transactions.

Individual Corruption

According to Transparency International's Global Corruption Report 2008, widespread corruption in connection with the resettlement funds of Three Gorges Dam Project has led to resettlement compensation for the 1.4 million displaced people being significantly reduced. Residents of Hubei Province staged a protest because they only received CNY 5,000 out of the CNY 38,000 they were each promised in compensation. In 2005, the authorities announced that 349 people, including 166 officials, had been convicted of embezzlement of the resettlement funds, and the authorities reportedly managed to recover CNY 43 million, out of the total CNY 59 million that had been embezzled. Furthermore, the Bertelsmann Foundation 2010 also reports that a lack of secure property rights for Chinese farmers have resulted in an estimate of up to 40 million farmers having had their land seized by corrupt officials.

According to Transparency International's Global Corruption Barometer 2010, a little more than one-tenth of the surveyed households report to have paid a bribe to land services in 2009.

Business Corruption

Land administration departments in China are involved in several different types of corruption. According to the Carnegie Endowment 2007, local officials, through illegal means, obtain farmland at low prices in order to resell the land user rights to developers, in exchange for bribes. Similarly, the US Department of State 2010 also notes that areas where many cases of corruption took place, such as land usage rights and real estate, involved heavy state regulation and therefore these areas were more susceptible to fraud, bribery and kickbacks. However, despite of these, business executives from the World Economic Forum Global Competitiveness Report 2011-2012 rank the protection of property rights in China as relatively strong.

Political Corruption

The Chinese state owns all land in the country, and it can be difficult and lucrative to obtain building permits. According to a 2010 article by Associated Press, real estate is plagued by corruption; with bribes given to government officials in order to have real estate projects approved. In recent years, there have been numerous cases of high ranking officials who were involved in land corruption and who received severe punishments. For example, Xinhua Net in 2008 reported that the former Shanghai CCP Secretary Chen Liangyu used his position to ensure that his brother could engage in illegal land dealings that resulted in the loss of CNY 344 million of state funds. As a consequence, Chen received an 18-year prison sentence.

There are countless cases of bribery in the process of securing land use rights over particular plots of land. The great number of corruption cases connected to land use rights inspired the Chinese leadership to pass the Property Rights Law in March 2007. According to Freedom House 2011, despite a growing legislation body defining property rights in China, protection remains weak in practice.

Frequency

The World Bank & IFC: Doing Business 2012:
- It takes 4 procedures, 29 days and a cost of 3.6% of the property value on average to register property in China.

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the protection of property rights in China, including financial assets, a score of 5 on a 7-point scale (1 being 'very weak' and 7 'very strong').

Transparency International: Global Corruption Barometer 2010:
- 10.3% of the households surveyed reported to have paid a bribe to land services in 2009.

Carnegie Endowment: Corruption Threatens China's Future 2007:
- A 2006 survey of 3,067 corruption cases revealed that approximately half were related to land transactions or infrastructure projects.

- According to the Ministry of Land Resources, more than one million cases of illegal acquisition of land were discovered between 1999 and 2005.

Individual Corruption

According to Transparency International’s Global Corruption Barometer 2010, less than one out of ten surveyed households who had contact with the tax revenue services report to have paid a bribe in the previous year.

Business Corruption

According to Global Integrity 2009, tax laws are not always enforced uniformly or without discrimination. This is especially true in rural areas, where some well-connected small businessmen are able to evade taxes.

Wang Fusheng, the founder of one of the largest private investment groups in China, was arrested for corruption, bribery and evading approximately USD 30 million in taxes. According to a 2010 news article by Global Times, the prosecutors accused Wang of paying CNY 500,000 in bribes to two tax officials in return for the approval of the company’s falsified accounts.  The same source also reports that Wang had in 2004, paid CNY 1 million in bribes to the former deputy director of Beijing Local Taxation Bureau (in Chinese) to avoid the overdue fines.

Frequency

The World Bank & IFC: Doing Business 2012:
- A medium-sized company makes an average of 7 payments and spends 398 hours managing the administrative burden of paying taxes at a total tax rate of 63.5% of profits.

Transparency International: Global Corruption Barometer 2010:
- 7.8% of households who had contact with tax revenue services throughout 2009 report to have paid a bribe.

Individual Corruption

According to Transparency International’s Global Corruption Barometer 2010, a significant number of the surveyed households who had contact with the customs administration throughout 2009 report to have paid a bribe.

Business Corruption

Global Integrity 2009 reports that customs and excise laws are not always enforced uniformly or without discrimination. There are reports of companies paying bribes to custom officers in order to evade customs fees or pay less. Moreover, companies should be aware that the border administration, in relation to irregular payments in exports and imports, is not always transparent, as illustrated in the World Economic Forum Global Enabling Trade Report 2010.

Political Corruption

According to a 2009 news article by Sohu, the former head of the Xishuangbana Customs department was sentenced to 16 years in prison because of accepting more than CNY 700,000 in bribes from different companies, in return for allowing them to smuggle more than 1,000 tons of natural rubber into the country, causing a huge loss to the government. Read about the case details here (in Chinese).

Frequency

The World Bank & IFC: Doing Business 2012:
- For a standardised export shipment, 8 documents are needed, and the process takes an average of 21 days at an average cost of USD 500 per container.

- For a standardised import shipment, 5 documents are needed, and the process takes an average of 24 days at an average cost of USD 545 per container.

World Economic Forum: Global Competitiveness Report 2011-2012: 
- Business executives give the efficiency of customs procedures (formalities regulating the entry and exit of merchandise) in China a score of 4.4 on a 7-point scale (1 being 'extremely inefficient' and 7 'extremely efficient').

World Economic Forum: The Global Enabling Trade Report 2010:
- Business executives give the transparency of border administration (pervasiveness of undocumented extra payments or bribes connected with imports and exports) in China a score of 4.3 on a 7-point scale (1 'non-transparent' and 7 'transparent'). 

Transparency International: Global Corruption Barometer 2010:
- 28.2% of households who had contact with the customs administration throughout 2009 report to have paid a bribe.

Business Corruption

According to a 2008 news article by Financial Week, the business culture in China is embedded with gift-giving; there are many cases of employees excessively entertaining Chinese government officials, such as 'wining and dining' in order to win contracts, an activity that can be construed as corruption.

According to a 2010 news article by China Worker Info, Chinese state-owned companies often subcontract the work, which has led to substandard material and, consequently, unsafe buildings. This kind of subcontracting is illegal, but common, and all the while each contractor takes a cut of the deal.

Companies are recommended to use a specialised public procurement due diligence tool in order to help mitigate the corruption risks associated with public procurement in China.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

There are numerous cases of high-level officials enriching themselves through access to government resources and taking bribes in order to help approve project and contracts. One example is of Liu Zhihua, a former Vice Mayor of Beijing, who was supervising Olympic Construction projects and in charge of urban development in Beijing. He was found guilty of accepting bribes totalling USD 1 million, and was given a death sentence with a two-year reprieve, according to an October 2008 article by China Daily.

In November 2009, Kuang Xin, the director of civil aviation affairs at the National Development and Reform Commission, who holds an influential position over airport construction projects, had been detained for allegedly taking bribes to approve aircraft procurement deals, as reported by a 2010 news article by The Star.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.7 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 3.8 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

Business Corruption

There are numerous examples of corrupt behaviour within the mining industry. According to a 2009 news article by The New York Times, the local steel industry is plagued by corruption. One of the common illegal practices is that big government-run steel makers purchase extra iron ore with their import licenses, and pocket profit by re-selling excess ore to small steel makers who lack import licenses. There are several cases of corrupt local officials colluding with owners to grant hazardous mining rights and neglecting safety measures for workers. These practices have resulted in the deaths of several thousand miners.

According to a 2008 news article by BBC News, the rainforests of southwest China (e.g. Xishuangbanna) are threatened because rubber companies are clearing the rainforest. Farmers accuse local officials of corruption and collusion with rubber companies in destroying protected forests.

Political Corruption

According to a 2009 news article by The National, Chen Tonghai, former head of Sinopec, the state-owned oil refining company and one of China's ten biggest companies, was sentenced to death in July 2009, for accepting more than CNY 185 million in bribes. However, his death sentence was changed to a life sentence. The fact that one of the most powerful and well-connected leaders of a state-owned company was convicted sends a strong signal to other leaders of large state-owned companies about how seriously the Chinese state views corruption.

According to sources such as Telegraph and TIME news articles between 2009 and 2010, the British-Australian mining company, Rio Tinto was found to have colluded with Chinese steel mills during the negotiation over iron-ore prices. It is reported that bribes were allegedly paid by Rio Tinto representatives to Chinese steel makers over the iron-ore supply contract talks. Four Rio Tinto employees, including its China-based executive, Stern Hu, were charged with bribery and stealing commercial secrets. All of them were given prison sentences up to 14 years. According to the Telegraph, two other Chinese executives were also sentenced to prison for leaking secrets to the aforementioned employees. Chinese state media claimed that the espionage had cost the country a total of CNY 700 billion over the past 6 years due to inflated iron-ore prices, as reported by Forbes in October 2009.

A more recent corruption scandal was related to Hao Pengjun, the head of the Pu county coal office. According to an August 2011 article by Reuters, Hao was sentenced to 20 years in prison and was given a huge fine, after he was convicted for illegally running a mine and using the earnings to purchase properties.

Individual Corruption

According to Carnegie Endowment 2007, the banking sector in China is rife with corruption and fraud. It is not uncommon to pay bribes to obtain a loan approval in China. It is estimated that on average borrowers pay bribes equivalent to 9% of the loan amount.

Business Corruption

Bank fraud cases are not new in China. According to a 2010 news article by The Wall Street Journal, the head of a finance company in Beijing, was alleged to have bribed officials from the Beijing Rural Commercial Bank in order to help him obtain huge loans under fake names and businesses between 2007 and 2009. According to the same source, a total of 18 people, including 8 high-ranking bank officials, were arrested in relation to the scandal.

Political Corruption

According to the National Audit Office's National Audit Report No. 8 of 2008 on the banking sector, banks lend out big quantities of falsified private mortgage loans. This manifests itself in bank officials accepting bribes in order to give loans that are larger and at a lower interest rate than regulations permit. The industry also suffers from a lack of due diligence in verifying commercial paper transactions and inadequate oversight of financial accounts. The same report also revealed and referred to the judiciary illegalities and crimes amounting to CNY 5.672 billion in state losses. For instance, from 2004 to 2006, Zheng Fenglai, Vice Governor of a branch of the Agricultural Bank of China (ABC), and Liu Fude, chief of another ABC sub-branch, through means of loans and false discounting, misappropriated a total CNY 3.1 billion of bank funds and lent the funds to some private companies and individuals for their use. In July 2006, without authorisation, Zheng and Liu granted the same companies and individuals CNY 218 million in loans to be used for paying back the misappropriated funds.

According to a 2009 news article by AFP, corruption and embezzlement in Chinese banks and other financial institutions led to an estimated loss of CNY 6 billion in 2008. Three of China's largest state-owned banks were involved in nearly half of the cases with the embezzled funds. However, most of the funds have been retrieved, according to the chief auditor of the National Audit Office.

Another corruption scandal involved the former vice president of China Development Bank, Wang Yi. According to an April 2010 news article by China Daily, Wang was accused of receiving nearly CNY 12 million in bribes from November 1999 to February 2008, in return for offering loans to companies illegally. As a result of the bribery, Wang Yi was sentenced to death with a two year reprieve.

Frequency

World Economic Forum: Global Competitiveness Report 2011-2012:
- Business executives in China give the banks the score 5.3 on a 7-point scale (1 being 'insolvent and require government bailout' and 7 'generally healthy with sound balance sheets').

• Legislation: Criminal Law of the People's Republic of China criminalises both active and passive corruption in the public sector, as well as extortion and money laundering. Furthermore it is illegal for a civil servant to in anyway abuse his/her position or public property and money for private gains. In February 2011, China’s National People’s Congress adopted the Eighth Amendment to the Criminal Law, which includes a significant change to Article 164, criminalising the bribery of foreign government officials and officials of international organisations. According to a May 2011 news article by The Bribery Act, the amendment to the Criminal Law took effect on 1 May 2011. Moreover, the principle of extraterritoriality is applied in Chinese criminal law, meaning that a Chinese citizen that commits a crime punishable by Chinese law outside Chinese territory, such as bribing a foreign official overseas, is guilty of an offence (the Criminal Law, Chapter 1). Furthermore, China has signed and ratified the United Nations Convention against Corruption (UNCA), with a reservation about not being bound by the convention's second paragraph of Article 66. Chinese authorities have also been very firm in opposing any interference in China's domestic affairs. However, China seems committed to the UNCAC and, as symbol of the Chinese leadership's commitment to combating corruption, the country hosts the International Association of Anti-Corruption Authorities (IAACA) headquarters in Beijing. The IAACA's main purpose is to support the implementation of the UNCAC. China, having made the transition to a market economy, found a need to regulate the private sector and introduced the Unfair Competition Law 1993 to this avail. This law covers private sector corruption and clearly stipulates that bribery by private companies and managers to obtain undue advantages is illegal. The Regulations on Combating Money Laundering by Financial Institutions 2003 are intended to promote financial accountability. In 2007, China adopted the Regulations on Open Government Information (in Chinese), which is equivalent to a freedom of information act. However, the regulations also contain articles that give the government the right to decide which information is fit to be disseminated. In July 2010, new anti-corruption rules related to asset disclosure also came into force. The new rules require government officials to disclose personal financial details as well as business activities of their family members. Some critics worry that the current penal code does not provide punishment if officials do not disclose their assets, and the new rules do not require officials to disclose information to the public, therefore the new rules hold significant loopholes, according to VOA News’ article in 2010. In order to prevent money laundering, illegal cash withdrawals, tax evasion and bribery, the Chinese government has started to regulate gift cards. Anyone who purchases a gift card that holds a value of more than CNY 1,000 must have his/her name and the recipient's name registered, while the value of the gift card should not exceed CNY 5,000. The new regulation also stresses that all officials are strictly prohibited from accepting any kind of gift cards during their official activities. According to a May 2011 article by Xinhua News, a nationwide inspection on all gift cards in circulation will be launched by the end of 2011. Access the Lexadin World Law Guide for a collection of legislation in China.

• Government Strategies: Since China ratified the United Nations Convention against Corruption in 2006, the country has strengthened its anti-corruption policies. Furthermore, the authorities have intensified international cooperation and have been successful in recovering money that corrupt government officials have embezzled abroad. The Politbureau of the ruling CCP passed a five-year plan for 2008-2012 (in Chinese) in April 2008 for the prevention and punishment of corruption, which signifies a change from solely focusing on punitive actions to combining prevention (education and supervision) with punishment. The Criminal Law has been amended to include provisions for the immediate family members of government officials to be imprisoned up to 10 years if they abuse the official's position to get bribes or other illegal financial benefits, as well as the most significant amendment to Article 164 of the law, which for the first time criminalises bribery of foreign public officials and officials of international public organisations. In 2010, the CCP released a new ethics code, which includes 52 new points, aimed at curbing corruption among officials. The government has also set new targets for the 2011 anti-corruption campaign to crackdown on a new form of corruption, which consists of excessive celebrations, seminars and forums for officers, as well as to tighten the management of government vehicles, as reported by a December 2010 news article by China Daily.

• Anti-Corruption Agency: China does not have any independent anti-corruption agencies. However, the Central Committee for Discipline Inspection (CCDI) of the CCP is responsible for combating corruption and ensuring integrity among CCP cadres. In this capacity, the CCDI operates as the central control body against corruption within the government, as most government officials (and all those in the highest posts) are CCP members. However, a major paradox of internal investigation in China's highly stratified and hierarchical government structures is that internal investigators must investigate top party officials who are either responsible for having appointed the members of the CCDI or who are simply higher-ranking than the investigators themselves, thereby preventing access. In 2010, the CCDI punished more than 146,000 corrupt party members, out of which, more than 5,300 were criminally prosecuted, as reported in a July 2011 article by CNN. Nevertheless, the Bertelsmann Foundation 2010 points out that the Committee’s anti-corruption work has purely consisted of mass campaigns and moral exhortation, which has proven largely unsuccessful. Despite that low-level and small scale corruption has decreased in recent years, high-level, large scale corruption continues to worsen.

• National Bureau of Corruption Prevention (NBCP): The NBCP was established in September 2007 as a government anti-corruption bureau under the Ministry of Supervision. This came about after the Chinese government set up an inter-ministerial working group in June 2006 to come up with a plan to make China's legal system comply with the United Nations Convention against Corruption. The NBCP is supposed to analyse the roots of corruption in order to develop measures to prevent it. Another purpose of the NBCP is to ensure efficient corruption prevention by assessing new policies in order to find loopholes that could give rise to corruption. The NBCP is also supposed to guide anti-corruption work in both the public and private sector. However, it is not authorised to make investigations into individual cases. The NBCP seems to be focused on international cooperation with regard to anti-corruption work. A great deal of resources appears to be spent on awareness-raising and public information about cases. In February 2011, the NBCP issued its 2011 work plan. Hence, Global Integrity 2009 assesses the anti-corruption agency as 'weak'.

• Office of the Ombudsman: The Ministry of Supervision functions like an Ombudsman, among its other mandates. According to the Global Integrity 2009, the Administrative Supervision Law 2007 stipulates that supervisory bodies are established at or above the county level. Supervisory bodies are units that exercise the function of supervision on behalf of the people's governments, supervising administrative units and public officials of the state and other persons working in a state unit. The supervisory organ under the State Council is in charge of supervision throughout China and local supervisory organs at or above the county level exercise the equivalent supervision at local levels. Citizens can complain to these supervisory bodies when their rights have been violated or ignored. Civil servants can appeal to the supervisory organ at the same level in which they work or to a higher level supervisory organ. Global Integrity 2009 assesses the strength of the Office of the Ombudsman as 'moderate'.

• National Audit Office (NAO): The NAO inspects accounts of state-owned enterprises and government entities, and according to Freedom House 2007, it has been active in investigating and exposing cases of corruption, using methods such as open auditing. The NAO publishes reports, which includes annual expenditures of different government agencies. According to Global Integrity 2009, audit reports published under the new head of the NAO are vaguer compared to audit reports that were published under the former head of the audit agency, Li Jinhua, in terms of pointing out violations of specific agencies. Although still insufficient, the practice of open auditing should be taken as a sign that the Chinese authorities aim for increasing transparency in their procedures.

• E-Governance: Although e-governance is still a very recent measure in the anti-corruption drive, the Chinese leadership considers e-governance to be an important element of government reform and a way to increase efficiency and accountability. On 1 January 2006, China launched the central government website. The website contains links to all provincial and city-level governments. China has approximately 100,000 government web portals. The content on most government websites is only written in simplified Chinese characters, but some websites, including those of major cities, are also provided in English. Most websites are not interactive, but function instead as one-way, top-down communication channels.

• Public Procurement: China's Government Procurement Law 2002 took effect in January 2003. The law seeks to secure greater transparency in the government procurement process. It is modelled on the United Nations Model Law on Procurement of Goods, Construction and Services. However, the Government Procurement Law states that priority should be given to the purchasing of local goods, services, and construction (Art. 10), and thus essentially excludes foreign suppliers. The US-China Business Council 2009 published a list of where in China 'buy local' policies are in effect. China is still negotiating to join the World Trade Organisation's Government Procurement Agreement, and therefore does not violate the WTO rules when it includes clauses about the preference for procuring domestic products. China's Government Procurement Law covers conflict of interest for procurement officials. However, according to Global Integrity 2009, there is no mechanism in place to monitor that the conflict of interest regulations are upheld, except for the Tangible Construction Markets (TCMs, see below for more information on TCMs). According to law, major projects must be awarded via competitive bidding. Unsuccessful bidding companies have the possibility to challenge procurement decisions through judicial recourse. Companies that have violated the procurement law by, for instance, engaging in bribery, risk being excluded from future bidding. The enforcement of the law seems to be somewhat weak, as companies maintain that government procurement is still rife with corruption. It is suspected that many tenders are either not publicly announced or that open bidding takes place only on a pro forma basis, with the decision of who will be awarded the contract having been decided beforehand. Other laws that apply to public procurement are the Contract Law, the Public Bidding Law and the Law Against Unfair Competition. Several regulations also exist regarding the financing of government procurement, supervision of government procurement agents, and registration of suppliers.

• Tangible Construction Markets (TCMs): TCMs were introduced by the Ministry of Housing and Urban-Rural Development (in Chinese) in 1995 and serve as one-stop shops, aiming to improve transparency and to regulate bidding processes. According to a 2009 news article by Dangshi People, 85% of cities that are at and above the prefectural level have established TCMs, however, not all TCMs are equally developed compared to those in the major cities. According to Universitat Passau China's Tangible Construction Market - Anti-Corruption in Public Procurement 2008, the TCM in Beijing is equipped with a highly sophisticated electronic management system. The TCM consists of 11 different stages: entrance registration, publish procurement notice, registration of bidders, prepare for prequalification, conduct prequalification, prepare bidding, opening of bids, evaluate bids, select winning bid, sign contract and invoice service. In order to prevent collusion, all bidding documents are anonymous, and experts, who are randomly selected, meet for the first time inside a highly secured evaluation room, which is under video surveillance that broadcasts the evaluation process to a supervision room. According to the same source, all single public construction contracts with a value of over CNY 2 million or a total investment value of over CNY 30 million, are required to be tendered in TCMs. Some main concerns with TCMs are that not all stages of the standard procurement process are covered by the TCMs activities, as well as lack of capacities such as experts and evaluation rooms.

• Whistle-Blowing: Article 41 of the Chinese Constitution ensures whistleblower protection. The constitution ensures the right of all citizens to report unlawful conduct and forbids retaliation. The national Chinese leadership has publicly encouraged citizens to report misconduct by CCP members. Nevertheless, this is no guarantee for whistleblowers' safety. 'Blowing the whistle' on corruption and other unlawful activities is done at considerable personal risk, and this is especially true in rural China, where much corruption involves powerful, far-reaching local officials who also control the channels for reporting injustices. Similarly, Freedom House 2011 also reports that local authorities often retaliate against individuals who unveil corrupt practices, causing some whistleblowers to flee overseas or to other cities. In an attempt to get the public to report cases of corrupt behaviour and other crimes, the Central Committee of Discipline Inspection and the Ministry of Public Security (in Chinese) have opened 24-hour telephone hotlines as well as special websites (in Chinese). Global Integrity 2009 describes the whistle-blowing measures in China as 'moderate'.

• General Comments on Public Anti-Corruption Initiatives: China seems to be making sincere attempts at and also some progress in tackling corruption. One of such efforts is the change of the Criminal Law, which now criminalises bribery of foreign officials. This signifies a major step taken by the government to bring the country’s bribery laws in line with the international standard. China's shift from a punitive-only approach to corruption to one including prevention through education and supervision can yield positive results in the medium-long run. Enhancing transparency in governance is also being explored by the Chinese government as a means of curbing the problem. One of the most important steps in this process is to take the decision to allow the public to access information concerning government decisions and decision-making. However, China has just initiated the transparency process, and the question remains whether or not the Chinese leadership is genuinely committed and will implement lasting anti-corruption measures that will apply to all levels of Chinese society. Despite the many flaws in the legal system, Chinese citizens are increasingly using it, and Chinese lawyers are also filing suits that are testing the system. One of the main challenges for the central government is to overcome the resistance to reforms and attempts to increase transparency that are found among local civil servants and other interest groups that stand to gain from an opaque system and unequal access to resources and influence. Finally, the restrictions to the freedom of speech and press applied by Chinese authorities (see more under the 'Private Anti-Corruption Initiatives' section) deprive them of a further, effective long term instrument in the fight against corruption.

• Media: According to the Bertelsmann Foundation 2010, the Chinese government often infringes freedom of speech and press, despite being guaranteed by the Chinese Constitution (Article 35). Freedom House 2011 describes that China's media environment is still considered one of the most restricted both with regard to domestic and foreign journalists. Journalists and bloggers who report local corruption news are often subjected to harassment, physical attacks and criminal defamation charges. According to Reporters Without Borders 2011, China is the world's leader when it comes to imprisoning journalists, bloggers and cyber-dissidents. Many of them are subjected to vague terms in the criminal code and the state-secrets legislation, and are sentenced to long prison term for 'subversion' or 'divulging state secrets'.  Another 2010 report by Freedom House reports that the Chinese media is state-owned and is controlled by the CCP's propaganda departments. The media functions as an important tool in the campaign to curb corruption, and critical exposés of economic corruption and crime are publicised with the consent of the ruling party, the CCP. The media is allowed some freedom to expose bureaucratic mismanagement or abuse so long as it refrains from criticising CCP ideology and sovereignty. One prominent case in 2009 was when an online activist who posted allegations of local officials abusing their power, consequently was charged with defamation and given an 18 month-prison term. Nevertheless, corruption also taints the Chinese media. It is common for journalists to get paid after their reports are published, and if the reported stories are considered controversial, payment will instead be suspended. For example, according to a 2010 news article by Shanghai Daily, the director of the Farmers Daily newspaper was convicted of accepting CNY 200,000 in bribes in order to not report the Lijiawa Mine explosion in 2008. Despite that the government has been trying to shut down web sites that are deemed to be critical to the authorities, the Internet has increasingly served as a medium for dissent, as reported by the Bertelsmann Foundation 2010. Reporters Without Borders 2010 ranks China 171st out of 178 countries, while Freedom House 2011 ranks China 184th out of 196 countries in relation to press freedom and describes the country's press environment as 'not free'.

• Civil Society: According to the Bertelsmann Foundation 2010, the Chinese state and the CCP penetrate all organisations and movements, and also help shape them. According to a 2011 news article by Deutsche Welle, there is an estimated 430,000 officially registered NGOs in China, while two to three times that number are operating illegally. The government tolerates NGOs and activism in areas that it does not consider politically threatening, such as the opening and running of orphanages, and dealing with education for rural and poor children. NGOs dealing with causes that may attract foreign attention and support, that Chinese authorities might find compromising, meet many restrictions from the authorities. Other political activist groups such as opposition political organisations are often suppressed, as the government fears that such NGOs might grow stronger, thus pose a threat to the CCP. According to Global Integrity 2009, there are cases of civil society activists being given prison sentences or physically harmed due to their investigation of corruption. Moreover, civil society organisations hardly have any influences on policy-making processes, only a few ones, such as the Red Cross, have very limited influence on it. Thus, Global Integrity 2009 describes the civil society as 'very weak'.

• China Business Leader Forum (CBLF): The CBLF was established in 2005. It came about as a result of collaboration between the International Business Leader Forum and Renmin University. It is a forum where foreign and Chinese business leaders can discuss how to improve business standards, including combating corruption. Their focus is on how the private sector can positively contribute to this. See the related Business Fighting Corruption case.

• China Chamber of International Commerce (CCOIC): Founded in 1995, the CCOIC is China’s national chapter of ICC. The CCOIC represents the interests of companies that are operating in China. The CCOIC runs 6 different commissions dealing with various business areas, from Banking Technique and Practice to E-business. The CCOIC provides companies in China with information on business practices and experts opinion on business disputes.

The websites below provide useful facts on China as well as contacts and tools for companies operating in China:

• International Finance Corporation: China SME Toolkit
  Guide to sustainable business management practices for SMEs.
• Business Fighting Corruption
  An online resource centre for business on collective action to avoid corruption which contains a guide and resources for partnerships with companies and other stakeholders to fight against corruption.
• CIA World Fact Book: China Country Profile
• World Bank: China Data Profile

Sources for further reading:

• US Department of State: Investment Climate Statement - China 2011.
• Freedom House: Freedom in the World - China 2011.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• Transparency International: Global Corruption Report 2009.
• Global Integrity: China Country Report 2009.

UNCAC Status: Signed 10 December 2003. Ratified 13 January 2006.

Status on UNCAC Implementation
This field describes the country's status on the United Nations Convention against Corruption. Please note any declarations and reservations made upon ratification. The list of signatories can be found on the UNODC website. Read more about the UNCAC.

Other Relevant Conventions or Treaties:

• ADB & OECD Anti-Corruption Initiative for Asia-Pacific Anti-Corruption Action Plan for Asia and the Pacific: Endorsed 19 April 2005.
  Read Transparency International's summary and assessment of the action plan.
• United Nations Convention against Transnational Organized Crime: Signed 12 December 2000. Ratified 23 September 2003.
  Read Transparency International's summary and assessment of the convention.

Transparency CPI: 2011: 75/182 (Score: 3.6)

Transparency CPI
This field consists of the score for the country in question on the Corruption Perceptions Index from Transparency International as well as its ranking.

World Bank CORR Index (-2.5 - +2.5): 2010: -0.6

World Bank Corruption Index
This field consists of the score for the country in question on the 'Control of Corruption' indicator in the World Bank Governance Research Indicator Country Snapshot (GRICS): 1996-2010.

OECD Country Risk Classification (0-7): 2011: 2

Country Risk Classification
The classification of countries by risk category has the aim of providing OECD countries with a basis for calculating the premium interest rate to be charged to cover the risk of non-repayment of export credits. Countries are placed in risk categories 0 - 7, with 0 being the lowest risk category and thus the least expensive. Conversely, premium group 7 is the highest risk category. Each classification is comprised of 2 components: 1) an assessment of the country's economic/financial situation, and 2) its overall political stability. Access the complete list of OECD Country Risk Classification figures.

Data Verification:

Publication date: November 2011

Data verified by: Global Advice Network

General Information Sources

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• UK Trade and Investment: Doing Business in Hong Kong 2011.
• The Heritage Foundation: Index of Economic Freedom Hong Kong 2011.
• The Heritage Foundation: Index of Economic Freedom China 2011.
• US Department of State: Investment Climate Statement - China 2011.
• UNCTAD: World Investment Report 2011.
• European Union Chamber of Commerce in China: Business Confidence Survey 2011.
• Transparency International: Bribe Payers Index 2011.
• Reuters: 'EXCLUSIVE-China may cut spending on strategic industries', 7 July 2011.
• TIME: 'China's Great Swindle: How Public Officials Stole $120 Billion and Fled the Country', 26 June 2011.
• The Bribery Act: 'From May 1st new China anti-corruption laws follow long arm jurisdiction trend', 30 May 2011.
• Trust Law: 'China demonstrates intent to clean up corruption through law change', 23 March 2011.
• Bloomberg: 'China's Hu vows stronger flight against corruption', 10 January 2011.
• US Department of State: Investment Climate Statement - Hong Kong 2010.
• Transparency International: Global Corruption Barometer 2010.
• United Nations Conference on Trade and Development: World Investment Report 2010.
• European Union Chamber of Commerce in China: Business Confidence Survey 2010.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• China Daily: 'Govt sets new targets in anti-corrupiton campaign', 29 December 2010.
• Xinhua News: 'China issues first anti-corruption white paper', 29 December 2010.
• China Daily: '黄光裕已正式入狱服刑 涉案者各自领刑', 16 November 2010.
• Jurist Org: 'China anti-corruption official sentenced to death for taking bribes', 9 Septemeber 2010.
• China Daily: 'China boosts auditors' power as stimulus package spending prompts corruption concerns', 22 February 2010.
• CNN News: 'Trial begins in Chinese corruption crackdown', 2 February 2010.
• China Daily: 'Corruption hurting nation's image: Poll', 7 January 2010.
• Global Integrity: China Country Report 2009.
• Transparency International: Global Corruption Report 2009.
• US-China Business Council: PRC Government Procurement Policy 2009.
• Ting Gong & Huangao Shi, China Information: Management Corruption in China's Industrial Restructuring, Vol. 43, 2009.
• New York Times: 'Corruption costs China $US35bn', 31 December 2009.
• People's Daily Online: 'Major Commercial Bribery Cases of Multinationals in China', 6 August 2009.
• ABC News: 'Foreign Companies "Bribe" Their Way into China', 23 July 2009.
• National Audit Office: CNAO published statistic result of audit in 2008, April 2009.
• AFP: 'China toughens laws on corruption, insurance: reports', 1 March 2009.
• China Briefing: 'Foreign Direct Investment Drops by 32.7 Percent, 17 February 2009.
• United Nations Conference on Trade and Development: World Investment Prospects Survey 2008-2010.
• Trace International: BRIBEline China Report 2008.
• Transparency International: Bribe Payers Index 2008. 
  
• National Audit Office: Audit Findings on the 2007 Budget Enforcement and Other Financial Revenues and Expenditures of 49 Government Departments, September 2008.
• Christian Science Monitor: 'China Acts to Stem the Tide of Officials Fleeing with Cash', 31 October 2008.
• Far Eastern Economic Review: 'Resurrecting the China Joint Venture', 17 October 2008.
• Radio Australia: 'Political Reforms Key to Cleaning up Chinese Officials', 17 September 2008.
• New York Times: Report Accuses Officials in China of Embezzlement, 29 August 2008.
• Financial Week: 'Olympics Seen as BiZ Bribe Tar Pit', 11 August 2008.
• Xinhua News: 'Premier Outlines Anti-Corruption Work, Vows to Build Clean Gov't', 30 April 2008.
• China Daily: 'Political Bureau ratifies CPC's five-year anti-corruption plan', 28 April 2008.
• Freedom House: Countries at the Crossroads - China 2007.
• A.T. Kearney: FDI Confidence Index 2007.
• Carnegie Endowment: Corruption Threatens China's Future, Policy Brief No. 55, 2007.
• Cheng Wenhao, China CSR: China's Ongoing War Against Business Corruption 2007.
• China View: 'China Applies to Join WTO Procurement Agreement', 29 December 2007.
• Xinhua News: 'China Focus - Chinese Official Dismissed for Bribery in Local Leadership Reshuffle', 4 December 2007.
• Transparency International: National Integrity System Country Study Report China 2006.
• Transparency International: Global Corruption Report 2006.
• Carnegie Endowment: The Dark Side of China's Rise March-April 2006.
• German Institute of Global and Area Studies: China Aktuell No. 1, 3, 4, 2006.
• Jay Hoenig, China Business Review: 'Managing Business Risks', Vol. 33, No. 6, 2006.
• OECD: Governance in China 2005.
• Yan Sun, Cornell University Press: 'Corruption and Market in Contemporary China', 2004.

Corruption Levels Sources

Judicial System

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Investment Climate Statement - China 2011.
• Transparency International: Global Corruption Barometer 2010.
• US Department of State: Investment Climate Statement - China 2010.
• Financial Times: 'China executes former Chongqing official', 7 July 2010.
• The Wall Street Journal: 'As Chinese Judge Takes Stand, Court Corruption Goes on Trial', 4 February 2010.
• BBC News: 'China jails top judge for bribes', 19 January 2010.
• Global Integrity: China Country Report 2009.
• The Wall Street Journal: 'Chinese Seek a Day in Court - With New Faith in Rule of Law, More Citizens File Suit', 11 July 2008.
• Carnegie Endowment: Corruption Threatens China's Future, Policy Brief No. 55, 2007.
• Transparency International: National Integrity System Country Study Report China 2006.

Police

• World Economic Forum: The Global Competitiveness Report 2011-2012.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• Transparency International: Global Corruption Barometer 2010.
• The Associated Press: 'Senior Chinese police officer condemned for graft', 24 August 2010.
• AFP: 'China executes official at heart of graft trials', 8 July 2010.
• US Department of State: Human Rights Report - China 2009.
• China Daily: 'Ex-Judicial official stands trial in gang crackdown', 2 February 2010.
• Global Integrity: China Country Report 2009.
• BBC News: 'Police Held in China Gang Probe', 21 August 2009.
• Asia Times online: 'Corruption Taints China's Police Heroes', 30 April 2009.
• AsiaSentinel: 'China's Corrupt Police', 10 February 2009.
• International Press Institute: World Press Freedom Review - China 2006.
• BBC News: 'China editor 'died after beating'', 7 February 2006.

Licences, Infrastructure and Public Utilities

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Investment Climate Statement - China 2011.
• Xinhua News: 'China fights rampant graft in infrastructure projects', 18 October 2011.
• The Wall Street Journal: 'China indebted to corruption', 30 August 2011.
• The New York Times: 'Chinese Telecom Executive Sentenced to Death for Bribery', 30 August 2011.
• The New York Times: 'China’s Rail Safety Review Unlikely to Stop Existing Projects', 11 August 2011.
• The Telegraph: 'China rail crash scandal: timeline', 11 August 2011.
• BBC News: 'Shanghai officials jailed over deadly high-rise fire', 2 August 2011.
• The Telegraph: 'Chinese rail crash scandal: 'official steals $2.8 billion', 1 August 2011.
• The Independent: 'Rapid growth of high-speed rail in China', 25 July 2011.
• BBC News: 'Shanghai high-rise fire: China 'to prosecute 24 people'', 15 March 2011.
• Shanghai Daily: ''Alliance of Interests' blamed for inferno’, 7 March 2011.
• Transparency International: Global Corruption Barometer 2010.
• BBC News: 'Chinese quake activist sentenced', 10 February 2010.
• China Daily: '$34m of quake aid misused, NAO says', 28 January 2010.
• Global Integrity: China Country Report 2009.
• The Independent: 'China's quake cover-up', 4 May 2009.
• UK Anti-Corruption Forum: Overseas News, Newsletter No. 9, February 2008.
• Associated Press: 'Former Beijing Official Appeals Death Sentence', 28 October 2008.
• Carnegie Endowment: Corruption Threatens China's Future, Policy Brief No. 55, 2007.
• South China Morning Post: 'Hunan Bridge was Doomed to Collapse, Villagers Say; Residents Blame Shoddy Materials and Bad Engineering', 16 August 2007.
• PRC Public Security Ministry: 'China's Police See 66% Rise in Commercial Corruption Cases, Xinhua News, People's Daily', 9 January 2007 (in Chinese).
• Transparency International: National Integrity System Country Study Report China 2006.
• Transparency International: Global Corruption Report 2005.
• OECD: Governance in China 2005.

Land Administration

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• Freedom House: Freedom in the World - China 2011.
• US Department of State: Human Rights Report - China 2010.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• The Associated Press: 'China cracks down on stimulus-linked graft', 21 May 2010.
• China Daily: 'Vice-mayor investigated for bribery', 15 January 2010.
• US Department of State: Investment Climate Statement - China 2009.
• Transparency International: Global Corruption Report 2008.
• Xinhua Net: 'Former Shanghai Party Chief Gets 18-Year term for Bribery', 11 April 2008.
• Carnegie Endowment: Corruption Threatens China's Future, Policy Brief No. 55, 2007.
• Ministry of Land and Resources: Communique on Land and Resources China 2006.

Tax Administration

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• Transparency International: Global Corruption Barometer 2010.
• US Department of State: Investment Climate Statement - China 2010.
• Global Times: 'One-time Forbes list billionaire on trial in Beijing', 1 November 2010.
• Global Integrity: China Country Report 2009.

Customs Administration

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• World Economic Forum: Global Enabling Trade Report 2010.
• Transparency International: Global Corruption Barometer 2010.
• Global Integrity: China Country Report 2009.
• Sohu: '西双版纳海关腐败窝案一审判决 原关长获刑16年', 10 January 2009.

Public Procurement and Contracting

• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Investment Climate Statement - China 2010.
• China Worker Info: '58 killed in Shanghai’s towering inferno', 19 November 2010.
• The Star: 'Graft probe shakes up China's aviation sector', 30 June 2010.
• Global Integrity: China Country Report 2009.
• Associated Press: 'Former Beijing Official Appeals Death Sentence', 28 October 2008.
• China Daily: 'Beijing vice mayor given suspended death penalty', 19 October 2008.
• Financial Week: 'Olympics Seen As BIZ Bribe Tar Pit', 12 August 2008.
• Associated Press: 'China Quake Brings Aftershocks of Corruption', 30 May 2008.

Environment, Natural Resources and Extractive Industry

• Reuters: 'Local coal boss in China gets 20-year jail term for corruption', 15 August 2011.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• Telegraph: 'Two jailed over Rio Tinto scandal', 6 August 2010.
• Times Online: 'Timeline: the Rio Tinto four', 22 March 2010.
• Xinhua News Agency: 'Rio Tinto employees charged with bribery, infringing business secrets', 10 February 2010.
• Global Integrity: China Country Report 2009.
• Forbes: 'The Iron Ore War- China claims Rio Tinto espionage cost it $100 billion', 8 October 2009.
• The National: 'Two executed as China fraud crackdown continues', 6 August 2009.
• Time: 'Spotlight: The Rio Tinto Scandal', 3 August 2009.
• New York Times: 'Mining Company Inquiry Puts Focus on a Black Market in China's Steel Industry', 15 July 2009.
• BBC News: 'Corruption 'Threatens China Rainforest'', 21 August 2008.
• Carnegie Endowment: Corruption Threatens China's Future, Policy Brief No. 55, 2007.
• The Australian: 'Audit Shows China's Embezzled Billions', 28 June 2007.
• Washington Post: 'China Detains Three after Beating Death of Reporter', 18 January 2007.

Banking

• World Economic Forum: The Global Competitiveness Report 2011-2012.
• China Daily: 'Suspended death for ex-CDB exec', 16 April 2010.
• The Wall Street Journal: 'Fraud Case Shows Boom's Dark Side', 26 August 2010.
• US Department of State: Investment Climate Statement - China 2009.
• AFP: 'China's banks misuse millions of dollars: auditor', 18 February 2009.
• National Audit Office: Audit Findings on Assets and Liabilities, Profit and Loss of China Development Bank, Agricultural Bank of China, China Everbright Bank Co. Ltd., Former PICC Holdings Co. and Former China Reinsurance (Group) Corporation Ltd. in 2006, 2008.
• Carnegie Endowment: Corruption Threatens China's Future, Policy Brief No. 55, 2007.
• Gregory C. Chow: Corruption and China's Economic Reform in the Early 21st Century 2005.

Public Anti-Corruption Initiatives Sources

• US Department of State: Investment Climate Statement - China 2011.
• Freedom House: Countries at the Crossroads - China 2011.
• China Reviews: '美媒：中國反腐或將“殃及”奢侈品', 3 November 2011.
• CNN: 'Chinese communist chief vows to fight corruption', 1 July 2011.
• NTD Televeision: 'Doubts over Chinese Regime Gift-Card Regulations to Combat Bribery', 24 June 2011.
• The Bribery Act: 'From May 1st new China anti-corruption laws follow long arm jurisdiction trend', 30 May 2011.
• Xinhua News: 'China regulates gift cards to prevent corruption', 26 May 2011.
• Trust Law: 'China demonstrates intent to clean up corruption through law change', 23 March 2011.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• Freedom House: Freedom in the World - China 2010.
• China Daily: 'Govt sets new targets in anti-corrupiton campaign', 29 December 2010.
• VOA News: 'China Issues New Anti-Corruption Regulations', 14 July 2010.
• BBC News: 'China communists get new ethics', 25 February 2010.
• Xinhua News: 'Chinese Communist Party issues code of ethics to ensure clean governance', 23 February 2010.
• Global Integrity: China Country Report 2009.
• US Department of State: Investment Climate Statement - China 2009.
• US-China Business Council: PRC Government Procurement Policy 2009.
• Dangshi People: '建立规范的有形建筑市场，加强工程招标投标管理', 26 November 2009.
• Universitat Passau: China's Tangible Construction Market - Anti-Corruption in Public Procurement 2008.
• Guardian: 'Chinese Corruption Law Targets Lovers and Families of Officials', 26 August 2008.
• Xinhua News: '建立健全惩治和预防腐败体系2008-2012年工作规划', 22 June 2008.
• Xinhua News: 'Premier Outlines Anti-Corruption Work, Vows to Build Clean Gov't', 30 April 2008.
• China Daily: 'Political Bureau ratifies CPC's five-year anti-corruption plan', 28 April 2008.
• UNODC: Conference of the States Parties to the United Nations Convention
  against Corruption, 21 Janurary 2008.
• Freedom House: Countries at the Crossroads - China 2007.
• ADB & OECD Anti-Corruption Initiative for Asia-Pacific: Combating Corruption in Asia-Pacific - PR China's Measures to Implement the Anti-Corruption Action Plan for Asia-Pacific 2007.
• Xinhua News: 'National Corruption Prevention Bureau Established', 13 September 2007.
• Christian Science Monitor: 'Whistle-blower in China Faces Prison', 14 August 2007.
• People's Daily: 'Regulations on Open Government Information', 18 February 2007.
• Transparency International: National Integrity System Country Study Report China 2006.
• ADB & OECD: Curbing Corruption in Public Procurement in Asia and the Pacific: Progress and Challenges in 25 Countries, 2006.
• Transparency International: Global Corruption Report 2006.
• Invest In China: '2005 China's Construction Industry Survey and Summary of Tenth Five-Year Plan of Year 2005', 23 February 2006.
• OECD: Governance in China 2005.

Private Anti-Corruption Initiatives Sources

• Freedom House: Freedom of the Press Index 2011.
• Freedom House: Freedom of the Press - China 2011.
• Reporters Without Borders: China Country Report 2011.
• Deutsche Welle: 'NGOs blossoming in China, despite hurdles', 3 February 2011.
• Reporters Without Borders: Press Freedom Index 2010.
• The Bertelsmann Foundation: Transformation Index - China 2010.
• Freedom House: Freedom in the World - China 2010.
• Shanghai Daily: 'Jail upheld for journalist who took bribe', 5 January 2010.
• Global Integrity: China Country Report 2009.
• Freedom House: Freedom in the World - China 2009.
• Reuters: 'Chinese Reporter Chasing Corruption Claims Disappear', 15 December 2008.
• ABS-CBN News Online Beta: 'China Journalists Demand 'Hush Money' at Coal Mine', 28 October 2008.
• Reporters Without Borders: China Annual Report 2007.
• Mure Dickie, Financial Times: 'China Learns to Click Carefully', 13 November 2007.
• Likosky and Shtender-Auerbach, San Francisco Chronicle: 'When American Corporations Deliver U.S. Foreign Policy...', 2 November 2007.