Business Corruption in China
President Xi Jinping has started the country's biggest anti-corruption campaign since the rule of Mao Zedong. Since assuming office, President Xi has vowed to fight corruption and promised to fight 'tigers' and 'flies', by which he referred to high and low-ranking officials. His campaign has resulted in the punishment of 182,000 officials for corruption and abuse of power nationwide in 2013. The investigation into some high-level officials, such as a former internal security chief, Zhou Yongkang, and a former deputy logistics chief of the People's Liberation Army, Gu Junshan, is producing evidence that Xi is to break the party's long-established unwritten rule of immunity for members of the Politburo Standing Committee. Despite the positive development regarding corruption investigation and prosecution, the effectiveness of citizens as well as civil society groups reporting on corruption still remains low.
The Criminal Law of the People's Republic of China criminalises active and passive corruption in the public sector, as well as extortion and money laundering. The Criminal Law also criminalises bribery of foreign government officials and officials of international public organisations. However, the common Chinese practice of Guan Xi-related gift-giving – a custom of building connections and relationships based on gifts, banqueting or small favours – might be considered bribery by foreign companies and international anti-corruption legislation. Some traditional business practices in China, such as giving gifts during traditional festivals or celebrations, may also run afoul of the Chinese Anti-Unfair Competition Law and the Criminal Law, according to Clifford Chance in June 2011.
The Criminal Law does not contain an exception for facilitation payments like the US Foreign Corrupt Practices Act (FCPA), according to Morrison & Foerster in August 2011. Businesses should pay special attention to such practices, especially under the climate of the new government's fight against corruption, which is leading to an increasing number of foreign and multinational companies coming under scrutiny and being accused of corrupt practices by authorities (such as the GSK bribery scandal). Companies are advised give careful consideration to the type and value of gifts and the nature of the business relations. Further, companies should develop and implement compliance systems and conduct due diligence when doing business in China. For more information about Guan Xi, see this country profile's special section Guan Xi (关系).
Compliance Quick Guide
Chinese Anti-Corruption Laws
Publication date: May 2014
Data verified by GAN Integrity Solutions