China Country Profile

Snapshot of the China Country Profile


According to several sources, China is considered to be the most attractive investment climate in the world, despite the country's high levels of corruption. The transition process from planned to market economy not only led to unprecedented economic growth rates, but also created opportunities for public officials and others to enrich themselves illegally. It is estimated that at least 3% of China's annual GDP is lost to corruption. The Chinese government knows that corruption is endangering political stability and economic growth, and has therefore been pursuing an anti-corruption campaign targeted at both the public and private sector to try to curb the persistent problem. Companies consider corruption as constituting a major obstacle to doing business in China.

Positive developments in relation to corruption and investment:

  • China's anti-corruption campaign has led to the exposure of many corrupt business deals and is expected to help deter potential corruption offenders.
  • China's legal framework for curbing corruption is quite well-defined and, in combination with the strengthening of international anti-corruption cooperation, there have been improvements.
  • China has recently initiated a process to enhance transparency in governance. One of the most important steps in this process depends on the decision of whether or not to allow the public to access information concerning government policy and policy-making.

Risks of corruption:

  • Many companies have run into difficulties with the authorities because of corrupt behaviour by their agents or business intermediaries. The activities of agents are difficult to control; therefore, it is important to thoroughly vet agents.
  • The construction sector is notoriously corrupt, and companies are urged to be extra careful in connection with competing for a public procurement contract, especially if this is done outside the realms of the Tangible Construction Markets (TCMs), which serve as one-stop shops set up by the government in an attempt to curb corruption in the construction tender process. TCMs may be found in major cities, but not all are equally efficient and many construction tenders are not conducted through TCMs. The post-bidding process in the construction sector is also wrought with corruption.
  • Private ownership of land is not permitted, but the right to utilise a plot of land can be bought. In the awarding of land use right, many companies have been confronted with demands for bribes by public officials.
  • Although China's anti-corruption campaign has had its successes, as long as the judicial system is flawed, it will be difficult to realise major changes. There are many examples of corruption affecting the judicial system and political interference in connection with dispute settlement is not uncommon.