April 08, 2009
Corruption in China Proves Difficult to Uproot, But Corporations Can Mitigate Issue in Their Supply Chains
by Robert Kropp
Briefings from Ethical Corporation Institute find that China's traditional business culture
contributes to problem, but government regulation and attention by corporations to supply chains
help mitigate corruption.
Two briefings recently published by the Ethical Corporation Institute (ECI) document
the persistence of corruption in business practices in China, but find that the Chinese government
does seem to be taking steps to address the problem.
In the first of the two briefings, entitled
Anti-corruption, Ethics and Compliance in China, the ECI references figures published in 2008 by Transparency International that rank
China's business environment as among the most corrupt. Corruption in China takes a range of forms,
from small cases of bribery to avoid bureaucratic requirements to bribes in order to secure major
business contracts. According to the ECI, "China’s traditional business culture illustrates the
importance of personal relationships, with somebody’s word often replacing written contracts."
Anti-corruption initiatives are increasingly effective in China's coastal provinces, where
foreign investment has been concentrated over the past 30 years. Multinational corporations
operating in the inland provinces are more likely to encounter examples of protectionism and other
forms of corruption, as well as issues related to intellectual property protection.
executives interviewed for the ECU briefing believe that legal steps are being taken to address the
issue of corruption in China, but many of them express concern that China’s traditional business
culture could make enforcement of anti-corruption laws difficult.
The second briefing,
entitled Counter Supply Chain Corruption in China, finds that the global economic crisis has not
spared the Chinese economy, where exports decreased 17.5% and imports fell 43.1% during the
year-long period ending in January 2009. Some executives surveyed fear that economic pressures will
increase the tendency to resort to corruption in China.
The second briefing includes the
finding that corruption in China will persist during a time of economic recession, despite efforts
by the government to create a robust regulatory environment. Corruption in China will continue to
persist according to geographical variations, with anti-corruption efforts taking hold much more
readily in the coastal provinces.
Finally, the ECI encourages multinational corporations
with supply chains in China to develop programs that implement compliance codes and evaluate
partners based on ethical and compliance criteria.
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