Merrill Brink Releases New Comments on May 06th 2014: Dealmaking Opportunities in the Lower-Middle Market Revisit Your China-specific Anti-corruption Compliance Programme
London, UK (PRWEB UK) 7 May 2014 -- Companies doing business in China today face a much more stringent environment regarding ethical business practices than they faced even five years ago. Earlier this year, President Xi vowed to put an end to corruption within the Communist Party of China, citing a five-year plan to eliminate unethical practices—including commercial bribery—by Party officials.(1) This increased vigilance, along with the complexities related to navigating the cultural and legal differences between China and the United States, makes it more important than ever for companies to establish a comprehensive compliance programme designed for China.
Whether you’re creating a new programme or reexamining your current programme, the following guidelines can help you avoid costly legal proceedings and penalties.
Thoroughly Review China’s Anti-corruption Laws and Penalties
Unlike many other countries, China does not adhere to a single set of regulations for international organisations doing business within its borders. Instead, China’s laws come from various sources. Two statutes comprise the majority of China’s anti-corruption policy: the Criminal Law of the People’s Republic of China and the Anti-unfair Competition Law of the People’s Republic of China.(2) The Criminal Law makes an important distinction between “official bribery” and “commercial bribery.” “Official bribery” occurs when a bribe is offered to a person “assigned by a state organ, state-owned company, enterprise, or institution to a company, enterprise, or institution that is not owned by the state or a people’s organisation to perform public services,” implying that a person need not work for the government to be considered an “official.”(3) The penalties for official bribery are much more severe than penalties for commercial bribery, including the possibility of life imprisonment. The best way to minimise risk is to ensure that every member of your organisation involved in China-related business is educated and regularly updated on your anti-bribery.
Determine Which Laws Apply to Your Industry
In addition to understanding China’s general anti-corruption laws, it is also important to be aware of laws that apply specifically to your industry. Also, reexamine the kinds of transactions you typically conduct to identify any that may be construed to be indirect bribes. For example, pharmaceutical companies are not allowed to sell their products to public hospitals at a discount. Rather, the hospitals must purchase equipment and medications through a public bidding process whose final terms must be strictly adhered to.(4) The rationale behind this regulation is that hospitals charge patients for supplies and medication at prices that ensure a profit. Therefore, obtaining them at a reduced price would ultimately result in a higher profit, which can be construed as a bribe.(5) Understanding these nuances will be critical in defining an effective anti-corruption programme.
Understand China’s Gift-giving Culture
China’s cultural norms, which make gift-giving commonplace, compound the difficulties in navigating China’s anti-corruption laws. Before the Chinese government took a strong stance on anti-bribery, the giving of wine, jewelry and other luxury items to gain favor was a widespread practice. In fact, when the government began enforcing bribery laws more strictly, some luxury industries saw as much as a 27 percent decline in sales.(6) Furthermore, because the giving of gifts to form and maintain connections is integral to Chinese culture, the distinction between a gift and bribe is by no means clear.
Choosing to refrain from giving gifts as a protective measure is viewed as risky, as it may reduce your chances of success in China. Instead, one recommended approach is to set a limit on the value of your company’s gifts so they’re viewed as tokens of respect and not tools of coercion. Giving gifts such as food and drink that can be shared with others also helps to ensure that no individual feels targeted or pressured when receiving them.
These guidelines provide a great first step in defining an effective anti-corruption compliance programme to protect your organisation from accusations of bribery. Another way to ensure that your compliance programme is effective is to engage the services of a language service provider that is familiar with the complexities of Chinese anti-corruption laws.
Full article link: http://www.merrillbrink.com/importance-of-china-specific-anti-corruption-compliance-program-05052014.htm.
References
1 Xi promises harsher anti-corruption drive. (15 January 2014). Global Times. Web. (accessed 7 April 2014).
2 Yang, Wantao, Emilia Shi, Timothy P. Peterson, & Robertson Park. (28 January 2014). Understanding China’s approach to anticorruption. Corporate Counsel website. (accessed 7 April 2014)
3 Ibid.
4 Xiangwen, Liu, Monique Carroll, & Zhu Yuanyuan. (18 November 2013). What does an effective anti-bribery and corruption programme require?” China Law Insight. Web. (accessed 7 April 2014).
5 Ibid.
6 Holliday, Katie. (8 February 2013). Gift-giving crackdown hits China luxury retailers. CNBC. Web. (accessed 7 April 2014)
About Merrill Brink International, Ltd.
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Vanessa Lontoc, Merrill Brink International, http://www.merrillbrink.com, +1 (917) 720-5598, [email protected]
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