Commercial Bribery Under Fire in China

By Tang Zhengyu and Wu Min, Sidley Austin, Shanghai*

Since foreign investment in China began, and indeed since international strategies became necessities, multinationals have been advised to understand and incorporate local business tactics. Such advice should generally be heeded, but in doing so, companies must not allow Chinese idiosyncrasies and practices to become an excuse for violating local regulations and general business ethics. While bribery and its ilk may 'grease the wheels', they can open up a whole realm of unwelcome consequences. Foreign companies must be particularly wary, as they are often perceived as deep-pocketed and eager entrants to the lucrative China market and are seen to be easy targets for those who want to pick up a supplementary bribe.

Since February 2006, a nationwide campaign to crack down on commercial bribery has been underway in China, focusing on building projects, land transfers, asset/equity transfers, pharmaceuticals, government procurement and natural resource development. As part of the campaign, various sectors and government bodies are implementing new detailed enforcement procedures and increasing scrutiny of business practices. What are the governing regulations and penalties for commercial bribery? What best practice measures should a company adopt to ensure that business etiquette boundaries are not overstepped?