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Chinese Companies Encounter Increased Cross-border Anti-Corruption Enforcement

2018-11-07 10:44 Wednesday


In recent years, compliance and anti-business bribery have increasingly become increasingly important for Chinese companies. According to the 2017-2018 Annual Blue Book of Compliance in China, more than 10% of overseas Chinese enterprises have been subject to enforcement by host governments, of which 30% encountered anti-corruption enforcement. Regulators in China have also been increasingly vigilant, and third-party compliance management and response mechanisms from most enterprises remain incomplete.

 Cross-border Anti-Corruption

More than half of the enterprises were subject to administrative investigation, the highest proportion among all types of law enforcement actions. Businesses that suffered administrative penalties grew from 34% in 2016 to 45% in 2017. The intensity of criminal investigation and punishment in foreign countries has also increased: 27% of businesses were subject to criminal investigations; the proportion of individuals or companies subject to criminal penalties tripled to 14%.

Anti-corruption enforcement is largely concentrated in the health care, communications, real estate and retail industries. Real estate companies generally pay little attention to compliance, with less than 20% of Chinese real estate companies having comprehensive compliance policies. Although the financial sector places more emphasis on compliance, their compliance systems and the policy execution are weak. Healthcare companies have comparatively good third-party policy compliance and due diligence, but corruption remains persistent.

In China, anti-commercial bribery is enforcement is most common, mainly in the real estate, finance, medical and pharmaceutical, automobile manufacturing and telecom industries. Since the implementation of the newly revised Anti-Unfair Competition Law in 2018, 30% of companies have strengthened their third-party due diligence investigation capabilities, and slightly less than 30% have their strengthened risk management framework for marketing activities.

In responding to dawn raids, the performance of domestic companies is significantly higher than that of foreign joint ventures and foreign enterprises in China. 70% of state-owned and private companies have appropriate response mechanisms, compared with less than 50% of foreign and joint ventures. Given that dawn raids are increasingly the norm for enforcement by the Chinese government, both Chinese and foreign companies should develop and improve their response mechanisms.

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