China’s emergence as a global economic power has created new opportunities for many companies with international operations. These opportunities range from creating business operations within China to engaging in transactions with Chinese businesses. These business contacts will only increase as China continues to emerge as a world power.
However, the structure and culture of Chinese businesses can present certain problems for international companies. China remains a one-party state with many state-owned businesses, which means that many individuals with whom foreign companies interact could be government officials. In addition, there are general concerns about tolerance of corruption within China’s business culture.
These difficulties have been highlighted in recent news reports that Chinese authorities have accused GlaxoSmithKline of bribing doctors and executives. This appears to be part of a larger crackdown by the Chinese government on foreign businesses operating within China. To the extent government officials are involved, these accusations could also implicate anti-corruption statutes such as the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. Based on past experience, it seems likely that U.S. and UK officials will review such allegations to see whether the FCPA or the UK Bribery Act have been violated.
What to Do?
Companies should review their business operations in and with China, including their compliance programs. An assessment of the company’s training program should also be done. Such a review could allow the company to identify and resolve issues before government regulators become involved.