A corrupt anti-corruption campaign?

Dr. Jean-Marc F. Blanchard's picture

After he became China’s President, Xi Jinping made fighting corruption a central part of his domestic policy agenda. In line with this, state anti-corruption organs have investigated tens of thousands of Chinese Communist Party officials and government bureaucrats and numerous high-ranking officials at the central and provincial government levels have lost their posts or party membership, or have been put in jail. Many foreign companies welcome the anti-corruption campaign in concept because it means, if it works, they do not have to offer “gifts” or find “middlemen” and that they will not be at a competitive disadvantage if home country laws, scruples, or both preclude them from providing a gift.

The heightening attention to corruption in China has foreign businesses “scrambling to review their practices and adopt safeguards.” A concrete spur for this scrambling was China’s investigation of GlaxoSmithKline (GSK), a giant British pharmaceutical company, and Danone, a large French food firm. Chinese investigators alleged GSK funneled hundreds of dollars of kickbacks to those who used or prescribed its drugs. Chinese media accused a Danone unit in China of bribing doctors and nurses to use its baby formula products. Foreign firms, industry associations, and governments wonder aloud, though, if Beijing is just using the anti-corruption campaign as another tool to control foreign firms. They recognize that the government is probing domestic firms. But they do not see the same intensity of investigation, the same level of publicity given to such investigations, or domestic firms being targeted for the same corrupt practices in which they allegedly are engaged. Suspicions have been heightened, too, by attacks on foreign firms for excessive prices and product quality problems. It will take greater transparency and the Chinese government’s equal application of anti-corruption and other laws and regulations to domestic firms to allay foreign MNC concerns.