Corruption is a fact of life in China. In fact, Transparency International,
a German organization that applies its Corruption Perception
Index (CPI) globally, 1 rates China with a CPI of 3.6 and is number 75
of the 183 countries rated. New Zealand is rated the least corrupt at
number 1 with a CPI of 9.5, the United States at 1924 with a CPI of
7.51, and North Korea and Somalia the most corrupt at number 182
with a CPI of 1.0. The country’s press frequently has detailed cases
of corruption and of campaigns to crack down on bribery and other
forms of corruption. The articles primarily have focused on domestic
economic crimes among Chinese citizens and on local officials
who have been fired, sent to prison, or assessed other penalties.
There is strong evidence that the Chinese government is taking
notice and issuing regulations to fight corruption. Newly issued
Communist Party of China (CPC) regulations on internal
supervision and disciplinary penalties have raised hopes that the
new regulations will enhance efforts against corruption. The regulations
established “10 Taboos” for acts of party members that
violate political, personnel, and financial regulations and who
are involved in bribery, malfeasance, and infringement of others’
rights. The taboos included lobbying officials of higher rank,
handing out pamphlets or souvenirs without authorization, holding
social activities to form cliques, and offering or taking bribes.
Also on the list were making phone calls, giving gifts, holding
banquets or conducting visits to win support, covering up illicit
activities, spreading hearsay against others, using intimidation or
deception, and arranging jobs for others. Some believe that the execution
of three bankers, for “a run-of-the-mill fraud,” just before
the Communist Party’s annual meeting, was an indication of how
serious the government was about cracking down on corruption.
Much of China’s early efforts to stem corruption were focused
on activities among domestic Chinese companies and not on
China’s foreign business community. Traders, trade consultants,
and analysts have said that foreign firms are vulnerable to a variety
of corrupt practices. Although some of these firms said they had
no experience with corruption in China, the majority said they increasingly
were asked to make payments to improve business, engage
in black-market trade of import and export licenses, and bribe
officials to push goods through customs or the Commodity Inspection
Bureau, or engage in collusion to beat the system. The Hong
Kong Independent Commission Against Corruption reports that
outright bribes, as well as gifts or payment to establish guanxi, or
“connections,” average 3 to 5 percent of operating costs in the PRC,
or $3 billion to $5 billion of the $100 billion of foreign investments
that have been made there. The most common corrupt practices
confronting foreign companies in China are examined here.