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China Corruption. You’d Have To Be Blind….

By Dan Harris on Posted in China Business

One of the things I have learned from doing this blog is to roll with the punches that really do not have all that much to do with what I have written. If I write a post on how Hong Kong is usually not very relevant to the typical SME going into China, I get angry comments and emails from people incredulous at how I can be ignoring the many companies that go public via Hong Kong. And if I write a post, entitled, “China Corruption. We Ain’t Seeing It,” on how foreign companies do not NEED to engage in corruption in China, I get a whole host of angry emails and comments about how China has massive corruption and how I must be sticking my head in the sand. 

Well duh. I know there is massive corruption in China. We all know that.  

But, that does not mean that foreign companies must engage in it themselves in order to succeed? All I know is that in registering a company in China or registering IP in China (I pick these two things because they are the two most common registrations for foreign companies doing business in China) we have never been hit up for “extra fees” by a Chinese official and I cannot say that of a number of other emerging market companies in which my firm has done this sorts of registrations.  

Just by way of an example, here is comment left by Peter Humphries, who, for some unknown reason, believed that my post (and our readers) were claiming foreign companies NEVER engage in corruption in China (even though nobody ever said anything like that):

Of course there’s corruption in China, and especially at foreign companies. Otherwise you won’t have all those FCPA regulations rearing their heads and scaring the shit out of US executives responsible for their China operations. I wonder about the readers here and if they’re really involved in China at the ground level or just passing student level comment because the statement “we ain’t seeing it” as was noticed by Ted Baker is naive to the extreme and these comments displaying an ignorance of what remains a major managerial and operational concern.

I did not even bother responding to Mr. Humphries at the time but I remember thinking how it would have been nice had he gone back and read ANY of the following posts, before attributing something to me that I never said and never believed and essentially calling me and our readers complete idiots:

So yes, Mr. Humphries, I know there is corruption in China and I know foreign companies engage it in there as well.  Heck, I am always talking about how people do not seem to understand how much corruption there is even in the United States.  And just in case anyone out there is really as dumb as Peter Humphries seems to think we all are, I urge you to read this very thoughtful post on the FCPA Professor Blog detailing/analyzing the U.S. Government’s FCPA case against and eventual settlement with Veraz Networks, Inc.

I thought of all this when I received the following very nice email from “Andrew” today:

I remember you posted a blog a few weeks back about why Japanese manufacturers weren’t going to “pack up and move” to other South-East Asian countries due to a number of reasons. One of them was actually that corruption in China, according to Transparency International, was actually lower than these other countries. Have you read this article in Jamestown about the accumulation of so much wealth in China by so few families? Highlighted by the Mayor of Zhongshan? 

I also remember reading something in the Heritage Foundation a few years back by John Tkacik Jr. or Derrick Scissors that describes how most of the middle to upper class in China are, in fact, members of the Communist Party. This point, in some ways, is validated by the new book by Richard Mcgregor in so much as It seems impossible to rise out of destitution without being a member, or certainly connected to them, no? This is certainly not true in all cases, but I’m curious about what your thoughts are?

I read the Jamestown article (it’s excellent) and my thoughts are that the wealth analysis is probably true and that life does tend to be good for high (and even many mid-) level party and government officials. But, near as I can tell, life is good for these people not because they are receiving money from American companies, but because they are receiving money from Chinese companies and because they are able to give their friends and cronies money making opportunities.

Corruption in China: Just because it can easily be avoided by most American companies doing business in China does not mean it is not there. 

  • http://www.iqidu.com Mao Ruiqi

    The real point is, at least what I drew from your earlier blog, was that engaging in corrupt practices as a standard practice and/or as acceptable behavior, was to do so at great peril. For those who believe that the only way to succeed is by cheating may very well learn the hard way that in China “cheating” and “punishable criminal behavior” are very relative terms of craft.

  • http://www.thefederalcriminalattorneys.com Joseph

    Isn’t it nice when people cherry pick one topic or one article out of the many you’ve worked on and scream at you for it?

  • Sparky

    I have a blog and I am constantly having to deal with exactly what you describe. Even worse though, my blog is political and so I am always getting people who say I said or believe something I never said and do not believe, and then they rake me over the coals for it. Then when I make clear that I never said what they said I said or that I never believed what they said I believed, I get other people who accuse me of backing down. You can never please everybody, particularly those who read blog posts while hardwired with their own agenda.

  • Andrew Wilson

    Thanks for the kind words.

  • Magnus Englund

    Dan, you must admit that some of your comments here are deliberately written to be antagonistic. The headline titles, and the content are often provocative. Because you write in that style, people will challenge you, and you haven’t always been polite to other lawyers or professionals here with opposing views. You ripped into Elizabeth from ICS Trust for example – shes’ a well respected Canadian tax lawyer in Hong Kong. That didn’t go down well in certain cicrles here in Hk for example, and there have bneen other examples. Plus there are different opinions out there, and as you have said before yourself you are not impartial. Your blog exists to promote your firm, and you blow things up often deliberately out of proportion to get more coverage for your views, and understandably not those of other competing firms. Thats a fact, you can’t get around the issue that your articles are geared solely to promote Harris & Moure. Thats the weakness and people from other businesses in the same field will pick you up on it. Thats normal – CLB is as it says – a blog. You’ll have to live with it or carve a new career as a journalist for CBS Morning News. Youd make a great anchor btw!

  • Tim

    @Magnus – Then read further than the headlines. This post, other than discussing corruption, is about reading miscomprehension and knee jerk reactions. Both of which you are committing here. BTW,someone can be well-respected and still omit fundamental information. That is what happened in the Hong Kong post and I do not recall anyone getting ‘ripped’.

  • May Tam

    If this blog produces headlines like “China Corruption: We Ain’t Seeing It” and then writes a headline a few days later “China Corruption: You’d Have To Be Blind” then that is up to Dan if he wants to send mixed signals about what he thinks or understands. Consistancy isn’t a exactly a major quality here after all.

  • Aneet

    Corruption exists, the degree or level of corruption varies. This will continue till such time there are companies, executives willing to encourage this practice to get ahead. That said, China is far less corrupt than India, where corruption at the very basic level makes everyday, routine procedures a challenge.

  • Arlo P.

    Dan, you have been doing this long enough to know that there will always be times where people will simply read your headline and then assume they know what you are going to say and then write on that, rather than on what you actually said. No need for you to sweat it though because it’s your blog and you can always clear things up if you want. I understood your first post on this because I actually read it.

  • http://www.star-prototype-china.com Gordon Styles

    I am British with a factory in Zhongshan, China. I have lived in China more than 5 years. I have set up 2 companies, and run 3.
    As a western foreigner I have never once been offered a bribe, had to give a bribe, or be involved in any corrupt activity in China whatsoever. Some chinese looking foreigners do get involved e.g. the Australian/Chinese Rio Tinto executive Stern Hu who got 10 years for corruption recently.
    Clearly corruption abounds in China, but it is mostly the natives. Recently for example, the Mayor of Zhongshan, a lady, was arrested for having RMB 3,000,000,000 in unaccounted for assets.
    I also want to make it absolutely clear; central Beijing Government is waging a war against corruption in China. The political centre sees corruption as the greatest single threat to the further successful development of China.
    Night after night the local TV stations here pump out Public Service adverts showing public officials of all walks turning down bribes and looking very offended at the very notion that anyone would even offer a ‘red packet’ for doing their duty.
    Corruption abounds, but it is most certainly a dieing practice in China. I predict within 15 years China will be the cleanest place on earth to do business.
    Gordon Styles