A week or so ago, John Garnaut wrote a piece for the Sydney Morning Herald, entitled, “Learning the art of greasing the wheels.” In that article, Garnaut sets out how to build guanxi through bribery, among other things, and be good at it:
The art of building “guanxi” and the rituals of giving and soliciting bribes are not always the same thing in China, but they often are.
One reason Rio Tinto’s Stern Hu is in jail is because he was no good at it. Only an amateur would receive a bag of cash and store it in his household safe.
The wheels of Chinese business and officialdom are usually greased by more experienced players. They know how to embed their favours within intricate, personalised guanxi performances, which break down the barriers to bribery, and also minimise the risks of being caught. They channel transactions through multiple layers and stretch them out over years.
The article then discusses “Hu Gang, who ran an auction house in Changsha” and the two “instruction manuals” he has written on how to bribe effectively, though Hu himself was eventually caught when a judge confessed to having taken bribes from Hu. Hu writes “fiction” but in one of his books, he talks of an auctioneer having cemented his relationship with a judge by “quietly arranging” for a famous calligrapher to tutor the judge’s son and then the auctioneer would auction off the judge’s son’s calligraphy at grossly inflated prices by having a friend bid for it. The auctioneer would then pay the judge in cash from the auction proceeds, with a suitable auction commission subtracted out.
The article also discusses the research of Li Ling, a law lecturer at Northwest University in Xian and researcher at New York University, who has investigated dozens of first-person accounts:
The thing is half done once the gift is accepted’,” writes Li in the article ”Performing Bribery in China”, in the current edition of the Journal of Contemporary China.
Gifts need to demonstrate personalised care and ”sincerity” and this usually requires careful investigation of the target’s golfing, artistic, gambling or extra-marital hobbies. So China’s art auctions are hugely inflated by bribers paying officials for art works at multiples of the market price, its luxury golf courses are full of members who did not pay for membership, shopping centres are full of official’s relatives using shopping cards that were gifted to them and Macau is full of officials who do not pay for their gambling chips.
Choice of language is important, with a whole lexicon of euphemisms such as “doing guanxi” available in place of vulgar words such as “bribe”. Li writes that the art of guanxi can function as an “alternative operating mechanism” to break down the legal, moral and cognitive barriers to corrupt transactions. “Guanxi-practise is not only fuelling corruption, but it is a necessary and integral part of corruption in China,” she writes.
If at this point you actually foolishly belive that you, as a foreigner, are capable of pulling all of this off, I suggest you promptly read the post, “Private Suit Alleges China Bribes” at the FCPA Blog.
That post talks of a civil complaint recently filed in Indiana against Allison Transmission. The central claim in that case is that Allison executives paid bribes in China to win work there. Interestingly, the case is being brought by Stephen Lowe, an American who worked for Allison in Shanghai and is now claiming to have “witnessed cash payments, gifts of jewelry, and lavish parties for customers.” The post describes Allison’s main business in China as “selling bus transmissions to government-owned companies.” Lowe is suing under an Indiana state law that protects whistleblowers, alleging he was fired soon after complaining of Allison’s practices in China:
A few days after Lowe was fired, according to an account in the Indianaoplis Business Journal, he sent a letter to his former boss saying “you want to terminate me because I told you about one employee’s FCPA violations in China. You want to protect this employee and yourself.”
Lowe hired a Washington, D.C. labor-law firm to bring his suit in Indiana state court. The Indianapolis Business Journal said Lowe’s lawyer wouldn’t “say whether he lodged a complaint with the Justice Department. The federal agency would not confirm nor deny an investigation.”
Allison, the paper said, hasn’t yet filed an answer to the complaint. “We’re looking into the allegations but we can’t comment on the specifics of pending litigation,” a spokesperson said.
In my experience, the most likely person to turn your company in for wrong-doing is an ex-employer and the second most likely is an existing employee. Of the foreign companies that I have seen shut down in China for illegal activities (including operating in China without having a Chinese entity), I believe (though cannot prove) that in every single case, the government was alerted either by a former or an existing employee.
Former employees inform on their old companies because they are angry at them. Existing employees inform on their companies either because they are angry at them or because they want them shut down as they presently exist so that they can step in and turn them into a Chinese domestic business and start snaring the profits for themselves.
All I can say is what I always say, which is that the bribery game in China is just not worth it.
