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Bribery In China As A Waste Of Money

Posted in Legal News

I love it when someone else writes our blog posts for us and that is certainly the case today.  I received the following email asking me to write a post on bribery in China. Thing is, the email is the post and here it is (without a single word changed except for lining out the specific province):

I’ve been a regular reader of the China Law Blog since sometime in the middle of my company registration process and while maybe 90% of what you write isn’t specifically relevant to me, it’s all interesting and some of it has been relevant for other people I know.

I’d like to request a post on bribes, bribery, and not giving bribes.  I recently got into (and then carefully extricated myself from) a conversation with a fellow foreigner at a casual house party. Said foreigner was complaining about the inherent inefficiency of the _______Province government, the venal greedy nature of officials in _____ Province, and so on.  He just got hit up with yet another request for the red envelopes that are “necessary to doing business in China”.

I’ve never paid a red envelope. I’ve never been outright asked to give a red envelope. The one situation which I was absolutely certain was leading towards a request not only ended up with the official paying the bill at the expensive restaurant but also the comment that he appreciated that I said things like “please”, “thank you”, “sorry”, and treated him and his staff like human beings.

The particular foreign businessman who is giving bribes and loudly complaining about venal officials who ask for bribes is one of a number of a foreign businessmen I know that is giving bribes.  In every instance that I have accurate firsthand knowledge of a foreign businessperson giving grease payments to speed things up, things have taken significantly longer.

In his particular case, with a bilingual team of Chinese staff to help him out he has taken over a year to complete paperwork that I did
– completely on my own — in about 8 months.

In another case I know, after multiple failed attempts to go through the back door, the end result was to do things by the book rather than by guanxi and red envelopes.

In a third, the payment of bribes to some officials followed by the eventual decision to stop paying bribes to anyone led to “unfortunate delays” and “misunderstandings” from the un-bribed (or insufficiently bribed) officials’ departments.  Without going into too many details, that’s why the event no longer exists.

Of the Chinese businesspeople I know who have specifically told me about situations where they have given expensive gifts it sometimes works to their benefit and sometimes has no obvious result.  However, unlike foreigners doing business in China, they are working from within a system that they grew up in.  One presumes that they know whose palm to grease and how to do it.  That or they only tell stories about the times that it worked.

All of the foreigners I know who have given bribes have done so at the advice of their Chinese partners of staff.  Most of the foreigners I know continue to believe that bribes have helped them get more done more quickly in a corrupt system.  However, it’s clear from talking to them and comparing their experiences to the “clean living” lifestyle practiced both by me -and- a small handful of other foreign businesspeople I know that they are not only not gaining an advantage from bribing but are possibly setting themselves up for a pattern of repeat extortion.

Yup.  I 110% agree.  I am convinced that there are companies that almost want to pay bribes so they can act like they “really know the system.”  I am also convinced that there are companies that make clear from day one that they will never ever ever under any circumstances pay a bribe so don’t even bother asking.  Which of those two types of companies becomes most susceptible to being hit up for a bribe?  I am not saying that all companies can function in China without paying a bribe at some point, but I am saying that most foreign companies can and do function in China just fine without ever paying a bribe.

What do you think?

For more posts along these lines, check out the following:

  • RenQing

    Couldn’t agree more with the sentiment of this email. If you ever want to have the moral high ground in China – and this can be worth holding – then never go down the bribery path. I’d sooner fail trying than bribe someone for a result that could actually be removed from under your nose just as easily as it appeared – but where do you stand then?

    That said however… there is an art in there somewhere… knowing when to insist you pay for dinner and when to let yourself be treated is one. Giving tickets to the opera (you know he likes) because you were ‘given’ them by ‘a friend’, Mooncakes at Mid-Autumn, small gift or card at New Year etc and other roundabout means of keeping people sweet could also be called bribery but does not rely on red-envelopes.

    I believe we call it CRM as this fits within the acceptable limits of our own culture!

    • Nathan

      RenQing nailed it. A lot of the low-level small gifting and treating borders on bribery and sometimes crosses that border. In some ways though it’s hardly different than generous expense account spending. Personally I don’t have much trouble differentiating between generosity, which I don’t mind, and outright bribery which I’m not open too.

      In my experience ‘bribes’ can often be built into a transaction through the inclusion of a third party who is cozy with some decision maker at the principle – eg. a secondary supplier stipulated to be included in contract as a prerequisite for awarding said contract (an installer for instance). This stipulation usually happens face to face and never in writing. The price quoted for whatever service the third-party providing is usually higher than what you’d pay if you were sourcing said service freely. One can often assume that a payoff is taking place somewhere, but it’s only an educated assumption and there is no concrete way of knowing. That is of course unless the fee demanded by the secondary contract is far enough out of proportion to the service provided that corruption was obviously implied.

      It’s like if the contract included a $20 chocolate bar, I can say ‘yeah it’s an expensive chocolate bar, but it’s what the client wanted’. If that chocolate bar is $200, well that looks pretty obviously corrupt.

      Can’t ever remember receiving an outright request for a bribe. In fact when we have our annual audit the tax guys comment repeatedly on how clean everything looks. Almost makes me want to explore ways to maximize…heh heh. Better not.

    • Lucas

      Great Post. 

    • Marian Rosenberg

      The line between gifts and bribes is a fuzzy one…

      Imagine a situation where the wife of a government official that my company often has to deal with has a long document that needs to be translated and I decide to give her a heavy discount (or even do it for free).

      If I was friends with her before I knew what her husband’s position was, is it bribery?

      If I met her because of her husband’s position and then became friends with her, is it bribery?

      If it’s her husband who asked me to do the job, is it bribery?

      What about if her husband is a government official who I never have to do deal with professionally?

  • http://www.joyceyland.com/ Joyce Lau

    This may not be true in all industries and for all people. But in my experience, those who offer bribes are pretty straightforward.

    If they think of you as someone who can be bribed / gives bribes, you will be categorized that way and treated that way. If you firmly say no from the beginning, and make it clear that there is no advantage for them, they go away and find someone else to bother.

    As an Asian journalist working in Asia, I get offered stuff.  Recently, I turned down a Bali holiday in trade for falsely lavish coverage of a resort. (I’m not talking about the grey area, where some local publications do send journalists on junkets, or food is provided at a media event. This case was a clear-cut bribe)

    My standard line is “It’s NYT company policy and I will get fired if I take it. Also, it’s not in my power to give what you want. I couldn’t run a big free ‘advertorial’ about your resort if I wanted.”

    That’s is not the main reason I reject bribes. I do so because I’m honest. But offering a black and white practical reason — one that is true — lets everyone save face. I’m not personally rejecting their “offer”. It’s company policy.

    I don’t get rude, argumentative or go on about ethics or cultural differences. I politely, briskly, repeat my mantra. From then on, they just send me information, and I report as I want — the way it should be.

    Does bribery pay? Maybe in the short term. In my field, PR companies get the coverage they want, without the pressure of actually convincing journalists that their clients are legitimately newsworthy, or worrying about the unpredictability of coverage. Meanwhile, journalists (mostly young and Chinese) get the  “transportation fees,” iPads, five-star-hotel meals, or whatever it is they’ve requested.

    But in the long term? The foreign PR company that “went local” with bribes finds  it now has to pay more and more, at rising prices, all the time, if they want any coverage anywhere, because word has spread that give “gifts.”  And if they paid off ABC Newspaper once, why not twice for another client, and why not for XYZ Television and 123 Website?

    The honest firm may not have as much coverage in the beginning, but it will be spared this rolling snowball of corruption and expense.

    Plus, of course, there’s the bigger issue that everyone loses legitimacy. It’s the poor reader / viewer / consumer who is screwed, since nobody believes that anything is honestly reported.

  • http://www.joyceyland.com/ Joyce Lau

    Speaking of bribery, this just in from the WSJ: HONG KONG—The co-chairmen of Sun Hung Kai Properties Ltd., Hong Kong’s
    largest real-estate company by market capitalization, and a former top
    city official were charged in connection with a bribery investigation by
    Hong Kong’s antigraft body.

  • http://larrysalibra.com/ Larry Salibra

    Foreigners that pay bribes are the same ones that get taken advantage of by their own China employees.  Their employees see that the boss has shady ethics and so do the same. Treat others like you wish to be treated.

  • Tim

    Although I encourage my clients to stay away from bribery; this post is misleading. Bribes can and often do expedite government approvals and there are quite a few foreign invested firms that regularly practice bribery including those whom many readers here would expect to be above the fray. 

    And in many cases it just works. I don’t like it and I can give quite a few non-judgmental reasons why someone should not do this but most people I have witnessed engaged in bribery benefit from it more than they are penalized. 

    • Anonymous Poster

      Or are of the opinion that they benefit from it more.

      I’m the person who sent the email to Dan.  In the conversation that prompted me to ask him to do a post on bribery the other party was extremely pleased with himself about how he’d managed to expedite things while simultaneously annoyed at the culture that made expediting necessary. 

      He was expediting the ability to issue fapiao.  It only cost three red envelopes at 500 yuan apiece.  And it only took him two weeks longer than my application.

      When I brought that up, he correctly pointed out that I issue my fapiao in a slightly different way than he does.  He then went on to point out other examples of successful bribery on the part of his Chinese staff such as speeding up the company registration paperwork.  This was when I decided to leave the conversation.

      Two smug examples of how he successfully bribed government officials to expedite paperwork for his company and in both examples, while it wasn’t a very large sum of money, his expedited paperwork TOOK LONGER THAN MINE.

  • MHB

    Good article – but why did you put the Guangdong tag at the bottom? Are you trying to tell us something?

  • Hillary Klintion

    So you think that you can get Chinese people to do something without “incentivizing” them?   Get real….

    • MHB

      I take exception to that comment – as a general rule in competitive business, yes, you can be right. But the tone comes across badly.

      My wife (Chinese) was taught as a child, and strongly believes: ‘do good to others do good to yourself’. Her explanation – Any good deeds for others will pay off in the long run, whether it be by making you a more content person or by good deeds being done in turn for you. I have met many Chinese who have acted in accordance with this idea.

      • http://www.joyceyland.com/ Joyce Lau

        I take exception to that comment, too, especially as a Chinese person.
        This is a common, and false, excuse. “All Chinese people take / gives bribes. Corruption is just the Chinese way.”
        I hate it that Chinese people often look down on ourselves, and immediately link bad behavior to our (alleged) culture.
        Talk about bad stereotyping — the idea that no Chinese person out there is honest.
        It’s also defeatist. How will anything ever change or improve if that’s how we think? Yes, the world wants to do business with China. But China is also seen as a laughingstock because of its corruption.

        Well, I’ve made it almost 15 years working in HK without taking bribes, and know plenty others, too.

        I find that the people who make the most excuses, are the ones who have something to feel guilty about.

  • Lindum

    You can hold the moral high ground, but that’s about all you will be holding.

    Why do you think that any Chinese business people and middle -ranking and above civil servants in China spend all their time at lunches and dinners?

    The problem for the Chinese when taking or giving bribes to or from a Westerner, is they do not trust you. They don’t trust you to keep your mouth shut, and they don’t trust you becaause you are not one of the boys.

    As