Anti-graft, China, and the West

As western countries are trying to enforce their own internal anti-graft laws in regards to doing business in China, in some ways these efforts are misguided and are leading to unexpected results.  The “South China Morning Post” ( posted an article today, April 4, 2013, on its website, “Insight and Opinion” which sets forth some of the problems western companies are bringing on themselves with their sometimes ill-considered anti-graft efforts.  The article is entitled, “Western anti-graft efforts threaten democracy efforts”, by Robert Precht.  Mr. Precht writes:

“The efforts of some Western countries to enforce their own anti-bribery laws in China are more likely to produce false accusations and hinder democratic reform than reduce corruption.

According to news reports last month, the U.S. Department of Justice has targeted Microsoft and The Wall Street Journal for violating the Foreign Corrupt Practices Act, a 1977 law which makes it a crime for U.S. organizations to make payments, however small, to foreign government officials in order to secure any kind of decision in their favor. The law applies to, among others, U.S. companies, universities, foundations and non-profit organizations. Britain has a similar law that applies to British organizations working in China.

U.S. investigators are looking into allegations from tipsters in China that Microsoft made gifts to officials in return for software contracts and that The Wall Street Journal made payments to officials to obtain information for news articles.

Bribery or giving gifts to officials is common practice in China. When I was running a human rights program in Beijing on behalf of a New York-based non-profit, I was asked to give cash to Chinese university professors (government employees) to help my staff obtain proper visas and to officials in charge of approving company registrations.

Most frequently the machinery of bribery involves using “brokers” to get various tasks done.

My experiences were not unique. Friends and colleagues who also work in Beijing with US organizations – law firms, companies, foundations, universities – all have stories about making gifts to secure some favorable decision from a government bureaucrat.

When I complained to my Chinese friend about the pressure to make gifts, he said: “This is China. Either you … make gifts or you should leave.”

One of the unintended harms of enforcing the US anti-bribery law in China is that it may actually stifle efforts to end corruption. U.S. journalists, human rights workers and university researchers play an important role in shining light on the darker recesses of Chinese politics. Preventing Americans from making gifts to Chinese to obtain information useful to promote democratic reform will hinder the disclosure role the Americans play.

The U.S. law also gives the Chinese government a powerful tool to discredit anonymously Americans who anger its leaders. The Wall Street Journal investigation was launched at the behest of an anonymous whistle-blower who claimed its staff in Beijing had paid officials for information. This allegation comes on the heels of hard-hitting articles last year in which the paper revealed details about the fall of corrupt politician Bo Xilai, and about the unseemly wealth of some of China’s top leaders.

Anyone who has worked in China knows the power of its government to pressure, or employ individuals to make false accusations against, U.S. organizations. Yet organizations that find themselves the targets of the anti-bribery probes are virtually powerless to challenge their accusers.

The solution is simple. The U.S. Congress should amend the law, providing that it will only be applied in countries that meet certain minimum requirements of democracy and will not be applied in authoritarian regimes such as China.

The anti-bribery and similar laws may be useful in helping functional democracies keep free of corruption. In China it does a great disservice to foreigners and Chinese alike.”

Robert Precht is director of Justice Labs Limited, a Hong Kong think tank. Previously he served as director for China for the Global Network for Public Interest Law.  His article well illustrates the challenges and difficulties one faces when you want to do business in China.

Hawkeye in China

- Lex Smith

Published by admin on April 7th, 2013 tagged Uncategorized

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