West Fires Back At Anti-Graft Probes
After several months of silence as they were targeted for a series of anti-graft investigations, I’m happy to see that western firms are finally speaking out about the biased nature of this Chinese campaign against them. The firms are voicing their grievance through an industry organization, the European Union Chamber of Commerce, which is complaining that western drug makers have been unfairly targeted in the campaign that began around 2 months ago and has netted such big names as Britain’s GlaxoSmithKline (GSK) (London: GSK), Switzerland’s Novartis (Switzerland: NOVN) and French drug maker Sanofi (SAN). At the same time, the United Nations is adding its voice to the debate, saying this kind of anti-corruption campaign should be a welcome step to cleaning up the country’s business environment.
As a relatively impartial observer, I have to say that I agree with both of these views. I’ve been saying since the start that this corporate anti-graft campaign really does appear to unfairly target foreign firms, even though most of the firms are probably guilty of the bribery of which they’re accused. My major complaint is that most Chinese firms are equally guilty of similar practices, even though none have been targeted for investigations yet. At the same time, these recent probes do send an important message that such graft won’t be tolerated from anyone, and this campaign is an important step to cleaning up a Chinese business culture that is rife with corruption.
All that said, let’s take a look at the latest headlines in this ongoing corruption cleanup that dates back to July. GSK was the first pharmaceutical company to come under scrutiny for allegedly paying billions of yuan in bribes to doctors and other medical professionals to buy its drugs. (previous post) Since then, other internal whistleblowers have come out with similar allegations against other foreign drug makers, leading to more probes.
Now the European Union Chamber of Commerce in China is finally speaking out on the matter, saying most of the firms that have come under investigation have global standard operating procedures and are largely responsible in their China business practices. (English article) A chamber representative conceded there may have been cases of corruption by some of the firms, but also pointed out that not a single Chinese company has been investigated yet.
I’ve previously said that western multinationals make easy targets for Chinese investigators, as they often lack the networks of government and personal connections that protect local companies from similar probes. More recently Beijing has began investigating a number of officials at big state-run companies for corruption, which should come as a welcome development to show that not only foreigners are being targeted. But most of those investigations have been aimed at specific individuals for accepting bribes, and we haven’t really seen any major accusations leveled at entire Chinese companies yet for institutionalized graft.
From the European Chamber’s protest, let’s look quickly at the comments by Dimitri Vlassis, a top economic crime fighter at the UN. (English article) Vlassis says the investigations should be welcome by western firms and not a source for concern, as they reflect a new zero tolerance policy towards graft under new President Xi Jinping.
Perhaps Vlassis is correct, as Xi certainly does seem to be targeting both Chinese and westerners in his bid to clean up corruption in China’s business world. But if Beijing really is showing zero tolerance for such corruption, then it really should launch investigations against some locally based firms that are guilty of similar graft and other corruption, showing that no one is immune from such probes.
Bottom line: Beijing should launch more probes against domestic firms to show it is being even-handed in its corporate anti-corruption campaign and not just targeting foreigners.
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