China Entrepreneur: Voices of Experience from 40 International Business Pioneers

Chapter 6

Ethics and Corruption

“In China, there is an absence of religion. The moral concept is much weaker. In my mind, when a Chinese comes to a crossroad, the decision-making is about ‘What is the benefit for me?’ On average, the Chinese tend to think about their benefits first.”

Prakash Menon (India), President of NIIT (China)

“I have seen so many foreign companies in which the foreigners had no idea what was going on in their own company, underneath the Chinese surface. Many of these expats get cheated on several levels and have no idea what’s happened to them.”

Simon Lichtenberg (Denmark), Founder and CEO, Trayton Group

INSIDE CHAPTER 6

Putting Corruption into Context

Government Guanxi

B2B Corruptio

Unethical Employees

Avoiding Government Corruption

Blocking B2B Corruption

Fighting Internal Corruption

Conclusion

Introduction

For foreign entrepreneurs in China, the “c” word—corruption—is often one of their most serious concerns when preparing to invest in a business. On one hand, rumors abound about China’s guanxi (or relationships) system, in which backdoor connections to both government and private sources are necessary in order to operate a successful business. There is the widespread feeling that if you don’t use backdoor shortcuts to getting business done, your competitors will. On the other hand, foreign-invested businesses are subject to the tough anticorruption laws of their home countries, such as the Sarbanes-Oxley Act regulating accounting for U.S. companies worldwide. ...