By Cheng Wenhao
A significant change occurred between 2005 and 2006 with respect to China's anti-corruption campaign: whereas previously the campaign focused only on bribery and corruption in the public sector, the scope has now expanded, making anti-corruption in the private sector a priority issue.
China's anti-corruption campaign is now not only targeting officials who receive bribes, but also the businesses that provide bribes – both to public officials and to other businesses. The expanded scope of China's anti-corruption campaign will have a substantial, positive impact in China's business investment environment.
In China, the term "business bribery" (shang ye hui lu) refers to bribery by business entities and their employees in order to buy or sell products and services. China has been tackling this problem for more than a decade. As early as 1993, China passed a Law Against Unfair Competition; in 1996, China issued a Provisional Anti-Corruption & Bribery regulation. Both forbid business bribery and other improper business activities. China's criminal statutes also set harsh penalties for offering and receiving bribes.
However, the secret nature of business bribery activities combined with weaknesses of the law enforcement system have made it very difficult for China's official agencies to eradicate business bribery. To make things worse, there isn't always a clear line between business bribery and Guanxi (personal networks), and gray areas often exist. In fact, countries have different descriptions of bribery. For example, according to Chinese law, a public official can be regarded as corrupt if he or she (and even his or her relatives) receives kickbacks from business entities. However, if it is a government department or institution — not an individual — that receives payment from business entities for granting them contracts, it is difficult to prosecute any individuals.
Fast growth of China's economy and intensified competition in most markets have made business bribery a big problem in China, especially in such sectors as health care, real estate, finance and construction. And it has seriously disturbed Chinese economic development and social stability. Business bribery not only interrupts the smooth function of market systems, it causes great damage to the national economy and harms the interests of ordinary consumers.
In recent years, a number of foreign companies were fined by their own government for offering bribes in China in order to obtain business. These efforts in particular have greatly increased Chinese decision-makers' awareness of the problem. Beginning in 2006, while fighting corruption in the public sector, China has made fighting business bribery a priority of its official anti-corruption campaign. The state now targets not only bribery of public officials, but also bribery between business entities and individuals in order to facilitate business transactions.
In order to coordinate nationwide anti-business bribery practices that involve various industries and sectors, China has formed a Central Anti-Business Bribery Leading Group, which includes top leaders of more than 20 ministry-level public agencies. The group is concentrating on fighting corruption in industries hit most by the problem, including construction, land use, property rights transactions, medicine procurement and sales, and government procurement. Ministries and provisional governments have made their respective work plans.
New amendments to China's criminal laws are also expected to update provisions on business bribery to better address these crimes. And this will be promoted from various aspects such as policy, law, implementation, etc. For example, the Ministry of Commerce launched establishment of the Union Supervision System on Business Credit; the State Industry and Commercial Bureau will tackle the bribery problem in the medicine sales business; and the State Audit Bureau will emphasize investigation of business bribery in 2006.
In the past, officials who accepted bribes usually received harsher penalties than people who offered bribes. In order to reduce demand for business bribery deals, China's law enforcement agencies are now working to increase the costs for offering bribes. In January, China's prosecutorial agencies opened to the public the “bribers information database.�? This system, if used properly, will disqualify business entities and persons having been convicted for paying bribes from future public bidding for government contracts. Thus, it can greatly increase the potential costs that bribers need to pay for their unlawful practices in the past.
China is fighting the very difficult war against business bribery. The anti-business bribery campaign is progressing in tangent with some achievements. In order to make up the shortage of present law, the anti-business bribery items are expected to be included in the new reform of Criminal Law. In addition, some scholars call for the immediate constitution of a unified Law of Anti-Business Bribery. It can be expected that controlling business corruption will remain one focus of China's anti-corruption campaign in the near future. Such efforts will contribute to a fair and healthy market environment in China, directly serving the interests of both Chinese and foreign business entities alike.
About the author:
Cheng Wenhao is Director of the Anti-Corruption and Governance Research Center of Tsinghua University, which was established in 2000.
© 2006 Business for Social Responsibility