Cover Editorial - EO print edition no. 475
Translated by Tang Xiangyang
Original article: [Chinese]

Multinational corporations are currently facing unprecedented challenges in China regarding the morality of their business transactions. Rio Tinto employees were recently found guilty for taking bribes from Chinese steel companies; IBM is once again involved in a business corruption scandal; Johnson & Johnson has been connected to the dismissal of an official with the State Food and Drug Administration; and even Cheung Kong Holdings, a company owned by Li Ka-shing who once claimed that in regards to illegal business practices he would "never do such things" has been linked to the case of Guo Jingyi, a former senior inspector charged with taking bribes. Other cases concerning bribery which have already reached their verdicts have involved the companies Siemens, Daimler, Avon and Lucent.

There is a popular held view that multinational corporations frequently resort to commercial bribes because that is the way business is done in China. Corporations have to give up their principles and get used to China's "hidden rules" if they want to succeed here. This view is widely expressed whenever these types of events occur. However, this view is in fact a misunderstanding that needs to be corrected.

American Kimberley Ann Elliott states in her book Corruption and the Global Economy: "Be they developed countries or developing countries, be they so-called democratic or autocratic, corruption is everywhere."

James Wolfensohn, former president of the World Bank, also argued that scandals and fraudulent conduct not only happened frequently in Third World countries, but is also expanding in industrialized countries. The integration of governmental power and profit is perhaps the nature of capitalism.

In the United States, big companies maintain implicit but close ties with the government, political parties and Congress. At the same time, in pursuit of a relatively fair market environment, companies and the government establish strict regulations to control the nature of their mutual benefits. In the western world, companies are locked up in a cage of laws and regulations while in China, with imperfect regulation, companies are free from their cages. This is why commercial bribes frequently occur in China.

No companies possess a natural moral character. To clarify this point a bit, my intention is not to trigger nationalism, nor is it to discard responsibility, but to set clear parameters to solve the problem. Regarding the commercial bribes conducted by multinational corporations, a reasonable view is, we have cultivated the land for commercial bribery, but the seeds have been brought in by the multinational corporations themselves. Therefore, when managing this problem, we must account for the problems of both the multinational corporations and our business environment.

Many multinational corporations claim they have strict business rules to avoid the use of commercial bribes. Indeed they have. But since all of their institutions are global, such rules easily appear naive in countries without a system of complete commercial regulations. We can not require perfect regulations, but should there not be a difference between rules for developed countries and those for their developing counterparts? Besides, it has been proved that multinational corporations are intentionally ignoring such differences so as to create more "operational room" for themselves. Without a doubt, multinational corporations need to reflect on this type of action.

China has provided the fertile ground for commercial bribes and, frankly speaking, Chinese companies conduct commercial bribery more often than their foreign counterparts. Close cooperation with officials has continuously been considered a traditional way of doing business in China while our law has never effectively restrained such behavior. Many cases of commercial bribery are brought to light only when the identity of corrupt officials is reported to the police; an investigation is seldom targeted at enterprises. This indicates we still have lots of work to do to improve and intensify supervision on enterprises. When talking about tackling cases concerning commercial bribes, it is not only multinational corporations but also Chinese enterprises that should be targeted. Only in this way will we construct a fair and credible market environment.

This article was edited by Rose Scobie