U.S. Companies on High Alert in China

February 27, 2014

U.S. Companies on High Alert in China

China’s anti-corruption laws have put U.S. companies on high alert in the wake of several high-profile corruption and pricing probes. According to a new report from the American Chamber of Commerece in Shanghai, U.S. companies are now more concerned with their compliance with local laws than with international anti-corruption laws, such as the Foreign Corrupt Practices Act.  There is just one problem.  China has no unified anti-corruption law or enforcement body.  Thus, global firms must navigate a patchwork of regulations and government agencies in an effort to comply with Chinese law, and even so, they face both confusion and uncertainty.

Thus, it is not surprising that 40 percent of the 400 American businesses surveyed by the Chamber say they plan to spend more on compliance in China in 2014.  Moreover, the risks to American businesses from China’s anti-corruption crackdown are now a greater concern than the economic slow down reported across the country.   

While the survey did not focus specifically on reputational risk, the GSK experience should also serve as a warning sign to companies which find themselves in the cross-hairs of anti-corruption investigations.  GSK found itself battling politically motivated leaks, stories reporting great detail about ongoing investigations, and a rapidly maturing social media landscape that spread news widely in seconds.  As a result, the company’s reputation was spoiled before it even had much of a chance to investigate the charges and defend itself.  In addition to beefing up their compliance, global companies would be wise to make sure they are fully prepared to respond quickly and effectively, in China and globally, to allegations of corruption in their operations. 

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