One point I’ve alluded to before is that doing business in China is almost inevitably dirty. Bribes and graft and corruption are the norm, and I don’t know how a foreign business could get very far without playing by China’s unwritten rules of business. This is the “dirty little secret” of doing business there — the fact that literally all of the respected big-name companies making forays into China are breaking their own rules and sullying their own integrity. But from a pragmatic perspective, they simply have to. No bribe, no business.
This anomaly is hinted at in some of the articles now coming out about Lucent allegedly firing four senior executives in China for corruption.
Revelations that Lucent Technologies Inc’s senior executives in China may have violated US law banning the payment of bribes overseas is unlikely to be an isolated case in a country where corruption is common despite government campaigns to stamp it out, analysts said.
It is common for companies bidding for business in China to offer all kinds of financial incentives to potential customers, including foreign education for senior executives’ children, gifts of residential property or a car or paid overseas travel.
Industry sources said one company in the telecoms sector provided senior executives of one of its customers free holidays and a company car to drive their children to school.
There’s really no choice. I remember organizing an event where we had to put up a tent, and my client had to go back twice and bribe the fire chief with more than $10,000 (USD) to get the permit. (You need a permit for everything in China. It’s part of the graft system.) This type of corruption is built into the bureaucracy, and it keeps bureaucrats loyal to the party despite their crummy salaries. I hope Lucent isn’t thinking that it can succeed in China without playing the corruption game.
1
By Tom
I forget how many years ago, IBM got slapped by the US government big time for executives giving bribes to do business in Brasil. Have no idea whether the US government was doing an investigation of Lucent or not, but it might explain why they decided to throw the 4 executives overboard.
April 7, 2004 @ 7:09 pm | Comment
2
By Tom
Ooops. My mistake.
It was Argentina and IBM ended up paying a $300,000 civil penalty.
http://www.kaufmanandcanoles.com/pubTemplates/article.asp?PubCode=221
Of the 4 IBM execs involved, two of the four fled back to their native Brasil.
http://www.wired.com/news/business/0,1367,12115,00.html
April 7, 2004 @ 9:24 pm | Comment
3
By Conrad
Actually Richard, there are companies that do it honestly. A significant part of my practice involves corruption and advising companies regarding the US Foreign Corrupt Practices Act and and other countires related statutes.
A big multinational can, if it is determined to obey the law and willing to lose some business, function honestly in China. It is the smaller companies and the local businessmen who really have no choice.
April 8, 2004 @ 3:38 am | Comment
4
By Ron
Conrad is right.
However, if those of us who aren’t big players in China business avoid bribes, we stand to lose a lot.
Case in example:
Two days ago our goods were to be shipped out of China and to US, and of course that meant the container trucks should be able to enter our factory.
It so happened that we were asked for a specific amount for some papers and when we felt the payment unnecessary, overnight construction works started on the road right outside our factory gates.
If y’all remember from the articles I write about Doing Business in China, one of my associates is supposed to carry a lot of weight and he is mainalnd Chinese.
Result, we had to pay and the unnecessary road works stopped almost suddenly.
Yes, they hold us by our balls.
Cheers!
April 8, 2004 @ 4:29 am | Comment
5
By richard
Conrad, the company I was dealing with that had to payu the $10K in bribes for the tent was one of the very biggest multinational auto companies. Maybe some of the big MNCs can get around it, but lots of them cannot.
April 11, 2004 @ 10:43 pm | Comment
6
By pete
These comments are not meant to be taken as criticism of any U.S. citizen individually or any U.S. company either. But I would be interested in knowing how caving into the corrupt Chinese officials effects an American company’s business culture here in China and in the U.S.?
After having been here awhile and having see or heard about the endemic corruption in China, I wonder what its impact will be on world trade and ethics over the next 20 or so years? From what I have seen is that cheating and lying are not particularly frowned upon. In my experience a large percentage of all students either cheat or collaberate even when told not to. I am not sure there is any standards of ethics in China or at least none that are comparable to those in America.
The mainland Chinese seem to operate on the basis that only the results count, not how you got there. With China being a large market and relatively soon the largest, how will the “Chinese” attitude affect international trade activities and competition? Food for thought.
April 11, 2004 @ 11:27 pm | Comment
7
By pete
These comments are not meant to be taken as criticism of any U.S. citizen individually or any U.S. company either. But I would be interested in knowing how caving into the corrupt Chinese officials effects an American company’s business culture here in China and in the U.S.?
After having been here awhile and having see or heard about the endemic corruption in China, I wonder what its impact will be on world trade and ethics over the next 20 or so years? From what I have seen is that cheating and lying are not particularly frowned upon. In my experience a large percentage of all students either cheat or collaberate even when told not to. I am not sure there is any standards of ethics in China or at least none that are comparable to those in America.
The mainland Chinese seem to operate on the basis that only the results count, not how you got there. With China being a large market and relatively soon the largest, how will the “Chinese” attitude affect international trade activities and competition? Food for thought.
April 11, 2004 @ 11:27 pm | Comment
8
By Bingfeng Tea House
lonely (and simple) americans in china, part I
lonely (and simple) americans in china, part I
January 1, 2005 @ 3:36 am | Comment
9
By Bingfeng Tea House
lonely americans in china, part I
lonely americans in china, part I
January 2, 2005 @ 12:32 am | Comment