Coping with Corruption in Trading with China Essay

Words: 1042
Pages: 5

CASE 2-5 Coping with Corruption in Trading with China
Corruption is on the rise in China, where the country’s press frequently has detailed cases of corruption and of campaigns to crack down on it. The articles primarily have focused on domestic economic crimes among Chinese citizens, and on local officials who have been fired or assessed other penalties. Indeed, China has been rated by Transparency International as number 59 of the 102 countries the German organization rates on its “Corruption Perception Index.”1 Finland is rated the least corrupt at number 1, the United States at 16, and Bangladesh the most corrupt at number 102. Corruption’s long arm now is reaching out to touch China’s foreign business community. Traders, trade
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Because the savings can far exceed transport costs, some imports that would logically enter China through a northern port are redirected through the southern province.

Foreign traders make several types of payments to facilitate sales in China. The most common methods used are trips abroad. Chinese officials, who rarely have a chance to visit overseas, often prefer foreign travel to cash or gifts. (This was especially true when few PRC officials had been abroad.) As a result, traders report that dangling foreign trips in front of their PRC clients has become a regular part of negotiating large trade deals that involve products with a technological component. “Foreign travel is always the first inducement we offer,” said an executive involved in machinery trade. In most cases, traders built these costs into the product’s sale price. Some trips are “reasonable and bona fide expenditures directly related to the promotion, demonstration, or explanation of products and services, or the execution of a contract with a foreign government agency.” But other trips, when officials on foreign junkets are offered large per diems and aren’t invited specifically to gain technical knowledge, may be another matter. Foreign travel isn’t always an inducement—it also can be extorted. In one case, a PRC bank branch refused to issue a letter