EVERYONE rightly wants a share of China’s growth, but are companies ready for the challenges of a region where corruption is part of the landscape?
China’s problem is notorious. President Xi Jingping is publicly leading an anti-corruption crusade and last year, Chinese courts convicted 29,000 people for embezzlement, bribery or dereliction of duty. China scored just 40 points on the 2013 Corruption Perception Index, on which a score of 50 or below indicates a nation with a serious corruption problem.
State capitalism has received a lot of attention for its ability to get big projects done, fast. But a corrupt system without market feedback has little to stop work being done badly, on the cheap. When senior roles can be bought and good materials are regularly swapped for shoddy, quality is out of control.
Whatever the merits of this particular case, the charging of Glaxosmithkline’s (GSK) former head of operations in China shows that such concerns affect every business that trades in China. The region’s corruption taints strategic calculation about its economic trajectory. Worse, it puts local agents at high risk of being drawn into a culture of illicit payments. Finally, firms are at the mercy of sudden retribution, when higher echelons decide to demonstrate how they are the ones riding the tiger they do not know how to dismount.