Best Practices for Managing Compliance in China 2013

Executive Summary

• Because of a highly competitive and culturally different operating environment, ensuring adherence to corporate ethics and compliance policies remains a concern for many US companies doing business in China. A recent US-China Business Council (USCBC) member survey on compliance best practices found that 60 percent of interviewed companies were concerned about competing with companies not following the Foreign Corrupt Practices Act (FCPA).
• Underdeveloped rule of law and lack of transparency greatly increase the risk that Chinese government agencies may solicit companies for benefits or kickbacks.
• Compliance training and monitoring techniques such as audits and whistle-blower programs are critical components of a successful compliance program. Over 90 percent of interviewed companies incorporate such techniques into their compliance programs.
• An increasing number of companies is seeking to incorporate into their existing compliance programs measures that will minimize liability risks from joint venture (JV) and third-party service providers.
• Companies tend to run compliance programs and set up local compliance teams in accordance with regional characteristics, by incorporating tailored training or allowing regional teams to approve entertainment expenses programs.
• US companies vary in the thresholds they set for entertainment expenditures for Chinese government stakeholders, as well as the methods by which they approve expenditure requests.
• The majority of companies interviewed was not optimistic that new Chinese government compliance efforts would lead to significant improvement in the enforcement of China’s anti-bribery laws.