With lower labor costs than the United States and fewer regulations, many American businesses decide to extend their companies to China and to build their factories in China.
However, they must also be wary of corruption, as the Chinese government and their economy maintain a close relationship. While the anti-corruption campaign launched by the Chinese President, Ji Xinping, mainly focused on corruption within the government, it also investigated foreign and domestic companies. Penalties for serious corruption could include a life sentence in prison or the death penalty. In addition, judiciaries can also be swayed by political elections.
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Despite the extensive anti-corruption campaign, China’s placement on Transparency International’s Corruption Perceptions Index of 2016 showed China to have the same score as it did when President Ji Xinping first took office in 2013. So, how do Chinese companies avoid corruption?Doing business in China is rooted in Chinese traditions such as having good guanxi with business partners, because the law cannot and did not always hold their company’s partner to honor mutual agreements. That includes maintaining a good relationship or guanxi with business partners. Maintaining one’s guanxi could mean having tea with business partners and getting to know them outside of the meeting room. However, having expensive parties for business partners and their associates can be seen as bribery.
Generally, native Chinese people are wary of foreigners, so to fully be capable of having good guanxi, one must not only be respectful and aware of Chinese culture but ideally speak some Chinese (preferably mandarin) as well. Furthermore, because communication between business partners is crucial, it is important to understand how to read and speak Chinese. Often times, a mutually beneficial agreement that has started out well may lose momentum after frustrations from being unable to explain Chinese concepts in English.
(Not that Google translate won’t work, but some Chinese phrases don’t translate well into English.) Understanding Chinese can also help avoid scams and corruption as well as improve company relationships and open doors for new opportunities in the future, as many Chinese companies feel more comfortable in pursuing business opportunities with companies that they have good guanxi with.