News

In June, 64 employees were fired from the Agricultural Bank after an audit exposed $6.45bn in irregularities, including money used in serious crime as well as for irregular loans. The Chinese Banking Regulatory Commission announced plans to fight corruption and fraud in the finance sector.

A month before, the Central Commission for Discipline Inspection publicly reported on 9,000 cases of commercial bribery. The country's stock exchange is introducing measures to protect shareholders' interests.

It is still not known whether these measures are designed to show that the Government is serious about tackling corruption or whether it will really start to clean up the system. At any rate, multinationals face a difficult path ahead. Whilst they would welcome anti-corruption measures, they may find that they bring new risks and market challenges in their wake.

For instance, measures to fight large-scale corruption in China's billion-dollar healthcare market could intensify the scrutiny with which regulators look at the underlying costs of the industry. In this way, the authorities may look more deeply into the processes of a healthcare company, exposing exclusive processes and intellectual property, as well as demanding an account the billion-dollar plus expenditure to get a drug to market.

Facing the China corruption challenge
Kenneth J. DeWoskin and Ian J. Stones
Far Eastern Economic Review, September 2006, Vol 169 No 7
Review by Morice Mendoza