'Rampant corruption' threatens Chinese procurement deals

6 August 2013

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7 August 2013 | Will Green

Companies doing business in China face the risk of “rampant corruption” in large procurement deals, according to a report.

China Country Risk Report highlighted a number of threats including corruption, intellectual property rights infringement, public protests, labour rights violations and new environmental regulations.

The report from Maplecroft said: “Corruption is deeply entrenched in all levels of government and the private sector. This is primarily a result of the marked increase in economic activity and investment coupled with a lack of regulation and accountability.”

Referring to heavy industry, the study said “rampant corruption remains a top concern in large procurement deals” and “complex networks of manufacturers and traders make it very difficult for foreign buyers to monitor the entire supply chain”.

The report added: “Foreign companies will face high legal and reputational risks when interacting with local government officials. This is especially the case given increased public scrutiny of their activities in the past few years. Increasing public expectations for anti-corruption measures will heighten the risk of social instability.”

It also warns about being associated with poor working conditions, the cost of complying with environmental rules and protracted legal wrangles. But it said the country weathered the global financial crisis well, with an average annual growth rate of 9.2 per cent from 2008 to 2012. 

“The challenge now facing the economy is to manage the smooth transition to a new growth model with lower overall levels of growth,” said the study.

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