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A Perfect Storm of Doing Business in China

A little fear is healthy. It will keep you vigilant and aware. At this point if corporate compliance departments are not a little fearful of doing business in China then their managers and employees are not doing their jobs.

Doing business always requires managing risks. Doing business in China requires managing a “perfect storm” of risks:

State-Owned Entities. 

Although the percentage of state-owned entities’ share of economic output has been steadily decreasing since the late 1970s, they are still major players in banking, transportation, telecom, construction, oil and gas, and healthcare. State-owned entities are so prevalent in China that multinational companies seeking to develop relationships in China may not even know that seemingly private companies are actually state-owned entities or have other close government ties.

Broad Definition of “Foreign Official.” 

We have witnessed the SEC and DOJ applying a “foreign official” definition that seems to be continually expanding , when the DOJ prevailed on its interpretation of ate-owned “companies” as being an instrumentality of the government. For drug and device companies, their sales teams interact on a continuing basis with foreign officials.

Culture of Gift Giving

Companies seeking to enter or succeed in China are faced with a culture where gifts are an expected part of doing business. Managing expectations of potential customers, while at the same time managing gift and entertainment policies that address an often-gray area of when a gift “crosses the line,” pose unique challenges.

Gray Market Income. 

Chinese doctors are underpaid and generally unhappy with their working conditions. Doctors expect to supplement their meager salaries with “gray market income” –payments in return for their prescribing decisions. Although officially forbidden, it is common. Companies seeking to do business with professionals in China may find themselves being compared to other companies that are offering rebates, kickbacks, or other incentives to utilize their products or services.

Conflation of Leisure and Business Travel. 

China only recently relaxed its restrictions on private Chinese citizens traveling outside of Mainland China, and many Chinese are seeking opportunities to travel to the US and other tourist destinations. Leisure travel that tries to disguise itself as business travel, such as a trip to a US company for one day within a ten day sightseeing tour of the US, have been the target of many recent enforcement actions.


原文見: - | SourceEC - Corporate Gifts Malaysia | Promotional Gifts | Door Gifts Blog
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