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Resource alert: Best practices for managing compliance in China

Chinese President Xi Jinping addresses a welcoming luncheon co-hosted by the U.S.-China Business Council in Washington in 2012. [Photo courtesy of Xinhua] The U.S.-China Business Council recently released the results of a survey of its membership on Best Practices for Managing Compliance in China. The full report -- available here (pdf) -- will be a great resource for readers of the FCPA Blog.

In the summer of 2013, the USCBC interviewed more than 30 member companies from a broad range of industries to learn more about which practices foster employee compliance in the China market. The interviews covered different aspects of company compliance programs, including the expense approval process, training programs, and solicitation of benefits.

The U.S.-China Business Council, based in Washington, D.C., is generally regarded as the leading association of U.S. companies doing business in China. It was founded in 1973 as the result of a suggestion of Chinese Premier Zhou Enlai to then National Security Advisor Henry Kissinger during the talks which led to the Shanghai Communique.

The Council’s member companies are of all sizes and members include some of the largest and longest established companies doing business in China. The Council's Board of Directors over the years has been a virtual who’s who of corporate America. Information gleaned by surveying Counsel membership normally reflects the current issues being faced by those conducting business operations in China. Further information about the Council is available on its website.  

The Council’s executive summary of the Report follows:

  • Because of a highly competitive and culturally different operating environment, ensuring adherence to corporate ethics and compliance policies remains a concern for many U.S. companies doing business in China. Sixty percent of the interviewed companies were concerned about competing with companies not complying with the Foreign Corrupt Practices Act.
  • 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 the interviewed companies incorporate such techniques into their compliance programs.
  • An increasing number of companies are seeking to incorporate into their existing compliance programs measures that will minimize liability risks from joint venture 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.
  • U.S. 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 weren't optimistic that new Chinese government compliance efforts would lead to significant improvement in the enforcement of China’s anti-bribery laws.

These are all familiar issues for FCPA practitioners, although the hard, on-the-scene data should be useful. The high level of concern about competitors not following the FCPA, or even subject to it, is interesting, given that this not  a new issue.

The significant attention being given to  Chinese expectations for gifts, travel and entertainment is well  justified. The emphasis on locally tailored training is gratifying, given the difficulty of getting Chinese staff
to buy in to, or even understand, what they regard as “foreign” issues.


Benjamin P. Fishburne, III practices law independently and has been a partner in several major international law firms. He is a former Assistant General Counsel and, later, General Counsel of the U.S.-China Business  Council. He can be reached here