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China’s austerity regime sets way for new business model

April 2014

China’s new era of austerity could lead to a new way of global corporate governance, a Beijing forum has been told. Its still-growing economy will set the tone for a new world way of doing things, as the west continues to contract under its own debt-reduction programme.

The forum, organised by the British Chamber of Commerce, and the China-Britain Business Council heard from leading CSR speakers, including Wang Liwei, editor of Charitarian magazine, Sammy Feng, head of CSR at DLA Piper and Carma Eliott from the British Council.

Eighteen months since China’s new leadership of President Xi Jinping and Premier Li Keqiang took power, the new business landscape is becoming much clearer.

Firstly, there has been the clampdown on corruption, with a pledge that no matter how senior a figure is politically or commercially, they will all be targeted as “tigers and flies” in Xi’s own words.

Following corruption, extravagance is also now a no-no, with lavish banquets and the giving of luxury items banned.
Wang especially says this means the end of a grey area for foreign firms, including the high-profile bribery case of UK pharma giant, GSK, wherein the line now stands in doing business.

“In the past there was probably a breakdown in communications between foreign managers and their Chinese managers over ways of doing things. That is over now, “ he said.

Sammy Feng added: “What Xi has done has a major impact on big companies, especially in terms of government procurement in areas such as the telecoms and construction sectors, and of course the impact is felt in the hospitality industry.”

The strength of the crackdown has taken many people by surprise.

Figures presented to China’s parliament early in March showed that last year, 51,306 officials and 37,551 cases were investigated for work-related crimes including bribery and embezzlement - figures representing an 8.4% increase in the number of officials and 9.4% in cases - according to the work report of China’s top procuratorate, according to China Daily.

But that’s also good news for the future.

“It means a much more level playing field for everyone, domestic and foreign firms, a new era of transparency,” said Feng.

And as China’s economy grows to become the world’s number one, it will set a benchmark for the future way of doing business.

“Clearly what that means is that companies will need to follow the rules of doing business in China, globally,” he added. 

Asia | Corporate governance


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