Pass Go in China: Do Not Go To Jail

Business in China is done through relationships. As a result, building your business network or guanxi without crossing the line into corruption is key to your success in China and to staying out of jail in the United States. Corruption is a serious issue for anyone who does business in China and while the perks are changing, the law has not. In China, you build business relationships by giving gifts and trading favors, but you need to avoid these pitfalls.

You Are Not Chinese

Gifts help you build business relationships in China. It is worth your time to find a guide on gift giving in China and pay attention to the details. You can build relationships and friendships that will last for the rest of your life. You can also insult someone and hurt your business prospects.

Guanxi is strongest with family and close friends. Even after doing business in China for several decades, you will still be an outsider. You will never have the deep guanxi that Chinese people have. This won’t prevent you from success in business in China, but you will have an easier time if you admit the reality to yourself: You are not Chinese. You are doing business under a different legal system with different advantages, disadvantages and consequences. Understanding the value that you bring and being aware of the advantages and disadvantages will help you advance your business interests in China far more than going native.

Pay Attention When

If you start to think that it is okay to do something because everyone else is doing it, you are on a slippery slope. This may sound good in the moment, but it will be more than uncomfortable justifying your decisions in court. The DOJ wants companies to develop a compliance program to manage corrupt practices. You might want to develop your own personal “compliance program.”

First, consider how people fall into these traps. It starts with spending time in a situation where corrupt practices are okay. The choices and practices begin to feel normal. This is why gift giving and guanxi are such a slippery slope when doing business in China. Next you begin to justify the behavior, “We’re competing on an unfair playing field” or “We won’t get caught if we do it just this once.” In reality, the playing field is rarely fair and it is probably the first step rather than “just this once.” You are in real danger at this point. Developing a plan can help you make the right decisions.

You are Always Your Own Best Advocate

You know your situation best. You always (or at least you should) have your own self-interest in mind. The trick is to step out of the situation and look at it more objectively. This can be done by considering choices from a different perspective:

  • Ask yourself what this decision would look like in court. Put yourself in the role of a prosecutor or judge and consider what your story sounds like from that perspective.
  • Consider the best practices back home. Would this be acceptable or a news story waiting to happen?
  • Is there anyone you would not want to tell about this choice? If your grandmother/father/best friend/husband/wife would not approve, perhaps you should reconsider.
  • “Look back” at the the choice (and potential pattern of choices) from 10 years in the future. Does it still make good business sense?

Next Steps

First, always consider ways to turn any attempts to collect a bribe into a legitimate business opportunity. Next, ask a group of friends to become an advisory group. Membership in this group should depend on the person’s willingness to offend you for your own good. Having a good friend point out that an idea could land you in jail will probably be uncomfortable, but it is certainly better than actually going to jail. If you do business in China, make sure that at least one of your friends has little or no China experience. This will offer a more objective perspective.

For the really big decisions, if you don’t have access to corporate counsel, hire a lawyer to help you vet decisions. You are better off feeling the pain in your pocketbook than in the uncomfortable bed of a jail cell. In the end though, only you can make the right choices.

2 replies
  1. Steve Barru
    Steve Barru says:

    I found that Chinese make a distinction between gift giving and bribes. Giving somebody a $50 or even $100 package of premium tea is okay; a $500 or $1000 cash bribe is clearly not okay. In other words, not all gifts are the same, and Chinese recognize this just as we do. In fact, if I am not mistaken, there are some laws or regulations on the books about allowable gift giving in China.

    Chinese are likely to draw the line between appropriate and inappropriate gifts in a different place than we do. Americans working in China have to recognize the standards set by FCPA, even if these are arbitrary. This creates tensions and difficulties in some situations.

    Chinese may know the difference between a legitimate gift and a bribe, but lots of Chinese simply do not care. Corruption is rampant and there is a general lack of respect for the law or playing by the rules in business. Corruption in China starts at the top. Some of the most privileged, powerful people in the country are the most corrupt. The rest of the society takes their cue from this high level corruption. It is this more than the importance of guanxi in business that creates problems for American businesses trying to abide by FCPA.

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