Public Procurement and Contracting
In China, the law provides provisions which forbid companies found guilty of violating procurement regulations (i.e. bribery) from participating in future tender bids. The regulations, according to Global Integrity 2011, are strictly enforced in practice. Although the regulations are being effectively enforced, companies should take note that the business culture in China is embedded with the concept of gift-giving; there are many cases of employees excessively entertaining Chinese government officials, such as 'wining and dining' in order to win contracts, an activity that can be construed as corruption, according to a 2008 news article by Financial Week.
According to a 2010 news article by China Worker Info, Chinese state-owned companies often subcontract the work, which has led to substandard material and, consequently, unsafe buildings. This kind of subcontracting is illegal, but common, and all the while each contractor takes a cut of the deal.
Companies are recommended to use a specialised public procurement due diligence tool in order to help mitigate the corruption risks associated with public procurement in China. See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.
There are numerous cases of high-level officials enriching themselves through access to government resources and taking bribes in order to help approve project and contracts. One example is of Liu Zhihua, a former Vice Mayor of Beijing, who was supervising Olympic construction projects and in charge of urban development in Beijing. He was found guilty of accepting bribes totalling USD 1 million, and was given a death sentence with a two-year reprieve, according to an October 2008 article by China Daily.
In November 2009, Kuang Xin, the director of civil aviation affairs at the National Development and Reform Commission, who holds an influential position over airport construction projects, had been detained for allegedly taking bribes to approve aircraft procurement deals, as reported by a 2010 news article by The Star.
According to Global Integrity 2011, the Civil Servant Law of the People’s Republic of China establishes regulations addressing conflicts of interest for public procurement officials. However, incidents of conflict of interest often occur due to a weak enforcement of the law. In addition, there is no legal mechanism to monitor the assets, incomes and spending habits of public procurement officials.
See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.
World Economic Forum: The Global Competitiveness Report 2012-2013:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.7 on a 7-point scale (1 being 'very common' and 7 'never occurs').
- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 3.8 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').