Compliance in China

Compliance features among the challenges faced by foreign companies in China. It includes complying with laws and guidelines as well as internal corporate codes. It is the company’s responsibility to ensure that employees follow the law, minimize risks and protect the company.

China is officially fighting corruption. President Xi Jinping has targeted public official suspected of serious transgressions and has established a comprehensive anti-corruption initiative.

In addition to improving its image, the anti-corruption plan of the Chinese government involves far-reaching legislative reforms, including harsher penalties, and companies are subject to increased monitoring.

The Chinese government has recently endorsed the establishment and implementation of compliance structures and have enacted related legislation. The improper handling of compliance problems can not only damage the company - persons involved may be found personally liable.

Compliance measures should include suppliers, partner companies and joint venture partners. Vulnerable areas include awarding of contracts, customs matters and granting of approvals from authorities. Bribery must be avoided. Companies that want to retain market access need to establish distribution and marketing systems that comply with statutory requirements.

Risk mitigation measures include compliance training, which should be offered in the local language and take cultural particularities into account. And risk-mitigating internal controls should be tailored to local processes and IT systems.

If there is a compliance infringement  despite these precautions, an investigation should be considered. It is best to use an international team consisting of Chinese colleagues and persons from the home country of the parent company. The increased data protection requirements in China should be taken into consideration during such an investigation.