Rattled by investigations, foreign firms in China beef up compliance

Mon Sep 2, 2013 5:13pm EDT
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By Michael Martina and Kazunori Takada

BEIJING/SHANGHAI (Reuters) - Foreign companies in China are getting increasingly jumpy about a spate of antitrust and corruption investigations by Chinese authorities and are hiring lawyers to make sure their operations comply with the law.

The investigations represent one of the most significant risks to doing business in China in years. Antitrust regulators have looked into sectors such as pharmaceuticals, milk powder and jewelry in recent months and suggested that autos, telecommunications, banks and oil firms could be next.

Corruption probes have targeted the pharmaceutical industry while authorities have also launched a major investigation into China's leading oil and gas company.

One executive from a foreign-listed medical device maker told Reuters he canceled his summer vacations plans and instead spent the past month criss-crossing China to make sure the company's operations were not violating any Chinese laws.

Lawyers in China say client enquiries related to a five-year old anti-monopoly law - suddenly being enforced with zeal - have jumped, including requests for antitrust audits.

Reuters spoke to two dozen foreign executives, business consultants and lawyers. All the company executives declined to be identified for fear of attracting scrutiny from regulators.

Overall, they said they were still optimistic about doing business in China, where hundreds of millions of more consumers will join the middle class even as the economy looks set to grow in 2013 at its slowest pace in 23 years.

While corruption investigations periodically make the headlines, the latest campaign appears to have more teeth than usual with President Xi Jinping, who took office in March, using the crackdown as a totem for his administration.   Continued...

A Chinese national flag flutters in front of a GlaxoSmithKline (GSK) office building in Shanghai July 12, 2013. REUTERS/Aly Song