Published by ChinaMNC · Wanbai

Anti-Corruption in China: What Foreign Founders Need to Know

China’s renewed anti-corruption drive affects business operations. Learn key risks and compliance expectations for foreign founders registering or running a company in China.

Anti-Corruption Campaign: A Business Consideration for Foreign Founders

China’s leadership has reiterated a sustained anti-corruption campaign, emphasizing its impact on the economic environment and risk landscape. For foreign founders registering or operating a company in China, understanding the direction of this policy is essential for compliance and risk management.

Key Policy Signals

At a recent event commemorating the 90th anniversary of the Long March, President Xi Jinping stressed the need to “persist in advancing full and rigorous Party self-governance” and to achieve “self-purification, self-improvement, self-renovation, and self-enhancement.” He described corruption as an “obstacle and stumbling block” to national development and called anti-corruption a “major struggle that cannot be lost.”

In January, at the Fifth Plenary Session of the 20th Central Commission for Discipline Inspection, Xi urged “more sober and firm advancement of the anti-corruption struggle.” Since the 18th Party Congress, China has pursued a path of “addressing both symptoms and root causes” and “promoting the integration of not daring to corrupt, not being able to corrupt, and not wanting to corrupt.”

Official data for the first three quarters of this year show that discipline inspection and supervision organs nationwide filed 800,000 cases and disciplined 680,000 individuals. Xi warned that if corruption is allowed to spread, it would “damage the economic development environment, induce various risks and hidden dangers, and shake the Party’s governing foundation.”

Implications for Foreign-Invested Enterprises

The campaign targets both high-level and grassroots corruption. Xi emphasized that “corruption remains prone to occur and frequent,” and that a high-pressure stance must be maintained: “there must be no hiding place for corrupt elements.” For foreign founders, this means heightened scrutiny of business practices, particularly in interactions with public officials and state-owned entities.

Grassroots corruption cases, such as the misuse of rural collective funds in Guangxi’s Pingle County, illustrate the campaign’s reach. In that case, villagers suspected irregularities in the leasing of collective mountain land; discipline inspectors found village officials had embezzled funds, and the misappropriated rent was recovered. Such cases highlight the risks of improper dealings at local levels, which can affect supply chains and local partnerships.

Xi also called for “innovative methods” to “discover, accurately identify, and effectively govern various corruption problems” in light of new trends. This suggests that oversight mechanisms are evolving, and companies should ensure robust internal controls.

Integrated Approach: Beyond Punishment

The strategy of “integrating not daring, not being able, and not wanting to corrupt” is a core component of Xi’s party-building thought. It combines deterrence, institutional safeguards, and cultural education. For businesses, this implies that compliance systems should align with both regulatory requirements and broader ethical expectations.

Xi stressed the need to “connect rectification of conduct, discipline, and anti-corruption,” using “joint investigations” to punish intertwined problems and “joint governance” to eliminate common roots. This approach was exemplified in Chongqing’s Dianjiang County, where discipline inspectors investigating an official’s improper hosting of a wedding banquet uncovered close ties with a businessman, leading to serious disciplinary and legal violations. The case underscores how personal and business relationships can come under scrutiny.

The campaign also emphasizes cultural education, drawing on traditional values. At the Sansu Shrine in Meishan, Sichuan, Xi pointed to the importance of “extracting governance concepts and thinking from fine traditional Chinese culture.” For foreign founders, fostering a corporate culture of integrity can help mitigate risks.

Practical Compliance Steps for Foreign Founders

• Assess third-party risks: Conduct due diligence on local partners, agents, and suppliers, especially those interacting with government bodies.
• Strengthen internal controls: Implement clear policies on gifts, hospitality, and interactions with officials; ensure proper record-keeping.
• Train employees: Educate staff on anti-corruption laws and company policies, emphasizing the consequences of violations.
• Monitor regulatory changes: Stay informed about updates to anti-corruption enforcement and adjust compliance programs accordingly.
• Promote ethical culture: Encourage transparency and integrity, aligning with China’s emphasis on cultural values.

Looking Ahead

Xi’s remarks at the 20th Party Congress in 2022, where he quoted “Though thousands oppose, I will go forward,” signal a continued hard line. The campaign is framed as a “protracted war” to safeguard China’s modernization. Foreign founders should view anti-corruption compliance not as a one-off task but as an ongoing commitment.

By understanding these policy directions and embedding compliance into operations, foreign-invested enterprises can better navigate China’s business environment and contribute to a level playing field.

Call to Action: Foreign founders can contact ChinaMNC on WhatsApp / WeChat at +86 153 1898 8535 for help registering and operating a company in China.

This summary is based on information published by the relevant Chinese government website and is general information, not legal or tax advice.