Some food for thought about where Chinese money goes around the world:
Diplomat
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Chinese Outward Investment and Host Country Corruption The link between the two is not as obvious as some critics claim.
The effect of Chinese outward investment (COI) on host country corruption levels, government accountability, and transparency has been a topic of considerable interest among activists and scholars as well as businesspeople and policymakers who fret Chinese malfeasance is putting their firms at a competitive disadvantage. This makes sense given billions of dollars of Chinese investment in countries such as Angola, Sudan, and Venezuela, which fare quite poorly in the pertinent international rankings. Moreover, there are numerous reports of Chinese companies paying bribes to secure a major port deal in Sri Lanka, to try to obtain a major broadband telecommunications deal in the Philippines, and to secure lucrative oil and gas opportunities in Kazakhstan. Beyond this, Transparency International’s 2011 Bribe Payer Index ranks Chinese companies second out of a list of 28 countries in terms of their willingness to pay bribes. Indeed, one set of writers from Pacific Forum CSIS has accused China of hypocrisy, waging a vigorous fight against corruption at home, but “turning a blind eye to the dangers that could result from massive infusions of Chinese money.” Simply put, China is ignoring how its investment and associated financial aid and loans can “nurture corruption and distort good governance.”
As these examples illustrate, concern is well warranted. On top of this, there are a number of conceptual reasons to be concerned about the link between COI and corruption levels. One is the simple fact that corruption can “grease the wheels.” This alone would make offering bribes quite alluring to Chinese firms since they are relative latecomers to the game of outward investment and often find it difficult to compete head-to-head against more advanced foreign enterprises. Also, Chinese businesses are familiar with operating in a murky institutional environment at home where laws are lacking or poorly enforced, normative institutions are poor, personal relationships are essential, and corruption levels are very high. Indeed, their know-how in dealing with such conditions may give them strategic advantages vis-à-vis others. Furthermore, corrupt host countries do not seem so “alien” to Chinese firms given the situation at home, which means that what international business specialists call “psychic distance,” may not dissuade investment. Moreover, while China has rhetorically discouraged unethical behaviors and taken measures to see what state-owned enterprises (SOEs) are doing with their assets abroad, it has not punished its firms for violations of its version of the U.S. Foreign Corrupt Practices Act (FCPA) nor has it taken aggressive action against any firms that have engaged in problematic ethical practices. Finally, there is evidence that Chinese firms, above all SOEs, are quite risk tolerant because of the backing of the Chinese government.
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Edited by MSantor, Jul 27 2015, 12:12 PM.
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