Thursday 20 February 2014

Wow paragraph on Bullet Point 2 (Risks/Rewards).

Thanks to Vicky, Georgia and Hope whose last essays (bullet point 2 essay) provided the basis for this wow paragraph on the risk of corruption.

Bo Xilai in court (pic: BBC)


Another risk faced by foreign businesses in China is the risk of operating in an environment where there is deep rooted institutional corruption. This was highlighted by the trial of the senior Chinese politician, Bo Xilai, who was sentenced for life for bribery, corruption and abuse of power in September 2013. The case illustrates that the power of senior Chinese officials is not restrained by the same safeguards that we have in the UK. A free press and democratic elections don’t exist in China and the legal framework is very different to that in EU countries. The risk of corruption is possibly increased by the culture of “Guanxi” (relationships/trust) which can lead to gift-giving on a grand scale. A recent (2013) example of a UK company which has been caught up in a Chinese corruption scandal in China is GlaxoSmithkline (GSK). The pharmaceutical company allegedly used travel companies to channel £300 million to bribe doctors and officials and has admitted wrongdoing by some of its executives. This led to their sales plunging 61% in July-September 2013 with a negative impact on their brand and profits. There are a good number of other companies which have been caught in the China corruption “trap” e.g. the GSK case has similarities with the improper payments that Avon has been alleged to make in China. The end outcome of being embroiled in such corruption scandals is the risk of financial losses. So in that sense the proposition in the question, i.e. that the risk of financial losses is the greatest one that companies face in China, looks to be sound. 

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