Financial Transparency Coalition

The Great Hall of the People in Beijing, China | Photograph by Jacob Ehnmark

Last week, China executed Wen Qiang, a former high-ranking member of the Chongqing judiciary on charges which included accepting bribes, protecting criminal gangs and even rape. The execution of Wen, charged with taking over 12 million yuan ($1.76 million) in bribes, is the climactic result of a massive crackdown on corruption in Chongqing which has resulted in nearly 100 officials being prosecuted.

Despite the breadth of corruption in Chongqing, however, this is not an isolated problem in China.  Rather, it is part of a larger issue which plagues the country and contributes to making Asia the leading region for illicit financial flows in the world. According to Global Financial Integrity’s “Illicit Financial Flows from Developing Countries: 2002-2006”, Asia accounts for 50% of normalized illicit flows from developing countries. China alone lost $233.5 billion to illicit flows during the time period outlined by the report.

Both U.S. and Chinese authorities have recently begun cracking down on multi-national corporations which are exacerbating the problem of corruption in China. BusinessWeek reports,

“U.S. authorities have upped the number of bribery cases they pursued to a resolution around the world, from 11 in 2005 to 34 last year, according to Trace International, a nonprofit anti-bribery group based in Annapolis, Md. In a report released June 17, Trace pointed out that China, with 25 cases completed since enactment of the FCPA, fell behind only Iraq and Nigeria for the most international corruption prosecutions. Citing a World Bank estimate that more than $1 trillion in bribes are paid each year, U.S. Attorney General Eric H. Holder Jr. on May 31 called ‘combating corruption one of the highest priorities of the Department of Justice.’”

Chinese authorities have also stepped up their efforts by passing stricter requirements for government officials to report their incomes, investments, and personal assets.

However, while targeting corrupt officials is important to stemming the flow of illicit funds out of the region, anti-bribery efforts must not lose sight of those who are pulling the strings: the multi-national corporations who fall over themselves to line the pockets of corrupt officials.

California-based Control Components Inc. (CCI) was charged by the Department of Justice last year with bribery and awarding kickbacks to officials in several countries, including China, in order to win contracts. China’s Global Times recently reported that over 40 Chinese firms, mostly state-owned enterprises, were involved with over $1.8 million in bribes from CCI.

The U.S. government has set a high standard with the FCPA – refusing to tolerate bribery from neither the bribers nor the bribed-officials.  China should follow suit and pursue corporate officials offering bribes in addition to the public officials who are accepting them.