Shifting sands: a warning to business as China looks to stamp out old ways

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Record fines and unprecedented investigations into bribery and competition violations signal a clear message to multinational firms to re-evaluate how they do business in China.

Beijing’s ongoing campaign to rid the country of institutionalised corruption has recently been expanded in the form of investigations that have implicated a number of multinationals. Spearheaded by the Ministry of Public Security (MPS) in tandem with the National Development and Reform Commission (NDRC), investigations are focusing on business practices that negatively affect Chinese consumers. In July 2013, MPS conducted a series of raids on GlaxoSmithKline’s (GSK’s) Chinese operations. It has been alleged that the Fortune 500 giant provided approximately $486m (£300m) worth of gifts to doctors and health officials to secure demand for its products. Following these allegations, there have been reports that Novartis and Sanofi are being investigated, and that the NDRC is conducting surveys into the pricing for medical devices and pharmaceutical products. The GSK investigation also follows public efforts to crack down on China’s ‘gift-giving culture’ and bribery more generally, for example through measures designed to discourage government officials from hosting lavish dinners…

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