Weekly Wrap – 16th January 2014

 

Hi I am Tom McLeod, Managing Consultant of McLeod Governance.

This is what I would be thinking about this week.

Xi Jinping’s Crackdown on Corruption

As we have discussed previously since the appointment of Xi Jinping as President of China in November 2012 there has been a crackdown on corruption in China.

Impact on How Business is Done in China

Over the Christmas period, we read a very interesting article which quoted the Hong Kong based Global Chairman of KPMG, Michael Andrew.  It that article KPMG noted:

At the moment you cant even give a mooncake – a traditional greeting – to a Chinese official.  This has all happened in three months.

It has gone from being the way business is done in China to the way that business is not done.

There are a number of very senior people very scared about their past histories.

If you talk to the Chairman of any State Owned Enterprise – this is their number one issue.

To ensure that they are compliant with the new direction.

In the long term you are seeing a very different business culture coming through.

Ramifications of Anti Corruption Effort

There are three obvious implications of this quote – this change in the culture of business in China.

Firstly, obviously, you are going to see an increase in  corruption investigations; whether it is going to be by organisations or by regulators.

For those that are corrupt you are equally likely to see increased efforts to cover their tracks.

The third implication has massive ramifications for how business is done in and with China.

Are we at the start of an era of greater compliance based activities in China and what will that lead to in terms of the governance of Chinese organisations, their risk management and the management of their controls?

2014 promises to be a very interesting year on many fronts – not least watching how this issue unfolds in the great economy of China.

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