China needs to raise graft defences

Companies across the border rank below emerging-market peers for systems to counter corruption, study by governance group finds

PUBLISHED : Monday, 21 October, 2013, 3:56am
UPDATED : Monday, 21 October, 2013, 10:04am

Mainland companies are likely to be exposed to a higher risk of corruption than those in other emerging markets due to a lower level of corporate transparency, a study by global anti-corruption organisation Transparency International said.

A recent ranking compiled by the Berlin-based non-government group showed that mainland companies were, overall, the worst performer in all BRICS countries when it came to disclosing information about their organisational structure, financial statistics and any anti-corruption programmes they ran.

The organisation surveyed 100 large, listed, state-owned and private enterprises in 16 emerging economies earlier this year, measuring and ranking their transparency level based on the data and information publicly available on their websites.

The 33 mainland companies included in the study received an average score of two out of a maximum of 10. The more transparent the company was, the higher the score.

For the other BRICS states, the average score in India was 5.4, 5.1 in South Africa, 4.3 in Russia and 3.4 in Brazil. The average score of all surveyed companies was 3.6.

Liao Ran, senior programme co-ordinator with Transparency International, said the information a company disclosed about its anti-corruption systems was an important indicator of its awareness and commitment to combating corruption

"However, none of the Chinese companies in our study publicly says that it forbids things like 'facilitation payments'," said Liao, referring to small bribes given to government officials or others with the aim of getting certain government approvals or to aid a deal.

In addition, nearly half of the surveyed mainland companies did not publicly state that they trained employees and management on how to prevent corruption.

Another reason for the low ranking of mainland companies, Liao said, was perhaps because two-thirds of the surveyed companies were either state-owned or privately held, and so were not required to disclose certain information. According to the corporate transparency ranking, Indian telecommunications giant Tata Communication ranked the highest of all 100 companies with a score of 7.1. It was followed by sister companies Tata Global Beverages and Tata Steel.

Laptop and smartphone manufacturer Lenovo, which ranked 19th, was the best-performing mainland company at 5.4.

By contrast, eight of the 10 least transparent companies were from the mainland. They included Chery Automobile, China Shipbuilding Industry, electrical appliance maker Galanz, China National Chemical, Zhejiang Geely and China Shipping.

"As more and more Chinese companies are planning to expand overseas, we expect they would become increasingly transparent as they will be required to comply with foreign laws. Hopefully, these changes will spill over into their domestic activities," Liao said.

Separately, a report by global consulting firm EC Harris found that the mainland remained around the midpoint of a global ranking on the ease with which foreign retailers could open new stores.

The world's most populous country was ranked 23rd of 40 surveyed countries, trailing neighbours such as Japan, Thailand and South Korea, but faring better than other Asia-Pacific nations including India, Indonesia and the Philippines.

"China, India and Indonesia are more difficult for retailers to expand into than Western markets due to a restricted supply chain and low project delivery capability," said Jonathan Moore, head of Asia property at EC Harris.

"This would create far greater risk and potential reputational damage for retailers."