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Badi Soch: Anti-corruption or pro-protectionism in China?

The Chinese investigation of corruption charges against British pharmaceuticals GSK and Merck, along with top western milk formula-makers like Nestle SA and Abbott Laboratories, indicates China’s seriousness about dealing with corruption and overpricing by foreign multinational companies operating in the Chinese market. The investigation also dovetails with the ongoing anti-corruption campaign, which is at the centre of President Xi Jinping’s reform agenda. However, in light of its slowing economy – with the lowest growth rate in 13 years at 7.8% in 2012 – China’s crackdown on corruption looks like a thinly-veiled implementation of protectionist policies aimed at helping flagging domestic enterprises.

The first of two points to consider is that business in China is often driven by the traditional Chinese concept of guanxi – a network of contacts that an individual can call upon when something needs to be accomplished; corruption is often a necessary part of this networking. Secondly, the corruption charges against ex-politician Bo Xilai – facing a possible life sentence – and the suspended death sentence for former Minister of Railways Liu Zhijun, suggest that the Chinese government is addressing domestic corruption as well. But the two may well turn out to be the sacrificial lambs in a public relations campaign to show the people that the “anti-corruption drive” will not spare the high-ranking.

Compiled by Malik Hirani, Researcher at Gateway House

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