Revised law will improve business environment

The first day of the year marked further progress in China's efforts to improve its business environment, with a new Anti-Unfair Competition Law taking effect on Monday.

The new law aims to reflect the changed business landscape in the country and address the complaints about the lack of legal clarity on what constitutes bribery, which had created uncertainty over what may be offered as commercial incentives without crossing the line.

It has been common practice for companies doing business in China to build up connections using gifts and other forms of favors to clear the way and gain beneficial contracts, with the greasing of palms often deemed an acceptable, if not necessary, way of doing business.

While the Criminal Law covers bribery offenses in respect of enterprises and individuals in both the public and private sectors, the revised law covers commercial bribery whose purpose is to seek "transaction opportunities or competitive advantage".

Thus the new law prohibits not only the giving of money or property as bribes, but also other off-the-book kickbacks, and it follows international practice in stipulating that bribe recipients include third parties engaged by a transaction party.

It also stipulates tougher punishments for such practices. For example, an enterprise found to be involved in commercial bribery can now be fined up to 3 million yuan ($461,500) and may also have its business license revoked.
Business entities, both domestic and foreign, will now have to strengthen their compliance systems to ensure they do not fall foul of the revised law.
And while the law aims to maintain fair market competition and improve the business environment in China, it may also help State-owned enterprises investing in projects in other countries.

Tougher anti-corruption laws and more stringent compliance efforts — already specified as a major task during the 13th Five-Year Plan (2016-20) — will better prepare Chinese companies for the complex business environment overseas, which can only benefit them in the long run.

Meanwhile, in China, the revised law will necessarily promote a level playing field for law-abiding companies, whether Chinese or foreign.