Beijing’s antigraft crackdown forces foreign firms to rethink business practices in China

Creating guanxi – relationships or connections – used to be a reliable way for multinational firms to break into the China market.

Several big names, including two of the world’s largest financial institutions – JPMorgan and Zurich Insurance – and GlaxoSmithKline, one of the largest drugmakers on the planet, have been caught in the media spotlight this year and a subsequent public outcry about their business methods in the country.

Some of the alleged breaches of business ethics were old news to many but suddenly became a hot topic in the past few months following government investigations and complaints from the public.

There had been many signs Beijing had begun to take corruption more seriously than ever since Xi Jinping succeeded Hu Jintao as China’s president in March.

Xi has repeatedly pledged to fight corruption, which is often linked to senior executives at powerful state-owned enterprises or senior government officials’ relatives, often known as princelings.

“The times are different now. You’ve got new leaders in China who have new ideas about how to manage the country and improve their own image as leaders,” said a Shanghai-based political risk consultant who declined to be named, as he was not authorised to speak to the media.

“You don’t even know who are the friends or enemies of those new leaders.

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This article appeared in the Nov. 29 2013 South China Morning Post print edition as Pruning China’s graft

By George Chen and Joanna Chiu 

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