Clifford Coonan: Graft in China... a way of life?

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The British engineer was shown a photograph of a local Communist Party official's daughter, and the cadre tapped the frame and said: "I hear you have good universities in Britain. But the American ones are good too. How will you compete when offering her a place? That's what it will take to secure the business!" The Briton lost the deal.

An Australian mining-equipment manufacturer discovered his company's equipment was being copied – exactly – by a neighbouring factory, to the point where he was approached by the boss of the factory looking for the exact mix of paint. But this rival was also his partner, and it took a major payout to ensure he stopped making the equipment. It was only a temporary respite, however, and the Australian eventually abandoned the joint venture.

Foreigners' accounts of doing business with China are filled with tales of local graft, of funding enormous banquets to secure access to corrupt officials and of kickbacks keeping the wheels turning. But the decision to impose hefty jail sentences on the Rio Tinto Four for paying bribes and stealing secrets has caused a major stir in the Western business community.

The four all admitted they had taken bribes, and the decision to hand down heavy jail terms is the government showing, in a very public way, that foreigners are not above the law.

Beijing has identified corruption as a major challenge to single-party rule and has taken some high-profile scalps in a number of public crackdowns on graft in the past few years. But there is a feeling that corruption is rife, despite the government's best efforts.

However, for many Western companies, this case must surely leave a rather nasty taste in the mouth. The problem is the lack of clarity about how one is supposed to operate in China. The rule of law is getting better, but there is still a way to go. And there is a perception that the Chinese government, using the legal system it controls, will intervene to help domestic interests.

The case must also send a chill down the spines of many foreigners working in China, who will tell you about the bribery they had to use to get their foot in the door.

The lack of transparency around the case – little consular access for the accused and very little independent media coverage – has also raised questions about how public the rule of law in China is. The commercial secrets act that Mr Hu and his colleagues were charged under is not public knowledge, and the details remain secret.

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