Bribes can never be unavoidable costs

A relation of mine who runs a small business in China told me a story of how corruption works there: “The city official in charge of granting operating licences suggested a dinner at a five-star hotel to discuss my renewal. I ended up paying the bill. The next week, he demanded another expensive meal – but this time he brought his whole family! This carried on for weeks.”

Is paying bribes and other forms of illicit remuneration the unavoidable price of doing business in China for foreign firms? The pharmaceuticals sector is certainly notorious for its corruption, but less so the manufacturing sector.

One businessman who works in China described to me more subtle ways in which official palms can be greased. “Maybe the official’s kids are in the UK. The Western business owners will buy things in the UK, including houses, for the whole family” he said.

Whatever the true extent of corruption in China, sensible foreign firms will eschew it. The Glaxo case shows the authorities will prosecute foreign nationals.