Can foreigners do business in China without violating the law? A recent article in the New Yorker on foreigners doing business in China quotes one English victim of fraud that undid the joint venture for which he worked as saying that “if you played by the rules, you were finished.” (Tim Clissold, author of Mr. China, cited by Evan Osnos, “Letter from China” The New Yorker,” Nov. 23, 2009.) The article also cites a very different view, that of Don St. Pierre, Jr., who with his father, a veteran of business in China, operates a successful wine importing business: “…If you are engaged in business you are subject to the same rules as everybody else.”

The first point of view seems obvious enough if Clissold meant simply adhering to laws as they are written, rather than in practice. Or is it? If it means you have to violate Chinese laws and regulations in order to succeed, you are obviously asking for trouble, and that seems like a dangerous course of action. But what does the alternative view mean when it refers to the conduct of “everybody else” in an economy and society in which the rules are often hard to find, opaque when you find them, and subject to varying interpretations or neglect in different parts of China according to the extraordinarily wide discretion of bureaucrats?

Suppose, for example, that the general manager of the joint venture in which you have invested is asked to find a job at the venture for the son of a provincial official who has some regulatory powers over it. Or suppose your Chinese partner suggests that a group of engineers ought to be sent to the U.S for training, but proposes an itinerary that indicates the group will spend more time in Las Vegas than anywhere else? Chinese laws and regulations, as well as Communist Party rules, prohibit officials from using their positions to extract benefits, including, for example, tourism. The U.S. Foreign Corrupt Practices Act prohibits giving “anything of value” to a “foreign official” with the “corrupt purpose” of obtaining business. It also permits, however, “reasonable and bona fide expenditures, such as travel and lodging expenses…of a foreign official…directly related” to promotion of products or “the execution or performance of a contract.”

[continued] Stanley Lubman: Business in China: What Does ‘Playing by the Rules’ Mean? – China Real Time Report – WSJ.