Updated: Mar 25
Local purchases in China by US corporations and their Chinese subsidiaries reached an estimated annual $500 billion in 2008. The size and rapid growth of buying in China for production and import purposes, poses a massive risk of corruption that has not been adequately addressed by US public corporations and their boards. While some of these questionable business practices may have been silently tolerated in the past by US management in order to accommodate rapid growth, today they present very serious legal and ethical challenges that need to be addressed. In this paper, the authors argue that US corporations can neither afford to wait for evidence of corruption to emerge nor to undermine local management through intrusive and frequently ineffective audits.