On the 10th anniversary of the Belt and Road Initiative, countries and regions tapping markets in the BRI are urged to strengthen their skills and recognize international compliance rules and local regulations to ensure they are up to scratch. Chai Hua reports from Hong Kong.
A serious challenge confronting companies tapping markets in the Belt and Road Initiative is how to mitigate compliance risks.
And the key to making the grade is accepting and adopting the widely recognized rules and standards to boost cooperation among them.
The advice comes from Wang Zhile, a member of the Tenth Principles Expert Group of the United Nations Global Compact — a strategic initiative supporting enterprises committed to upholding responsible practices across a wide spectrum of businesses.
Wang spoke to China Daily in an interview as the BRI, which commemorates its 10th anniversary this year, continues to make significant strides in areas like inclusive cooperation, transparency, expansion, anti-corruption measures and green development. President Xi Jinping, who in 2013 launched the massive China-led infrastructure project that aims to stretch around the world, has emphasized that these areas are vital for the high-quality development of BRI projects.
Xi mooted the BRI to lift international cooperation, stressing on multiple occasions it’s necessary to regulate the behavior of enterprises involved in the project and guide them to operate in compliance with legal standards.
At the opening of the Second Belt and Road Forum for International Cooperation in 2019, the president highlighted the importance of accepting and adopting widely accepted rules and standards in pursuing BRI cooperation.
“Few countries prioritize improving compliance operations to the extent that China does. This commitment is demonstrated by the attention given by top leaders and the implementation of regulations at the ministries and commissions,” Wang says.
Wang is also head of the Beijing New Century Academy on Transnational Corporations and a former director of the multinational corporation research center at the Chinese Academy of International Trade and Economic Cooperation.
Major Chinese mainland firms with established compliance management systems should focus on fixing the problems that have emerged, he suggests. There’s a need to beef up support for small and midsize companies to ensure they are able to operate in compliance with the required regulations.
Wang’s advice for enterprises involved in the BRI markets is to prioritize economic principles and conduct feasibility investigations before entering a new region. “Enterprises should develop the ability to recognize their compliance duties required by international rules and local regulations.”
As to what governments can do, he proposes setting up a specialized national committee to lead the overall development of Chinese companies’ compliance operations.
Regarding the significance of compliance management, Wang referred to its definition and history. “Compliance” means that a company adheres to the applicable rules and laws. This includes both country-specific laws and requirements from the regulatory authorities, as well as internal company commitments. International corporations must abide by the laws and regulations of all markets in which they operate.
High-speed development
The development of compliance has received global attention. In 1976, the Organization for Economic Co-operation and Development formulated the Guidelines for Multinational Enterprises — a balanced framework of nonbinding principles and standards for governments and enterprises. It covers issues such as human rights, the environment, employment and industrial relations, combating bribery, and addressing consumer interests and disclosure.
Nine principles of the United Nations Global Compact were launched in 2000 and, at the first Global Compact Leaders Summit in 2004, the addition of the 10th principle against graft by the United Nations Convention Against Corruption was adopted. More than 16,000 business and 3,800 nonbusiness participants have joined the UN Global Compact so far, according to its official website.
As the trend of strengthening compliance management took shape among multinational corporations, China formally joined the World Trade Organization in 2001 and began aligning itself with global rules.
Wang calls 2018 an epoch-making year for compliance in China as many important documents were enacted. In July 2018, the national standard GB/T 35770-2017 Guidelines for Compliance Management Systems, formulated by the China National Institute of Standardization, was formally approved and implemented. It’s equivalent to the ISO 19600:2014, with guidance published by the International Organization for Standardization (ISO) in 2014 for establishing, developing, implementing, evaluating, maintaining and improving an effective and responsive compliance management system within an organization.
In the same year, the National Development and Reform Commission issued guidelines for Chinese companies’ compliance operations abroad, while the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) announced similar codes for State-owned enterprises.
According to Wang, more than 20 central government departments have initiated guidelines to promote enterprise compliance, or participated in the supervision of enterprise compliance so far. “This level of government involvement underscores the importance of compliance, and reflects the commitment to ensuring that enterprises operate in a responsible and compliant manner,” he says.
Under such vigorous promotion, the development of compliance has been on the fast track. For instance, on the Chinese mainland, when the ISO updated its standards in 2021, it took just one year for China to adopt it domestically.
Bringing into action
In the next phase of the integration into global norms, Wang believes the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will be the focus, as China formally applied to join the pact in 2021.
“China has now built a unique road to promote corporate compliance management with Chinese characteristics, and as a result, a large number of companies with strengthened compliance management, both State-owned and some well-known private firms across the country, have emerged,” he says.
According to data from the SASAC in March, nearly 70 percent of the central SOEs have chief compliance officers to oversee and maintain compliance with their operations. More than 28,000 personnel are currently working on compliance management in central SOEs and their subsidiaries.
“China’s culture of guanxi (personal and business relationships) had led to a lack of focus on compliance management in the past. Nonetheless, the government’s vigorous efforts are yielding results as people’s legal and compliance awareness has been on the rise,” says Wang.
Shenzhen, in particular, has been a shining example of how compliance management can be integrated into a city’s development. The bustling southern Chinese metropolis has made compliance management pivotal in its efforts to build a rule-of-law city. In line with the central government’s call to support Shenzhen as a pilot demonstration zone for socialism with Chinese characteristics in the rule of law, the municipal government has been establishing a compliance management system.
A compliance management committee was initially set up in Shenzhen’s Bao’an district to integrate and implement the central government’s compliance management requirements into the local platform. The city also created an enterprise compliance construction and management information system. This system provides companies with a self-testing function for legal compliance, enabling them to manage the entire compliance process online intelligently.
Moreover, the People’s Procuratorate of Shenzhen successfully conducted a corporate compliance non-prosecution reform exercise. A company that was put on record for smuggling of goods in 2020 was not prosecuted after showing strong commitment to and practicing compliance management. The People’s Procuratorate of Shenzhen also conducted third-party supervision and evaluation of the firm’s compliance construction results.
As a member of the third-party supervision and evaluation team, Wang found a relatively effective management system is now in place in terms of organizational and institutional systems, operational mechanisms and compliance culture.
Bao’an district’s Procuratorate and the Justice Bureau have also set up a team of independent monitors for local enterprise compliance. The team has professional knowledge in various industries and compliance service experience, enabling them to provide “tailor-made” compliance plans for enterprises, helping them draw up rules and regulations, plug management loopholes, and cultivate internal compliance forces. At the same time, it has solved the problem of weak supervision of procuratorial organizations.
Wang stresses it’s necessary to guide companies to transform their operations from passive compliance to proactive compliance, internalize external rules into internal regulations of the company based on legal operation, and elevate them to the level of corporate culture and values.
Contact the writer at grace@chinadailyhk.com