Corruption Flows Along China’s Belt and Road
January 18, 2019
Jonathan E. Hillman
Senior Fellow, Economics Program, and Director, Reconnecting Asia Project
A version of this article was originally published by Nikkei Asian Review on January 18, 2019
China’s Belt and Road Initiative (BRI) sprouted another sinkhole this month when the Wall Street Journal reported that Chinese officials agreed to help bail out Malaysia’s state development fund 1Malaysia Berhad, known as 1MDB, by inflating the cost of infrastructure projects.
The story is still unfolding: Malaysian officials have announced a probe. Beijing has denied the report. Former Malaysian prime minister Najib Razak, who has been charged with corruption over 1MDB, denies the allegations against him.
What can no longer be denied is that the BRI is opaque by design. By limiting outside scrutiny, the initiative’s lack of transparency gives Chinese companies an edge in risky markets, and it allows Beijing to use large projects to exercise political influence.
Of course, Chinese companies are not alone in being accused of peddling influence. But authorities in the United States and European Union are more vigilant in policing their own companies abroad. China adopted a foreign bribery law in 2011 but has done little to enforce it. Chinese companies are also among the least transparent according to a Transparency International study of 100 companies in 15 emerging markets.
As Chinese companies push deeper into emerging markets, inadequate enforcement and poor business practices are turning the BRI into a global trail of trouble. A long list of Chinese companies have been debarred from the World Bank and other multilateral development banks for fraud and corruption, which covers everything from inflating costs to giving bribes.
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