China’ action against British executive may prompt firms to rethink their investments

Chinese police's action against a British executive of GlaxoSmithKline Plc might cause some international companies to rethink their investment plans in the country.

Sending a strong warning to the pharmaceutical industry, Chinese police on Wednesday charged GlaxoSmithKline's former China head Mark Reilly along with two other executives, Zhang Guowei and Zhao Hongyan, with corruption. The authorities charged them for paying bribes to doctors, hospitals as well as the officials of China's industry and commerce department to boost sales.

By taking the bold step, Chinese authorities showed their determination to wipe out corruption and corporate bribery, but some observers have cautioned that the move could prompt foreign companies to rethink their investment plans in the fast-growing market.

Michael Li-Ming Wong, an associate at Gibson, Dunn & Crutcher, said, "It may be that there's no middle ground, and that's going to cause people to hesitate. It's very different to be subjected to a different country's laws, especially a country that is just not known for the rule of law, and protection of individual rights."

He noted that the legal landscape in western countries like the U. S. and the U. K. is better understood, while multinationals often find it difficult to deal under the Chinese regulations.

GlaxoSmithKline said in a statement that it took the allegations very seriously as they were deeply contrary to its values. The company added that it was trying to reach a resolution that would allow the company to keep on making a vital contribution to the health & welfare of China.

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