Corporate Compliance: A Cutting-Edge Topic in Corporate Governance in China

Corporate compliance originated from the corporate governance practice aiming at mitigating risks related to the Foreign Corrupt Practices Act in the United States, via the practices in other common law countries, but also some civil law countries, has been introduced to China and recently become a buzzword of corporate governance. An ever-increasing amount of peer-review papers from different law specializations are publishing; more and more prosecution agencies are partaking in the pilot programmes; the market share of corporate compliance related services is being fiercely carved up by law firms across the country……Given such a context, this short article is tasked to provide some insights of the development of corporate compliance in China from the lens of practice and theory.

One of the earliest published paper, Compliance Management Structure of Internationalized Large-scale Banks and Its Implications,[1]introduced the fundamental principles and common practices of corporate compliance in banking industry. It was the only paper on the topic of “corporate compliance” published in 2006. One decade since then, only 37 papers on the same topic have been published.[2] This is a good indication that although the concept of corporate compliance was introduced to China as early as 2006, this has not attracted the attention of academics, practitioners, and public institutions. Only in 2017 did the outbreak of the “ZTE case”[3]really made China realize the importance of corporate compliance, so some scholars also called 2017 “the first year of corporate compliance in China”. Chinese academics have begun to take a more active interest in corporate compliance, while some large-scale multinational companies have also embarked on establishing compliance systems.

In academic circles, the number of publicly available articles on the topic of corporate compliance went from 11 in 2017, 41 in 2018, to 77 in 2019. As of December 10, 2020, the number of articles published on related topics for the year 2020 has also reached 78.[4] Until now, however, the main academic work on corporate compliance from a law research paradigm has emerged from criminal law. Sun Guoxiang and Li Bencanare two prominent Chinese criminal law scholars whose articles examining corporate compliance from a criminal law perspective have received by far the most citations. The former pointed out in his article that the criminal compliance of enterprises has not received due attention, and that China should build a criminal compliance system in criminal legislation and justice, taking into account the foreign practice of criminal compliance and the characteristics of unit crimes.[5] The latter from the perspective of “ZTE Case” holds that the concept of criminal compliance is already reflected in Chinese criminal law, but further legislative strengthening is needed, for example, by means of the crime of negligence involving business supervision.[6]In addition, another renowned Chinese criminal law professor, Chen Ruihua, does not explore corporate compliance merely from the perspective of criminal law. Since 2019, Chen has published more than 15 papers in leading academic journals touching on criminal compliance, administrative regulatory compliance, and the ontology of corporate compliance. In 2020, he also published the first comprehensive academic monograph on corporate compliance in China,[7]dedicated to building a legal theory of corporate compliance in China and promoting its practice from a multidisciplinary perspective.

From a practical viewpoint, many Chinese companies have established compliance management systems, primarily as a tool to address overseas compliance risks. Meanwhile, Chinese prosecutors are increasingly experimenting with compliance pilot programs and are rapidly promoting corporate compliance incentives nationwide as one of the ways to enhance social governance realization. ZTE is an early Chinese company that has established a comprehensive compliance management system and is a leader in China in terms of compliance organization system, compliance corporate culture and the number of compliance personnel. ZTE has set up a compliance system with export control compliance, data protection compliance, and anti-bribery compliance based on the most prominent risk exposures in its daily operations. Other Chinese companies have also largely adopted a customized compliance approach to build their corporate compliance systems. For example, in addition to compliance in anti-bribery, network security and privacy protection, and trade protection, Huawei has also established customized compliance programs for intellectual property and trade secret protection, and financial compliance. Driven by academic research and corporate practice, Chinese procuratorial authorities launched the “Compliance Non-Prosecution” reform in six grassroots procuratorates overall the country in 2020. The Shenzhen Bao’an District Procuratorate has established a list of compliance supervisors, requiring companies to work with the law firms on the list to establish corporate compliance management.

One of the newly passed law in China already contains explicit articles on corporate compliance. The Export Control Law of the People’s Republic of China (adopted in 17 Oct 2020 and went into enforce on 1 Dec 2020) has two articles explicitly mention corporate compliance. Subparagraph 4 of Article 5 requires State’s export control administrative authorities to guide exporters to establish and improve the internal compliance system of export control. Article 14 establishes an export control incentive mechanism and reads as “Where an exporter has established an internal compliance system for export control, and the system is in good working order, the State’s export control administrative authorities may grant facilitation measures such as general licensing for the relevant controlled items exported by the exporter. The specific measures shall be formulated by the state administrative department of export control”. It can be seen from these two articles that soon, China’s export enterprises will establish or further improve their internal compliance management systems to obtain preferential export policies, and the State’s export control administrative authorities will also further refine the relevant provisions to promote the development of enterprises’ compliance management.

In summary, the development of corporate compliance in China has taken a bottom-up approach. Driven by both corporate practice and academic research, the Chinese legislature and judiciary have also begun to explore the establishment of a corporate compliance system as a corporate governance approach, a risk prevention mechanism, and a criminal and administrative incentive. In the coming years, corporate compliance will undoubtedly become a cutting-edge topic of practice and research in the field of corporate governance in China. It will be interesting to see how China will establish a corporate compliance theory and practice with its own characteristics.

Author: Li Zhuolun, PhD candidate at the UniversitàdegliStudi di Urbino Carlo Bo (Italy), Current Researcher of the Indian Society for Legal Research.


[1] Shen Xiaoming. “Compliance management structure of internationalized large-scale banks and its implications”. International Financial, 01(2006):56-62.

[2] The authors searched CNKI, China’s authoritative online journal database, by the keyword “corporate compliance” and found that only 37 papers on corporate compliance were published in all disciplines from 2006 to 2015, and most of the articles were by scholars from economics, management, finance and other disciplines, with only a few articles originating from law.

[3] Bureau of Industry and Security. Secretary Ross Announces$1. 4 Billion ZTE Settlement; ZTE Board Management Changes and Strictest BIS Compliance RequiementsEver[EB/OL]. https://www. commerce. Gov/news/press-releases/2018/06/secretaryross-announces-14-billion-zte-settlement-zte-board-management, 2018-06-14.

[4] The data are from the search results of “corporate compliance” on the CNKI.

[5] Sun Guoxiang. “The Concept and Function of Criminal Compliance and Its Construction in China.” Criminal Science,02(2019):3-24.

[6]Li Bencan. “Criminal compliance in the Chinese legal system——A perspective from ZTE Case.” Legal Science.02(2018):96-105.

[7]Chen Ruihua, Essential Theory of Corporate Compliance, Beijing: Law Press, 2020.

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