State-owned enterprises were the vanguard of the ‘going global’ wave, but their compliance was often poor. Frankie wang reports on a changing of the guard
ALTHOUGH STATE-OWNED ENTERPRISES (SOEs) are not a phenomenon solely restricted to China, Chinese SOEs have always been stuck with such negative labels as “inefficient”, and “slow in decision-making”.
However, the operating philosophy and methods of a significant number of SOEs have undergone a transformation. Su Yanan, who has worked in a law firm and joined China Life Capital as legal director a few years ago, says that the stereotypical image of “working from 9 to 5, and not being very efficient” is not at all an accurate description of the current state of development of SOEs.
“Particularly in large enterprises and financial institutions, the market orientation of their professional staff is extremely high, and they stress efficiency in the way they do things,” she says. “After I joined China Life, I also found that my superiors and colleagues were quick in their pace of work, and the team was very professional.”
The change in SOEs is also manifested in their attitude towards compliance work. In recent years, the managers of Chinese SOEs have regularly been spotted at large compliance forums inside and outside China. So, what has pushed SOEs to enhance their compliance awareness? And what is the state of compliance system development in SOEs now?
AGE OF ‘BIG COMPLIANCE’
The concept of compliance is expanding in China with changes in the market. At the end of 2018, the State-Owned Assets Supervision and Administration Commission (SASAC) of the State Council and the National Development and Reform Commission (NDRC) successively issued the Guidelines for the Compliance Management of Central State-owned Enterprises (for Trial Implementation), and the Guidelines for Compliance Management in the Overseas Operations of Enterprises.
They specify that the term “compliance” means that the operational and management acts of (Central State-owned) enterprises and their employees comply with the requirements of relevant laws and statutes, international treaties, regulations, industry standards, commercial practice, codes of ethics, rules and regulations formulated by the enterprise in accordance with the law, among others. From this it can be seen that the coverage of what is to be complied with is quite expansive, marking the arrival of the age of “big compliance”.
Gary Gao, a partner at Zhong Lun Law Firm in Shanghai, says the most common reasons for SOEs to be placed under investigation and penalized by foreign regulators are violations of anti-corruption and anti-money laundering regulations, or trade-related laws of the host countries. The EU’s General Data Protection Regulation (GDPR) is also a pitfall for SOEs in terms of overseas compliance.