China Strengthening Enterprise Compliance Supervision
Strengthening legitimate business operations has already become the consensus among enterprises across the world. Strict compliance governance is not only essential to enterprises themselves, but also constitutes an important part of the internationalization and legalization of the business environment.” On May 4th, Jiang Zengwei, the Chairman of the China Council for the Promotion of International Trade pointed out, during the Launch Conference of the National Enterprises’ Compliance Committee of the CCPIT, “we have established this committee follow the tide of compliant development of corporations, as well as to adapt to the internationalization of the management of enterprises.”
The timely establishment of the National Enterprises’ Compliance Committee
“A better understanding of the regulations and practices of international trade is key for the China’s transition from a big trade nation to a powerful one. These rules are also important preconditions for business operations. However, we are far from taking them seriously, and there is still much room for improvement,” said Jiang Zengwei. He also pointed out that in the future, only enterprises with leading technology and management skills, as well as impeccable compliance systems will be competitive enough in the global market; otherwise they will be washed out by the vigorous competition.
All delegates present at the meeting agreed that the launch of the National Enterprises’ Compliance Committee of CCPIT came at the right time
Executive Vice President of China Enterprise Federation Zhu Hongren stated that the United States, with its dominant position in the global market, the monopoly of advantages of high and new technologies, and the extraterritorial jurisdiction mechanism of the Long-arm Act, has to some extent translated compliance requirements into a means of protecting its strategic trade interests. “The recent ZTE incident also shows that integrity and compliance operations are the lifelines of enterprises, and Chinese companies, whether they operate locally or develop overseas, should firmly stick to the principle of integrity and compliance and constantly improve their compliance management capabilities,” he said. “We will strengthen the construction our a compliance system, improve and implement rules and regulations, conscientiously examine business risks, and implement competition and operations on the premise of respecting interna- tional rules and the relevant national laws and regulations,” Zhu Hongren suggested.
The inaugural meeting brought together representatives from central enterprises, state-owned enterprises, private enterprises, and foreign enterprises in the field of compliance. These enterprises all seemed to have the common believe that, at the national level and at the governmental level, the establishment of the National Enterprise Compliance Committee truly represents a milestone in the construction of compliance management among Chinese enterprises.
The National Enterprise Compliance Initiative was also released at the inaugural meeting. “This is a very good initiative. Compliance and advocacy for positive energy are what we need, and from now on, we are going to accomplish this mission together, not just on our own. Therefore, we should also promote international trade in general and advocate the establishment of a good image of Chinese enterprises when we are promoting the “Belt and Road” initiative,” said Yu Mang, Deputy General Manager of Legal Affairs of China Mobile Communications Group Co., Ltd.
“As a representative for private enterprises, one of the most striking feelings is that our company is not alone,”
said Sun Hong, the Vice President of Zhejiang Geely Holding Group Co., Ltd. He also said that the current international situation puts forward higher requirements for Chinese enterprises’ compliance when going global. “Especially with regard to Sino-us trade frictions, the United States is also looking for various excuses to impose sanctions on Chinese enterprises. Under such circumstances, we must impose strict demands for ourselves and put our best effort into everything.”
Challenges ahead during the compliance process
“In the process of going global, some enterprises face the problem of non-standard behavior, which has had a negative impact on the production and management of enterprises, and even on the image of our nation. Some enterprises do not understand international rules and develop blindly without scientific reasoning; others conduct price-cutting competition; and others pursue achievements regardless of the cost, damage to the environment, security risks and so on.” Liu Minqiang, the Counsellor of the Department of Foreign Investment and Economic Cooperation of the Ministry of Commerce, pointed out that enterprises face a variety of compliance challenges during the process of “going global”.
Therefore, determining how to balance business interests and compliance development of Chinese enterprises and to build century-old brands is both a new challenge and a concern for enterprises in the progress of development.
Zhang Yinping, Director of Ping An Insurance’s Anti-money Laundering Department, pointed out that the reasons for violating the regulations can usually be roughly classified into three categories: firstly, some companies neglect the regulations, inadvertently get out of line and are thus punished; secondly, deliberate violation of the rules; and finally, being willing to comply, but having no sound plan in place to achieve the desired objectives.
Hu Qin, Vice Director of the Risk Management Department (Legal Compliance Department) of China Merchants Group Co., Ltd., pointed out that the China Merchants Bureau has also encountered many problems during the process of promoting the construction of a compliance management system: for example, regarding the issue of external design standards for compliance management, how to organically integrate the construction of a compliance management system based on international standards, national standards and standards for central enterprises, and regarding team construction of compliance management. There is a shortage of qualified personnel in the compliance field at present, which has led to insufficient experience when dealing with these problems.
In the process of compliance, especially in the face of the temptation of interests or the premise of industrial survival, choosing whether to follow the path of compliance or whether to get the benefits to first survive is often the direct problem faced in enterprise operation.
Li Zhuyong, Legal Director of the People’s Insurance Company of China Ltd., has considered how to strengthen compliance from another perspective. “We found that in the course of cooperation with some enterprises, violations by upstream and downstream enterprises can bring you a lot of risks. In the recent Facebook data scandal, Cambridge Analytica, the company with which Facebook worked together, actually removed data and used it.” He cautioned that companies should pay greater attention to partners or third party compliance and be more careful.
Guo Nan, who has worked on compliance for over 10 years, is the Asia-pacific Compliance Officer of BP (China) Investment Co., Ltd. He expressed that although there are many compliance cases that have prompted companies to work more comprehensively on compliance, it is actually a kind of management philosophy and system. A well-managed enterprise is mostly reflected in its internal rules and regulations, which include the prevention of bribery, money laundering, data leaks, monopolies, and the process of financial approval. Employees are required to comply with the Labor Law and environmental requirements.
Guarantee Compliance, Benefit Enterprise
Jiang Zengwei suggested that, “For future committee work, we should advocate the enterprise compliance culture, promote the construction of an enterprise compliance management system, strengthen the compliance regulations according to the law, improve the legal services regarding enterprise compliance, and effectively guard against management risks. We will also strengthen the training for compliance personnel in enterprises and enhance their ability to guarantee compliance. Besides this, we will reinforce the study of international compliance rules and exchanges with other countries and international organizations around the world.”
Many enterprises have strengthened the construction of their compliance management system for a long time. Wang Zhile, director of the Beijing New Century Academy on Transnational Corporations, mentioned that many companies’ compliance was initially put forward because of the risks they faced. However, in order to establish a compliance system, they should not only be focusing on avoiding risks, but also on forming a compliance culture from the perspective of enterprise values, sustainable enterprise development and long-term profits.
According to Tian Peng, Chief Risk Officer of China National Offshore Oil Corporation (CNOOC), CNOOC’S compliance system has been deepening year by year, espe-
Choosing whether to follow the path of compliance or whether to get the benefits to first survive is often the direct problem faced in enterprise operation.
cially in overseas areas. In 2014, the parent company issued the Code of Conduct for Overseas Institutions and Personnel, and issued the more detailed Guidelines for Overseas AntiCorruption and Bribery Compliance Work in 2017. Based on cross-national analysis, the company carried out targeted research on the corresponding anti-corruption laws and regulations and introduced instructions regarding overseas compliance along with the forms and procedures. In addition, he believes that an important part of closed-loop management is accountability for compliance. Once violations are detected, determining how to conduct accountability for officials and leaders, and how to implement the Party-led group inspection work are the situations faced by stateowned enterprises when monitoring the formation of a closed-loop system.
It is because their compliance work is solid, says Mr. Sun, that they have gained considerable profits from it. “Within a year, we have successively completed six major acquisitions, and compliance contributed to our progress on these projects.” He says that compliance has to be carried out in a downto-earth manner in order to ensure that every project will be sound.
Liu Jian mentions that, with the development of compliance, new issues are constantly emerging. At the end of 2017, Daimler put in place digital risk compliance officers, who were tasked with responding to increasingly pressing data protection requirements and dealing with legal regulatory requirements regarding cybersecurity. As for some questions about gift-accepting, they introduced the two top versions of China’s compliance practices, providing employees with self-assessment questionnaires. This has significantly reduced the need for low-risk compliance consultation.
The 15t h Beijing International Automobile Exhibition (Auto China 2018) successfully drew to a close at the China International Exhibition Center in Beijing on May 4, 2018. As one of the most important events in the international automobile industry, the exhibition attracted extensive attention from consumers and also included participation by both domestic and foreign -players in the automobile industry.
Auto China 2018 attracted the participation of more than 1,200 exhibitors from 14 countries and regions. Approximately 1,022 vehicles were displayed at the venue, with 105 of them making their world debut during the exhibition. Multinational Automobile Companies contributed 46 of these just-launched vehicles, with 16 of them making their international debut and 30 of them making their Asian debut. There were also 64 concept vehicles and 174 new energy vehicles showcased at the event, with Chinese automobile companies contributing 124 of these new energy vehicles. An audience of approximately 820,000 attended the event.
The above figures provide a general picture of this exhibition, and also indicate the robust growth of the global and Chinese automobile market. The development of Chinese new energy vehicles became a highlight of this event and also the whole automobile industry.
Rising popularity of new energy vehicles
Auto China 2018 continued the excited fever of Auto China 2017, with the number of displayed new energy vehicles and domestic manufacturers rising. Both traditional automobile manufacturers and new players in the industry have consolidated their presence in the area of new energy vehicles. Some domestic companies launched their new energy vehicles at the exhibition, including BYD’S Yuan EV360, Beijing Auto’s ET400, Dongfeng’s Fengguang 580 and Lifan’s 650EV.
The Jianghuai IEVA50, one of the most important highlights of this exhibition, features an endurance mileage of 500 miles, which marks a new chapter in Chinese new energy vehicle development.
BYD’S Song MAX PHEV ( Plug- in Hybrid Electric Version) was also showcased during the exhibition. The automobile’s
appearance and interior have been upgraded from the last version, and the new vehicle is powered by a 1.5T turbo-supercharged engine.
Great Wall Motor launched its own new energy vehicle brand GWKULLA. The GWKULLA R1 is an electric-powered mini vehicle that features a combination of blue and white colors. This vehicle adopts the ME platform, a professional electric vehicle platform that features a highly integrated electric drive system. The system’s power density reaches 160Wh/ kg, and its system efficiency is 97%, meaning that each kwh is able to support a 10mile drive.
NIO also launched its ES8 6-seated model at the exhibition. According to their previous plans, it’s the NIO ES8 was originally slated to be unveiled during the first half of this year. This model features a 70kwh three-element lithium battery. It takes only 1 hour to charge the vehicle from 0 to 80% battery capacity by applying the quick charge technology. The new vehicle has an endurance mileage of 355 miles and can even achieve 500 miles when staying under the speed of 60km/h.
Multinational manufacturers further tap Chinese market
The wide participation of multinational automobile manufacturers in the exhibition indicates their deep enthusiasm towards the Chinese market.
Rupert Stadler, the CEO of Audi, said that Audi is planning to work with FAW Group to double their productions. He said that Audi will promote 10 new SUV models before 2022 and that the share of electric vehicles in its sales in the Chinese market will reach 30% by 2025.
Stadler said that Audi will expand its cooperation with SAIC Motor and double the employment of engineers in China to 750-800. However, he did not indicate a time schedule for this.
BMW CEO Harald Kruger said that BMW is looking to establish a cooperation relationship with Brilliance Auto and is open about the share ratio of the joint venture. Kruger said that he preferred a 50-50% shareholding structure for the joint venture.
It is also reported that BMW is planning to establish a joint venture with Great Wall Motor to develop the BMW Mini brand in China.
Peter Fleet, President of the Ford Motor Company, Asia Pacific, said that he hopes China will further loosen the limit on the shareholding proportion for foreign companies in China’s automobile sector, and accelerate the approval procedure for the establishment of a joint venture regarding electric vehicles between Ford and Zotye Motor.
The Tesla MODEL 3 was first launched for the Chinese market at the Beijing automobile exhibition and attracted a lot of attention from the public. The MODEL 3 is scheduled to be delivered to Chinese customers in 2019.
The recently-held Boao Forum for Asia gave the signal that China will remove the hurdles for market entry and ease up on the limit on the shareholding proportion for foreign companies in the automobile sector. China will also expand imports and lower import tariffs for vehicles in 2018.
On April 17, the National Development and Reform Commission said, when answering questions from the press about the negative list of foreign investors and the opening-up of the manufacturing sector, that the automobile industry will gradually open up. The limit on the shareholding proportion for special vehicle and new energy vehicle companies by foreign capital will be removed in 2018; the limit on the shareholding proportion for commercial vehicle companies by foreign capital will be removed in 2020; the limit on the shareholding proportion for passenger vehicles by foreign capital will be removed and the establishment of more than two joint ventures will also be permitted. After an interim period of 5 years, the automobile industry will remove all limits.
China will allow the establishment of automobile companies wholly controlled by foreign capital before 2022, in order to open
up the world’s largest automobile market. This plan will change the requirements for joint ventures between multinational corporation and domestic partners.
It is known that Nissan Group and DFAC have established a joint venture. If the shareholding proportion is raised above 50%, this venture will gain a leading position in new vehicle development and adjustment of the production mechanism. However, Nissan Group said that it will not raise the shareholding proportion immediately as this would harm their current working relationship.
Ford Group has also chosen Chongqing as the place to develop its new generation of Focus models. The Ford strategy is to give priority to China and then to the rest of the world. It shows that Ford is focusing on the Chinese market, whilst also showing that Ford Group will be withdrawing from the U.S. market.
Over the course of the rest of 2018, many multinational automobile companies are striving for cooperation with domestic automobile manufacturers, indicating their focus on and enthusiasm for the Chinese market. Chinese local automobile companies will also be faced with more fierce market challenges.
Chinese automobile industry under reform
President of Chang’an Group, Zhu Huarong, said, at the China Auto 2018 summit, that the Chinese automobile industry is undergoing a number of great reforms including those related to AI intelligence, new energy and new competition. It is true that the industry is facing a lot of changes, and also fierce competition.
Insiders in the industry point out that the automobile industry is facing four development trends, including electric vehicles, smart driving, e-commerce and the sharing economy. These four trends cover the supply and demand side of the industry. Electric vehicles and smart inter-connectivity will upgrade the supply side, while e-commerce and the sharing economy will further promote development on the demand side.
From the technological perspective, vehicle intelligence, unmanned driving and the Internet of Vehicles are three important development trends.
Vehicle intelligence. Vehicle intelligence is displayed in two aspects: the first is the application of automatic electrical devices to replace mechanical operations, in order to better control vehicles and make the driving experience safe and efficient. The second is the integration of information and entertainment into the vehicle to create a more relaxing environment for drivers. This is also called Infotainment.
Li Weili, Deputy Director of the Information Data Management Department of the National Information Center, said that in the long run, vehicle intelligence will improve driving safety. Once an intelligent transportation system and a platform are established, drivers will be able to acquire a clear picture of the road surroundings and conditions in a timely manner, and will be able to take preventive measures to avoid accidents. Meanwhile, the smart transportation system will help drivers plot the best driving routes to alleviate traffic congestion.
Unmanned driving as a key reform. It is reported that Hangzhou will hold a test experiment of unmanned driving on real roads over a 1.6-mile distance adjacent to the headquarters of Alibaba Group. This shows that Hangzhou will be another big city embracing unmanned driving, following in the footsteps of Beijing, Shenzhen and Shanghai.
The most striking news about unmanned driving is Baidu Chairman & CEO Robin Li’s drive along the 5th Ring Road last year. The unmanned driving technology has continued to make further progress in 2018. On New
When it comes to 2018, many multinational automobile companies are seeking cooperation with domestic automobile manufacturers, indicating their focus on and enthusiasm about the Chinese market.
Year’s Eve, Baidu Apollo unmanned vehicles became the first fleet of vehicles to travel on the Hongkong-zhuhai-macau Bridge.
This rise in new technology also means conflicts with old traditions and paradigms. Questions about unmanned driving will always exist. The major doubt focuses on the driving safety. Although manned driving involves a lot of risks, including operational mistakes, driving when tired, sudden illness and drunk driving, it will take a period of time for the public to accept automatically-driven vehicles, as the losses will be incalculable if the driving system loses control.
However, it is unquestionable that unmanned driving represents the future trend of automobile technologies. Time is still needed to improve such technologies.
Internet of Vehicles Provides Platform for Communication. The Internet of Vehicles is the collection and application of static and dynamic information about vehicles through electronic tags and data collectors installed in the vehicle, so as to monitor vehicle driving conditions and provide comprehensive services.
How can the Internet of Vehicles be described? People from Foton Motor explained that in the near future, automatic driving and communications among different vehicles will become possible. In the city, vehicles will be able to move through roads and alleys under the command of an intelligent transportation system. Even blind people will be able to drive vehicles. New energy stations are located everywhere across the city, ready to charge vehicles. The smart driving system will largely increase the driving efficiency, and make zero accidents an achievable goal.
Insiders in the automobile industry have said that the Internet of Vehicles is not just about connecting your cellphone or tablet to the vehicle, or projecting a mobile app onto the screen of the vehicle. From the point of view of factory installment, the Internet of Vehicles refers to the vehicle and network. The Internet of Vehicles is a local area network which represents a close technology system.
Discussions have recently been focused not only on traditional information technology, such as sensor technology, computer technology and telecommunications technology, but also on Internet of Things, big data, and cloud computing. Traditional industry players including VW, Volvo, Cadillac and Toyota have recently been discussing these concepts, and some network companies such as Google, Baidu, Alibaba and Tencent have joined the discussion. The two sides are moving closer to each other in the context of industry reform and innovation.