On 27 January 2016, Transparency International launched its latest 2015 Corruption Perception Index (“CPI”). China’s ranking significantly improved from last year, moving up seventeen places from 100 to a rank of 83. This suggests that the Chinese government’s anti-corruption campaign may be taking effect and resulting in a more positive perception of the level of public sector corruption in China.
Significance of the CPI
The CPI Index was established in 1995 as a composite indicator used to measure perceptions of corruption in the public sector in different countries around the world. Since then, it has been used as an important gauge by companies in managing corruption risks when conducting businesses in foreign countries.
A country or territory’s score indicates the perceived level of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean). A country or territory’s rank indicates its position relative to the other countries and territories in the index.
Highlights of the 2015 CPI
The following are some key points arising from the 2015 CPI:
- Two-thirds of the 168 countries on the 2015 index scored below 50.
- More countries improved on their CPI scores than declined.
- China’s rank improved from last year, moving up 17 places to #83 from #100, although its CPI score only increased by one point.
- Hong Kong dropped one spot to #18 from #17, but improved on its CPI score by one point.
- In Asia, India, South Korea, Thailand, Indonesia and Vietnam see improvements in their rankings, suggesting a reduced perception of the level of public sector corruption in those countries.
- Singapore, Australia, Japan, Malaysia and Philippines, among others, have declined in their rankings.
- Globally, Denmark takes the top spot for the second year running, with North Korea and Somalia being the worst performers. Brazil was the biggest decliner in the index, dropping seven positions to a rank of 76.
The table below sets out some key jurisdictions in the Asia Pacific region showing their 2015 CPI rankings and scores against their 2014 position.
Extract of AsiaPac Countries
Actions to Consider & Conclusion
The latest CPI should remind companies that rely on its rankings to review their global compliance programs and make regional adjustments accordingly. Companies should pay attention to those countries and regions that have dropped significantly in the their rankings and scores, and identify any compliance risks that may be previously undetected.
For companies doing business in China, despite improvements in China’s ranking, we recommend continued vigilance and regular review of compliance policies and business practices. The recent Ninth Amendment to China’s Criminal Law, which became effective last November, demonstrates the Chinese government’s continued pursuit of the antigraft campaign in China. As discussed in our previous alerts, the anticorruption landscape has become more stringent than ever in China, with an increased focus on bribe-givers and the introduction of additional compliance risks for executives in responsible positions.