International Law

China Luxury Goods Market Gets Boost From Bribery

By Stan

Excellent New York Times article (h/t China Digital Times) on bribery of government officials, with the background of the recent National People’s Congress meeting thrown in for context:

Though sales spike in March during the national congresses, executives of luxury goods companies say that lavishing government officials with such products is a year-round practice that reflects China?s culture of gift-giving and tradition of basing business decisions on personal relationships. They admit to having special accounts for government officials, their relatives and even their mistresses, often with code names like Dr. No and Miss K.

I wonder if there is a market for selling these guys special encryption software? Wait a minute, I forgot that encryption software is highly regulated. They could get into trouble for that too.

Luxury producers also keep profiles of their customers? fashion tastes. Government officials, for example, favor Ermenegildo Zegna suits and Salvatore Ferragamo shoes, the executives say. They dislike gifts with big noticeable logos, lest the bribe be too obvious. And they mostly covet expensive watches, which are easily hidden and sometimes traded for cash.

That’s exactly what I tell my wife each year when my birthday draws near and she asks me what I want. “Something small and easy to resell.”

The gifts are essentially bribes or kickbacks, and they are prohibited under Chinese law. But in China, legal experts say, bribery laws are selectively enforced, and party members in good standing are rarely investigated.

Why insert the word “essentially” in that first sentence? Kickbacks are kickbacks — a rather straightforward practice. As far as bribes are concerned, that’s much more complicated. The most common categories are: 1) the short-term, specific favor sort of bribe (I give you X, you do me favor Y — also known as the quid pro quo); and 2) the good faith, long-term gesture (I give you X today, you do me an unspecified favor in the future — also known as the Don Corleone).

As a result, the practice of bribing government officials ? by other government officials and, more commonly, by private businessmen ? is so widespread that luxury goods producers have come to count on it as an increasingly important revenue source.

Please, please, please — would one of my PR/marketing friends create an ad campaign for a luxury goods brand with the goal to expand their share of the bribery market? I would pay to see this, or at least give you a watch.

© Stan for China Hearsay, 2009. | Permalink | No comment | Add to del.icio.us

Full post as published by China Hearsay on March 14, 2009 (boomark / email).