Recent Chinese media reports put numbers to the Communist Party’s heavy presence in the mainland’s internet sector. These statistics, viewed against the backdrop of recent corruption scandals in this industry, spell significant FCPA risk for multinational companies.
Eyebrows were raised last week when the Communist Party Committee of online media company Sina published its first-ever tweet on microblog network Sina Weibo.
According to a Party member within the company, Sina’s Party Committee was formed in October 2010.
The 283-member Committee is led by Party secretary Fu Yi, a staffer in the Admin Department and the head of Sina’s workers’ union.
The newspaper Southern Metropolis Daily reported that among the employees of Beijing’s 26 leading internet companies, there were 2,680 Party members.
For multinationals doing business with these companies, this further expands exposure to foreign officials.
Beijing is home to 420,000 internet companies, 95 percent of which are privately owned.
Eight internet companies besides Sina have formed Party organizations within their ranks, including search giant Baidu and social network Kaixin.
Baidu alone reportedly employs more than 1,000 Party members.
Founded in 2000, Baidu is the most visited website in China and the world’s second most valuable online search company after Google.
In August 2012, three Baidu employees were arrested for allegedly taking bribes to delete internet posts. Companies paying websites to quash negative online buzz is said to be a form of corruption that thrives behind China’s Great Firewall.
China’s central government recently ratcheted up internet controls, officially sanctioning the deletion of “illegal content” from the web.
After the Baidu scandal broke, the minimum fee for post deletion reportedly skyrocketed from 600 yuan ($96) to 2,400 yuan ($386).
Companies often opt to use illegal “internet p.r. companies” to pass bribes to internet moderators, according to media reports. By orchestrating whitewashes of online content on behalf of corporate clients, these middlemen can earn several million yuan per year.
To drum up demand for their services, these “p.r. companies” have also been known to post negative comments online.
A recent Baidu search for “post deletion service” produced 3.86 million results, including links pointing to websites that promised “complete packages” covering all available internet portals for a one-off fee of 30,000 yuan ($4,800).
Sources: Xinhua News (新华社), Southern Daily (南方日报), The Beijing News (新京报), Legal Evening News (法制晚报)
This post is part of an ongoing China Compliance Digest investigation into current anti-corruption compliance risk factors.
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