Professional Documents
Culture Documents
1. How would you compare Chinas and Russias corruption percentage index?
What might be driving these differences? What issues could this create?
Over 170 countries are ranked annually from 100 (low corruption) to 0 (high corruption)
based on the Corruption Perception Index (CPI) which describes corruption as the
mistreatment of public influence for private advantage. In 2013, China scored a mark of
40 for its CPI while Russia scored just 28. Hence, both countries have scored similarly and
can be classified as highly corrupted countries.
There are many driving factors to reflect on in relation to such scores. The primary issue
is high levels of concentrated ownership in both the countries. Companies listed in their
respective countries stock exchanges are majorly state owned enterprises (SOE) or
owned by block holders which causes inadequacy in asset allotment. This causes a
deviation of capital away from corporations, diminishes liquidity and disheartens minority
shareholders from contributing in long term projects.
ownership, there exists an absence of self-governance within the board. The minority
investor benefits are conceded and in China, the managerial board has not caused an
effect in its authority role. Moreover, insider trading is still flourishing in both countries (In
Russia, an efficient law against insider trading was only passed just in 2011) due to
absence of encouragement for whistle blowing, incompetent legal system and futile
Securities Laws. Incorrect financial reporting by companies, particularly in China,
continues to create a crisis and in Russia, the mean size of bribes has considerably
increased over the years.
This has created many issues in Russia and China. In Russia, corruption takes up as high
as 48% of its GDP based on a report by World Bank. The main focal point of bribery has
also experienced changes: bribes were taken by bureaucrats as they could aid legal
breaches; however, they now get bribes just to do their work. Cost of corruption is paid
by the Russian people. Their amounts to paid as tariffs for housing, gas, electricity and
water has been rising quickly. On the other hand, the cost of corruption in China can as
high as $86 billion according to Minxin Pei. Corruption in China also affects Western
company curiosities and foreign investors as they risk human rights, financial liabilities
etc. and at the same time competing with local firms as employ legal infractions to gain
market power.
2. In general how would you rate the overall political risk of both countries? Are
there any recent examples of political risk? What are some possible methods,
political risk, a small degree of risk will always exist and companies must look out for the
business atmosphere methodically prior to getting involved in international markets. In
addition, full insurance is practically unfeasible as cash flows are doubtful, hence,
insuring amounts that are more than the initial investment is difficult.
Reference List
http://www.transparency.org/research/cpi/overview
http://www.transparency.org/cpi2013/results
http://en.wikipedia.org/wiki/Corruption_in_China
http://www.business-anti-corruption.com/country-profiles/east-asia-thepacific/china/snapshot.aspx
http://en.wikipedia.org/wiki/Corruption_in_Russia
http://www.business-anti-corruption.com/country-profiles/europe-centralasia/russia/snapshot.aspx
http://eprints.qut.edu.au/44126/1/Bin_Dong_Thesis.pdf
http://www.albertodifelice.com/essays/corruption-china.php
http://www.cecc.gov/events/roundtables/corruption-in-china-today-consequences-forgovernance-human-rights-and-commercial
http://carnegieendowment.org/files/pb55_pei_china_corruption_final.pdf
http://www.gwu.edu/~ieresgwu/assets/docs/ponars/pm_0430.pdf
http://www.ier.hit-u.ac.jp/Common/publication/DP/DP557.pdf
http://imrussia.org/en/society/376-corruption-in-russia-as-a-business
http://cria-online.org/9_5.html
http://www.investopedia.com/ask/answers/06/politicalrisk.asp
http://www.reuters.com/article/2013/10/21/us-column-wasik-politicalriskidUSBRE99K0Q820131021
http://www.forbes.com/sites/steveculp/2012/08/27/political-risk-cant-be-avoided-but-itcan-be-managed/
http://www.accenture.com/sitecollectiondocuments/pdf/accenture-managing-politicalrisk-controlling-loss-finding-opportunity.pdf