How to Conduct Anti-Corruption Due Diligence in China: A 2026 Guide

Essential anti-corruption due diligence framework for foreign companies operating in China under the 2026 regulatory environment.

Introduction

Anti-corruption due diligence in China has become an increasingly critical component of international business operations. For foreign companies operating in or entering the Chinese market, understanding and implementing robust anti-corruption due diligence procedures is not merely a best practice — it is a legal imperative under both Chinese law and extraterritorial anti-corruption legislation such as the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, and similar laws in other jurisdictions. With China continuing its anti-corruption campaign under President Xi Jinping’s leadership — which has intensified significantly since 2012 and shows no signs of abating — the legal and reputational risks of corruption-related misconduct have never been higher.

The Chinese legal framework governing anti-corruption has undergone substantial development in recent years. The Ninth Amendment to the PRC Criminal Law (2015) expanded criminal liability for bribery, including commercial bribery by non-state actors. The PRC Anti-Unfair Competition Law (revised 2019) strengthened prohibitions on commercial bribery, and the Supervision Law of the PRC (2018) established the National Supervision Commission, expanding the state’s investigatory powers. In 2024-2025, several new judicial interpretations and regulatory guidelines further clarified the scope of anti-corruption obligations for businesses. This guide provides foreign companies with a comprehensive framework for conducting effective anti-corruption due diligence in China under the 2026 legal landscape.

The Legal Framework for Anti-Corruption in China

PRC Criminal Law Provisions

The PRC Criminal Law establishes criminal liability for both active and passive bribery. Articles 163 and 164 address bribery of non-state functionaries, while Articles 385 through 393 cover bribery involving state functionaries. The Eighth Amendment (2011) and Ninth Amendment (2015) expanded criminal liability for commercial bribery to include bribes given to relatives of state functionaries and former state functionaries, and introduced criminal liability for bribery of foreign public officials and officials of international organizations. Key provisions include:

• Bribery of State Functionaries (Article 389): Offering money or property to a state functionary for the purpose of securing improper benefits carries penalties of up to life imprisonment for serious cases
• Commercial Bribery — Non-State Actors (Article 164): Bribery of company or enterprise personnel for improper commercial advantage is punishable by up to three years’ imprisonment for serious cases, extended to up to ten years under the Ninth Amendment
• Bribery of Foreign Public Officials (Article 164, inserted by the Ninth Amendment): Criminalizes bribery of foreign public officials or officials of international organizations for the purpose of obtaining improper commercial benefits
• Introducing a Bribe (Article 392): Penalizes individuals who introduce or facilitate bribes between parties, with penalties of up to three years’ imprisonment
• Unit Crime Liability (Articles 387, 393): Companies (danwei/单位) can face criminal liability for bribery, with fines ranging from significant monetary penalties to asset forfeiture

The PRC Anti-Unfair Competition Law (2019 Revision)

The Anti-Unfair Competition Law (AUCL) is the primary regulatory framework governing commercial bribery in China. The 2019 revision introduced several important changes:

• Expanded Definition of Commercial Bribery: The revised law clarifies that any act of providing property or other means to a counterparty’s employee, a counterparty itself, or any entity or individual entrusted to handle relevant affairs, for the purpose of seeking transaction opportunities or competitive advantages, may constitute commercial bribery
• Liability for Third-Party Intermediaries: Companies can be held liable for bribery committed by agents, distributors, or other third parties acting on their behalf, even without explicit knowledge or authorization
• Increased Penalties: Maximum fines for commercial bribery were increased to RMB 3 million, with the possibility of business license revocation for serious violations
• Enhanced Investigative Powers: The State Administration for Market Regulation (SAMR) and local counterparts have broad investigative powers, including document seizure, site inspection, and questioning of relevant personnel

The Supervision Law of the PRC (2018)

The Supervision Law established the National Supervision Commission (NSC) and its local counterparts, creating a parallel supervisory system that operates alongside the procuratorate (prosecution) system. The NSC has authority to investigate corruption-related misconduct by state functionaries and can detain individuals for up to six months during investigation. Foreign companies should be aware that Chinese business partners’ employees who hold positions in state-owned enterprises or state-controlled entities are considered state functionaries for the purposes of this law.

Extraterritorial Anti-Corruption Laws Applicable to China Operations

Foreign companies operating in China must also comply with their home country’s anti-corruption laws, which often have extraterritorial reach:

• U.S. Foreign Corrupt Practices Act (FCPA): Applies to U.S. companies and their subsidiaries, as well as foreign companies whose securities are listed on U.S. exchanges. The FCPA prohibits bribery of foreign officials (including employees of state-owned enterprises) and requires accurate books and records
• U.K. Bribery Act 2010: Broader in scope than the FCPA, covering bribery of both public officials and private individuals, and introducing the strict liability offense of failure to prevent bribery by associated persons
• OECD Anti-Bribery Convention: Many OECD member countries have implemented laws under this convention that criminalize bribery of foreign public officials, with enforcement against companies operating in China

Stage 1: Pre-Engagement Due Diligence — Planning and Scoping

Effective anti-corruption due diligence begins before any substantive investigation takes place. The planning stage establishes the scope, methodology, and risk profile that will guide the entire due diligence process.

Risk Assessment and Classification

Before conducting due diligence on a specific counterparty, foreign companies should classify the engagement based on its inherent corruption risk profile. The following factors should be considered:

• Industry Risk: Certain industries in China present higher corruption risk, including pharmaceuticals and medical devices (where public hospital procurement is involved), construction and infrastructure (where government bidding processes are common), natural resources and extractive industries, and any sector involving government licenses, permits, or regulatory approvals
• Counterparty Profile: State-owned enterprises (SOEs), entities with government ownership or control, companies with politically exposed persons (PEPs) in management or ownership positions, and entities that have previously been involved in corruption investigations or enforcement actions
• Transaction Type: High-risk transactions include joint ventures with government-related entities, mergers and acquisitions requiring government approvals, government procurement contracts, and license or permit applications
• Geographic Risk: While corruption risk exists throughout China, certain regions and localities may present elevated risk based on previous enforcement patterns and local business practices

Based on this risk classification, companies should develop a tiered due diligence approach — standard due diligence for low-risk engagements, enhanced due diligence for medium-risk matters, and intensive due diligence for high-risk counterparties.

Due Diligence Team Composition

Effective anti-corruption due diligence requires a multidisciplinary team. At minimum, the team should include:

• Legal Counsel: With expertise in both PRC anti-corruption law and applicable extraterritorial laws (FCPA, U.K. Bribery Act, etc.)
• Forensic Accountant or Financial Analyst: To review financial records and identify suspicious transactions
• Compliance Professional: Familiar with the company’s internal compliance policies and procedures
• Local Investigators or Due Diligence Providers: For on-the-ground research, including background checks and in-person interviews
• Industry Specialist: With knowledge of the specific industry’s regulatory environment and common corruption risks in China

Stage 2: Information Gathering — Identifying Relevant Data Sources

The quality of anti-corruption due diligence depends critically on the quality and breadth of information gathered. Foreign companies should systematically collect information from multiple sources to build a comprehensive picture of the counterparty’s integrity risk.

Public Records and Open-Source Intelligence

A significant amount of useful information is available through public sources in China, though access has become more restricted in recent years. Key sources include:

• National Enterprise Credit Information Publicity System (国家企业信用信息公示系统): Provides basic registration information, annual reports, and records of administrative penalties for Chinese companies. This is the primary public source for corporate information
• China Judgments Online (中国裁判文书网): Contains court judgments and rulings, including corruption-related cases, civil disputes involving allegations of bribery, and administrative sanctions. However, access to certain judgments has been restricted since 2023
• Credit China (信用中国): The central government’s credit information platform provides records of administrative and judicial penalties, including those related to commercial bribery
• National Supervision Commission Case Database: While not fully publicly accessible, significant cases are publicized through official media channels
• Media and News Sources: Chinese and international media reports, including investigative journalism on corruption cases, can provide valuable red flags
• Social Media and Professional Networks: Platforms such as WeChat and LinkedIn may provide useful information about business relationships and affiliations

Commercial Due Diligence Providers

For enhanced due diligence, foreign companies often engage commercial due diligence providers with on-the-ground capabilities in China. These providers can conduct:

• Background Checks: Including verified identity checks, address verification, litigation and enforcement searches, and regulatory sanctions searches
• Beneficial Ownership Tracing: Identifying the ultimate beneficial owners of Chinese companies, which may be obscured by complex corporate structures
• Reputation Checks: Confidential interviews with industry contacts, former business partners, and other informed sources
• PEP Screening: Identification of politically exposed persons associated with the counterparty’s ownership, management, or advisory structure
• Site Visits: Physical inspection of business premises to verify operational substance and detect potential red flags

Self-Declared Information and Documentation Requests

For high-priority engagements, companies should consider requesting the following documentation from the counterparty:

• Anti-Corruption Compliance Policies: Written policies and procedures addressing bribery, gifts, entertainment, hospitality, and conflicts of interest
• Code of Conduct: The counterparty’s code of conduct and any training materials on anti-corruption compliance
• Organizational Structure: Including ownership charts, management biographies, and identification of compliance function personnel
• Financial Records: Audited financial statements, tax filings, and internal audit reports
• Prior Investigations: Records of any prior internal investigations or external enforcement actions related to corruption or fraud
• Third-Party Due Diligence Records: Documentation of the counterparty’s own due diligence on its agents, intermediaries, and business partners

Stage 3: Red Flag Identification and Analysis

Once information has been gathered, the due diligence team must systematically analyze the data to identify red flags — indicators of potential corruption risk that warrant further investigation or, in some cases, disqualification of the counterparty.

Ownership and Governance Red Flags

• Use of shell companies or opaque corporate structures that obscure beneficial ownership, particularly when no legitimate business justification exists for the complexity
• Involvement of politically exposed persons (PEPs) in ownership, management, or advisory roles, especially when the PEP appears to have disproportionate influence relative to their investment
• Rapid changes in ownership or management that coincide with regulatory approvals, government contract awards, or other events suggesting improper influence
• Lack of clear governance structure or compliance function, particularly for companies of significant size or regulatory exposure
• Reluctance to disclose beneficial ownership information or to provide basic corporate documentation

Financial Red Flags

• Unusual or unexplained payments to third parties, particularly in jurisdictions with limited nexus to the underlying business transaction
• Large or frequent cash transactions that are inconsistent with the counterparty’s stated business model
• Payments structured to avoid internal or regulatory thresholds, such as multiple small payments that appear designed to circumvent approval requirements
• Unexplained or excessive commissions, finder’s fees, or success fees paid to agents or intermediaries
• Discrepancies between financial records and tax filings or between reported revenues and apparent business operations
• Unexplained write-offs or forgiveness of significant debts or obligations

Third-Party and Intermediary Red Flags

• Use of agents or intermediaries with no clear value proposition or whose qualifications appear unrelated to the services they are engaged to provide
• Agents who are recommended by government officials or who have close personal relationships with officials involved in the relevant approvals or decisions
• Requests for unusually high commissions or fees that are disproportionate to market standards
• Reluctance to provide contractual representations regarding anti-corruption compliance or to accept audit rights
• Request for payments to be made to third-party accounts or in jurisdictions unrelated to the services being provided

Transactional Red Flags

• Expedited processing offered in exchange for additional fees or preferential treatment
• Gifts, hospitality, or entertainment of unusual value or frequency, particularly offered to or requested by government officials
• Requests for charitable or political contributions that are connected to pending regulatory approvals or government decisions
• Employment or internship offers extended to relatives of government officials involved in the counterparty’s business approvals
• Joint venture or partnership structures that appear designed to channel improper benefits to government officials

Stage 4: On-the-Ground Investigative Techniques

For high-risk engagements, desk-based research must be supplemented with on-the-ground investigation. Conducting field investigations in China requires careful planning, knowledge of local conditions, and sensitivity to legal constraints.

Conducting In-Person Interviews

In-person interviews with the counterparty’s management, compliance personnel, and other relevant individuals can reveal information that is not apparent from documentary records. Best practices for interviews in the Chinese context include:

• Prepare thoroughly: Review all available documentary information before the interview to identify specific areas of inquiry
• Use experienced interviewers: Preferably with Mandarin Chinese language capability and deep knowledge of Chinese business culture
• Ask open-ended questions: Avoid leading questions that may elicit the expected response rather than truthful information
• Cross-reference responses: Compare responses across different interviewees and against documentary records to identify inconsistencies
• Document carefully: Maintain detailed interview notes and, where legally permissible, audio recordings with consent
• Be aware of cultural factors: Chinese business culture emphasizes face (mianzi/面子) and hierarchy, which can affect the willingness of interviewees to disclose sensitive information

Site Visits and Physical Inspection

Site visits provide an opportunity to verify the operational substance of the counterparty and detect potential red flags that may not be apparent from documentary review. Key observations during site visits include:

• Verification of stated operations: Does the counterparty have the physical facilities, equipment, and personnel consistent with its stated business operations?
• Assessment of compliance infrastructure: Are compliance policies displayed or otherwise accessible to employees? Is there evidence of compliance training?
• Observation of business culture: What is the tone and culture of the workplace? Are compliance concerns openly discussed or treated as unimportant?
• Review of records: With permission, review of expense reports, travel records, and other financial documentation may reveal patterns consistent with improper payments

Working with Local Investigators

Foreign companies should carefully vet any local investigators or due diligence providers they engage. Important considerations include:

• Licensing and legitimacy: Verify that the provider is properly licensed and has a legitimate business presence in China
• Independence and conflict of interest: Ensure the provider has no prior or current relationship with the counterparty being investigated
• Data privacy compliance: Confirm that the provider’s investigative methods comply with China’s Personal Information Protection Law (PIPL) and Data Security Law (DSL)
• Legal constraints: Be aware that certain investigative techniques common in other jurisdictions — such as pretexting, undisclosed recording, and accessing protected databases — may violate Chinese law
• Reporting standards: Establish clear expectations for reporting format, level of detail, and verification of findings

Stage 5: Risk Mitigation and Remediation Strategies

When due diligence identifies corruption risks — whether concerning a specific counterparty, transaction, or geographic area — foreign companies must implement appropriate risk mitigation measures. The specific measures will depend on the nature and severity of the identified risks.

Contractual Protections

When moving forward with a counterparty despite identified risks, the following contractual protections should be incorporated into the underlying commercial agreement:

• Anti-Corruption Representations and Warranties: The counterparty should provide explicit representations that it has not engaged in bribery or corruption and maintains adequate compliance procedures
• Anti-Corruption Covenants: Ongoing obligations to comply with applicable anti-corruption laws and to maintain effective compliance programs throughout the duration of the relationship
• Audit Rights: The foreign company should retain the right to audit the counterparty’s books, records, and compliance practices at reasonable intervals
• Termination Rights: The right to terminate the agreement immediately upon discovery of corruption-related misconduct, without penalty
• Indemnification: The counterparty should indemnify the foreign company for losses arising from the counterparty’s corruption-related misconduct
• Training and Compliance Requirements: Requirements for the counterparty to conduct anti-corruption training for its employees and maintain specified compliance standards

Enhanced Monitoring

For medium and high-risk engagements, ongoing monitoring beyond standard contractual compliance is essential:

• Transaction Monitoring: Implement enhanced review procedures for payments, commissions, and other financial transactions with the counterparty
• Regular Compliance Audits: Conduct periodic compliance audits of the counterparty’s operations, with a specific focus on areas identified as high-risk during due diligence
• Relationship Reviews: Schedule regular business relationship reviews that include assessment of corruption risk factors and any changes in the counterparty’s risk profile
• Whistleblower Channel Access: Provide the counterparty’s employees with access to the foreign company’s whistleblower hotline or reporting channel

Remediation Programs

When due diligence uncovers evidence of past or ongoing corruption, companies should consider the following remediation steps:

• Internal Investigation: Conduct a thorough internal investigation to determine the scope and nature of the misconduct, with the involvement of external legal counsel where appropriate
• Voluntary Disclosure: Consider voluntary disclosure to relevant authorities, including Chinese enforcement agencies and, where applicable, home country enforcement agencies (U.S. DOJ, SEC, U.K. SFO, etc.)
• Remediation Plan: Develop and implement a comprehensive remediation plan that addresses the root causes of the misconduct and strengthens compliance controls
• Personnel Actions: Take appropriate disciplinary action against employees involved in misconduct, including termination and, where warranted, referral for criminal prosecution
• Third-Party Terminations: Terminate relationships with agents, intermediaries, or other third parties involved in the misconduct
• Compliance Program Enhancement: Strengthen the company’s overall compliance program, including enhanced training, monitoring, and controls

Developing a Comprehensive Anti-Corruption Compliance Program for China

The most effective anti-corruption due diligence is conducted within the framework of a comprehensive compliance program that addresses the specific risks of operations in China. Key elements of such a program include:

Written Policies and Procedures

Foreign companies should maintain written anti-corruption policies that are specifically tailored to the Chinese operating environment, including:

• Anti-Bribery Policy: Clear prohibitions on bribery and corruption, with definitions that cover both state official bribery and commercial bribery under PRC law
• Gifts and Entertainment Policy: Specific guidelines on the provision and receipt of gifts, meals, entertainment, and hospitality, including monetary thresholds and approval requirements
• Third-Party Due Diligence Policy: Procedures for vetting agents, distributors, consultants, and other third parties
• Political and Charitable Contributions Policy: Guidelines on political contributions (which are generally prohibited for foreign companies) and charitable donations
• Conflicts of Interest Policy: Requirements for disclosure and management of conflicts of interest
• Records Management Policy: Requirements for accurate and complete books and records, including prohibitions on off-the-books accounts

Training and Awareness

Effective training is critical to ensuring that employees understand and comply with anti-corruption requirements. Training programs should be:

• Tailored to the Chinese context: Including real-world examples and scenarios relevant to business operations in China, and delivered in Mandarin Chinese for local employees
• Role-specific: Different training content for sales personnel, procurement staff, senior management, and third-party intermediaries based on their specific risk exposure
• Regular and documented: Conducted at least annually, with attendance and completion tracked and documented
• Tested and reinforced: Including knowledge assessments and periodic refresher training

Monitoring and Testing

Compliance programs must include ongoing monitoring and testing to assess effectiveness and identify areas for improvement:

• Financial Controls: Implement robust financial controls, including segregation of duties, approval requirements for high-risk transactions, and regular reconciliation
• Compliance Audits: Conduct periodic audits of high-risk business units, departments, and transactions
• Data Analytics: Use data analytics to identify unusual patterns in payments, expenses, and third-party transactions
• Whistleblower Mechanisms: Maintain accessible and confidential reporting channels for employees and third parties to report suspected misconduct
• Case Management: Establish procedures for investigating and resolving reported concerns, including escalation protocols

Conclusion

Conducting effective anti-corruption due diligence in China requires foreign companies to navigate a complex and evolving legal landscape. The Chinese government’s sustained anti-corruption campaign has created an environment where corruption-related misconduct carries significant legal, financial, and reputational risks. At the same time, the extraterritorial reach of laws such as the FCPA and U.K. Bribery Act means that foreign companies’ China operations are subject to scrutiny from multiple jurisdictions.

The due diligence framework outlined in this guide — encompassing pre-engagement planning, systematic information gathering, red flag identification, on-the-ground investigation, and risk mitigation — provides a structured approach to managing corruption risk in China. Critically, due diligence should not be a one-time exercise but an ongoing process integrated into the company’s overall compliance management system. The legal and regulatory environment in China continues to evolve, and compliance programs must evolve accordingly.

Foreign companies that invest in robust anti-corruption due diligence and compliance programs not only reduce their legal and regulatory risk but also build stronger, more sustainable business relationships in China. In an environment where trust and integrity are increasingly valued by Chinese business partners and regulators alike, a demonstrated commitment to ethical business practices is itself a competitive advantage.