China’s draft anti-corruption law: A practical guide for multinational companies

Key points

• China has introduced its first dedicated anti-cross-border corruption law.
  
  
• The Draft Law would extend PRC anti-corruption enforcement to a wide range of overseas conduct.
  
  
• Covered companies could face penalties for compliance failures even absent underlying corruption.
  
  
• The Draft Law adopts several features not found in the United States’ Foreign Corrupt Practices Act of 1977 (FCPA) or the United Kingdom’s Bribery Act 2010 (Bribery Act), including blocking and countermeasure provisions.
  
  
• If enacted, the Draft Law would introduce new compliance and enforcement considerations for foreign companies operating in China and Chinese enterprises with overseas operations.

Introduction

In China, the Standing Committee of the 14th National People’s Congress (NPC) recently conducted a first reading of the Draft Anti-Cross-Border Corruption Law (《中华人民共和国反跨境腐败法（草案）》) (Draft Law).[1] If enacted, the Draft Law would establish a legal framework for extending the People’s Republic of China (PRC)’s enforcement authority to overseas bribery and transnational corrupt conduct.

Comprising six chapters and 47 articles, the Draft Law is China’s first standalone legislation focused on cross-border corruption. It would not create new categories of criminal offenses; instead, it would consolidate and extend existing laws – principally the Criminal Law, Supervision Law, and Anti-Unfair Competition Law – to cross-border scenarios. The Draft Law would have a broader jurisdictional reach and create freestanding administrative compliance obligations under Chapter 4, carrying their own penalties independent of any underlying criminal conduct.

In this article, we discuss the substance of the Draft Law: the five categories of regulated conduct, the jurisdictional framework, the new statutory compliance obligations, and the enforcement and incentive mechanisms. We then compare the Draft Law with two prominent international anti-corruption regimes – the FCPA and the Bribery Act – before setting out practical compliance takeaways for both foreign companies operating in China and Chinese companies with overseas operations.

Five categories of regulated conduct

The Draft Law identifies five categories of cross-border corruption:

• Bribery of foreign public officials or officials of international organizations: This applies to domestic entities and individuals as well as overseas entities operating within China.
  
  
• Bribery of PRC officials by overseas entities: This covers foreign entities or individuals that bribe PRC state functionaries or their closely related persons, government bodies, state-owned enterprises, public institutions, and people’s organizations. It also covers the related acceptance of bribes by those officials.
  
  
• Overseas duty-related offenses by domestic entities: This includes corruption and bribery, abuse of power, dereliction of duty, power rent-seeking, interest transfer, favoritism and malpractice, waste of state assets, and other duty-related violations or crimes committed abroad by PRC enterprises and their personnel.
  
  
• Catch-all provision: This covers conduct of the same nature that is carried out wholly or partly abroad and produces results wholly or partly within China, employing an “effects” test.
  
  
• Fugitive-related conduct: This includes suspected corrupt individuals fleeing abroad or engaging in cross-border transfer of corrupt assets.

Jurisdictional reach

The Draft Law’s jurisdictional provisions extend to PRC nationals and PRC-organized enterprises, including their overseas branches and subsidiaries, regardless of where the conduct takes place.

Foreign entities and persons are subject to territorial jurisdiction when they engage in bribery of PRC officials or within China. The catch-all effects test extends coverage further: If conduct occurs partly abroad but produces results within China, the Draft Law may apply. The Draft Law also includes defensive provisions.

Article 26 prohibits foreign institutions from conducting anti-corruption investigations within Chinese territory without PRC consent. It further prohibits institutions, organizations, and individuals within China from providing evidentiary materials or other related assistance to foreign institutions, organizations, or individuals without PRC approval. Meanwhile, Article 6 authorizes countermeasures against what China characterizes as improper extraterritorial assertions of jurisdiction by foreign authorities.

Article 26 is also part of a broader framework under existing PRC law. Comparable approval requirements for foreign enforcement activity and cross-border evidence transfers already appear in, among others, Article 4 of the International Criminal Judicial Assistance Law (2018), Article 36 of the Data Security Law (2021), and Article 177 of the Securities Law (2019). Article 26 is consistent with these requirements and does not appear to impose a materially more restrictive prohibition.

Although the provision has not yet been tested, Article 26 may be read as focusing on unauthorized foreign government enforcement activity in China rather than bona fide corporate internal investigations, particularly because Chapter 4 requires companies to investigate and address violations (Article 30).

Compliance obligations

Chapter 4 of the Draft Law imposes statutory compliance obligations on cross-border enterprises, defined under Article 29(2) as domestic companies that have established overseas branches or subsidiaries or that engage in overseas investment activities, as well as the China-based branches and subsidiaries of foreign enterprises. The framework includes the following requirements:

• Compliance management systems for all cross-border enterprises (Article 30, paragraph 1)
  
  
• Designated compliance management departments or personnel for domestic enterprises and, as needed, deployment of compliance officers to overseas entities (Article 30, paragraph 2)
  
  
• Internal reporting mechanisms (Article 31)
  
  
• Financial and accounting controls (Article 32)
  
  
• Third-party due diligence and management (Article 33)
  
  
• Employee training and integrity education (Article 34)
  
  
• Ongoing risk monitoring and internal auditing (Articles 31, 32)

Under Article 45, a company’s failure to establish the required compliance infrastructure is, on its own, a sanctionable violation.

If enacted, the Draft Law would impose a graduated enforcement process on companies. The competent authorities would first order rectification within a prescribed period and then, only if the company refuses to rectify, could order suspension of relevant business operations, cessation of business for rectification, or revocation of relevant business licenses, regardless of whether any underlying corrupt conduct has occurred.

Enforcement and incentives

The National Supervisory Commission would lead enforcement, with criminal liability established via cross-reference to the Criminal Law. However, the Draft Law also enables standalone administrative penalties for compliance failures, separate from any criminal case.

Enforcement is supported by a broad interagency referral network. Under Articles 13 and 14, anti-money laundering (AML), audit, finance, tax, financial regulatory, and customs authorities must refer suspected cross-border corruption leads and evidence to the supervisory or public security organs.

In practice, a routine tax audit, customs inspection, or AML review could therefore prompt a formal corruption investigation. The Draft Law also calibrates penalties: Article 42 requires increased administrative penalties for repeated violations, repeat offenses following prior enforcement, refusal to surrender or return illegal gains, and conduct causing serious harm to state or public interests. Accordingly, a company’s cross-border corruption history may be a relevant mergers and acquisitions due diligence consideration.

Conversely, Article 43 permits reduced or mitigated penalties for voluntary surrender and truthful confession, active cooperation and proactive provision of materials, remedial measures and return of illicit gains, and verified reporting of others’ misconduct. The Draft Law also contemplates collateral consequences such as adverse credit record entries and, where other laws or administrative regulations impose prohibitions or restrictions on the relevant business activities or professional qualifications, provides that such provisions shall apply (Article 39).

Article 17 adds an additional enforcement channel. Authorities must keep whistleblowers’ identities confidential, and reward and protect those who provide useful information. In addition, any organization or individual may report cross-border corruption. Because employees and third parties can report directly to the government, the credibility and responsiveness of a company’s internal reporting mechanism under Article 31 may influence whether issues are surfaced internally before being reported externally.

Comparing the Draft Law with the FCPA and the Bribery Act

The FCPA and the Bribery Act are two established and widely enforced anti-corruption statutes with extraterritorial reach. The Draft Law can be compared with these regimes to place China’s new framework within the broader global anti-corruption landscape and identify where it converges with, and departs from, prevailing international standards. The table below compares the three regimes across six key dimensions. 

Dimension	China: Draft Law	US: FCPA	UK: Bribery Act
Regulatory approach	Bidirectional: Regulates both outbound bribery of foreign officials and inbound bribery of PRC officials; also covers fugitive repatriation and asset recovery.	Unidirectional: Focuses on the supply-side bribery of foreign officials and includes accounting, books-and-records, and internal controls provisions for issuers.	Comprehensive: Covers both giving and receiving bribes across both the public and private sectors and includes a failure-to-prevent bribery offense.
Scope of prohibited conduct	Five categories: Foreign bribery, bribery of PRC officials by overseas entities, overseas duty-related offenses, conduct falling within the catch-all provision (i.e., conduct of the same nature carried out abroad with effects in China), and fugitive-related conduct. Cross-references the Criminal Law and does not create new criminal offenses.	Two principal components: Anti-bribery provisions prohibit payments to foreign officials for business purposes; accounting provisions require accurate books and records and adequate internal controls for issuers. Applies to “anything of value” and contains no de minimis threshold.	Four offenses: Active bribery, passive bribery, bribery of foreign public officials, and failure to prevent bribery (i.e., a form of corporate strict liability).
Jurisdictional basis	Nationality, territorial, and effects test: Covers PRC citizens and enterprises, including foreign subsidiaries, and foreign entities whose conduct or results occur in China. Includes provisions addressing foreign extraterritorial jurisdiction.	Three jurisdictional categories: Issuers; domestic concerns, regardless of where the acts occur; and other persons using US interstate commerce. Jurisdiction reaches activities involving USD-denominated transactions and use of US servers.	Territorial and close-connection jurisdiction: Applies a territorial and “close connection” test to basic offenses and a “carrying on business” test for the failure-to-prevent offense. Captures entities doing business in the UK.
Compliance obligations	Express statutory compliance obligation: Chapter 4 mandates a compliance framework. Non-compliance prompts administrative penalties, including in the absence of underlying corrupt conduct.	No standalone statutory compliance obligation: Books-and-records and internal controls provisions for issuers under Section 78m of Title 15 of the US Code effectively require compliance infrastructure. The US Department of Justice (DOJ) and US Securities and Exchange Commission (SEC) consider compliance programs in charging, penalty assessment, and resolution decisions.	“Adequate procedures” defense: Organizations may rely on the Section 7 defense if they can demonstrate adequate procedures designed to prevent bribery. The Ministry of Justice has published statutory guidance under Section 9 setting out six principles: proportionality, top-level commitment, risk assessment, due diligence, training, and monitoring. The burden of proof rests on the defendant.
Enforcement and penalties	Administrative and criminal enforcement: Enforced by the National Supervisory Commission, with criminal liability arising through cross-references to existing law. Provides for administrative penalties, penalty mitigation for voluntary disclosure and cooperation, and collateral consequences, including credit-record, business activity, and professional restrictions.	Criminal and civil enforcement: DOJ enforces criminal provisions and SEC enforces civil provisions. Individuals face criminal penalties of up to USD250,000 and five years’ imprisonment per anti-bribery violation, and up to USD5 million and 20 years’ imprisonment per accounting violation. Corporations face criminal penalties of up to USD2 million per anti-bribery violation and up to USD25 million per accounting violation. Additional penalties may apply under the Alternative Fines Act, under which fines may reach twice the benefit obtained. Civil penalties also apply, including up to USD16,000 per anti-bribery violation and tiered penalties for accounting violations of up to USD150,000 for individuals and USD725,000 for entities. Deferred Prosecution Agreements (DPAs) and Non‑Prosecution Agreements (NPAs) are available.	Criminal enforcement: Enforced by the Serious Fraud Office (SFO) and the Crown Prosecution Service. Individuals face up to ten years’ imprisonment and unlimited fines per violation, and corporations face unlimited fines per violation. DPAs have been available since 2014. Section 7 creates a failure-to-prevent bribery offense, a form of corporate strict liability subject to an adequate procedures defense.
International cooperation	Dedicated chapter: Addresses four methods of fugitive repatriation, asset recovery and sharing, and cross-border evidence gathering. Includes blocking provisions preventing foreign entities from conducting investigations in China without PRC consent, as well as countermeasures against foreign extraterritorial jurisdiction.	No dedicated chapter: Relies on Mutual Legal Assistance Treaties (MLATs), the United Nations Convention against Corruption, and the Organisation for Economic Co-operation and Development Convention. Enforcement may involve both international cooperation mechanisms and the FCPA’s extraterritorial jurisdictional provisions.	No dedicated chapter: Relies principally on MLATs, the European Union Agency for Criminal Justice Cooperation, and the International Criminal Police Organization. UK–US enforcement cooperation is well established.

 

Three key differences

Three features distinguish the Draft Law from the FCPA and the Bribery Act. First, the Draft Law is bidirectional. Unlike the FCPA, which focuses only on the supply side of foreign bribery, China’s Draft Law would cover both outbound bribery of foreign officials and inbound bribery of PRC officials.

Second, compliance would constitute an express legal obligation with its own penalties. Under the FCPA, a robust compliance program may mitigate sentencing; under the Bribery Act, “adequate procedures” serve as a defense to Section 7. Under China’s Draft Law, failure to establish a compliant framework would itself be a violation, regardless of whether any bribery occurred.

Third, the blocking provisions and countermeasure authority would have no direct equivalent under US or UK law. While Article 26 would largely restate approval requirements already found in other PRC statutes, its express placement in a dedicated anti-corruption law could increase the prominence of those requirements and create challenges for companies navigating parallel investigations.

Practical compliance takeaways

If enacted, the Draft Law would have implications for both foreign companies doing business in China and Chinese enterprises with overseas operations. Below are key compliance considerations for each group.

Foreign companies doing business in China

• Bribery of PRC officials would give rise to direct exposure. Foreign companies and their personnel that bribe PRC state functionaries would be subject to direct jurisdiction under the Draft Law. Historically, enforcement in this area has occurred primarily through the Criminal Law’s general provisions.
  
  
• The catch-all provision would broaden liability. Even where the primary conduct occurs outside China, the effects-based catch-all could bring foreign companies within scope if the consequences or related transactions touch China.
  
  
• Compliance obligations would extend to China subsidiaries. Chapter 4’s requirements would apply expressly to foreign enterprises’ China-based branches and subsidiaries, which would be required to maintain a compliance framework or face standalone penalties for non-compliance.
  
  
• Parallel investigations may create conflicting obligations. Companies under simultaneous investigation by PRC and foreign authorities, such as the DOJ or SFO, may face tension between the Draft Law’s blocking provisions, which prohibit cooperation with foreign investigators on Chinese soil without PRC consent, and requests or requirements imposed by foreign regulators. Companies are encouraged to assess whether a given investigation is, in substance, a bona fide internal corporate inquiry or one directed by, or conducted for the benefit of, a foreign government – the latter being the principal concern of Article 26 – and may route any transfer of evidence to foreign authorities through the approval channels required under PRC law.
  
  
• Cooperation in government investigations would be mandatory. Article 18 would impose an obligation on organizations and individuals to cooperate and provide evidentiary materials in cross-border corruption cases. Unlike under the FCPA, where cooperation is voluntary and treated as a mitigating factor, the Draft Law as written appears to leave companies with limited room to negotiate the extent of their participation. In major cases, foreign enterprises may also be required to cooperate on the basis of reciprocity.
  
  
• Obstruction would carry standalone liability. Under Article 44, refusing to provide evidence, concealing or destroying evidence, or obstructing an investigation would be independently sanctionable, regardless of whether the company has engaged in any corrupt conduct. This would have direct implications for document preservation and evidence management during internal investigations.
  
  
• Exit bans may restrict personnel movement. Article 19 would authorize exit bans on individuals suspected of corruption. Foreign executives and employees based in China may be prohibited from leaving the country once an investigation is initiated, a risk that companies are encouraged to consider in crisis management planning.

Chinese enterprises with overseas operations

• The enforcement gap would narrow. Chinese companies operating abroad have historically faced limited PRC enforcement where the corrupt conduct lacked an obvious domestic nexus. The Draft Law would change that: Its nationality-based jurisdiction and effects-based catch-all would put PRC citizens and enterprises within scope regardless of where the conduct occurs.
  
  
• Overseas subsidiaries would be explicitly covered. The Draft Law would extend its reach to PRC enterprises’ overseas subsidiaries, notwithstanding their separate legal personality under local law.
  
  
• Compliance would become a legal obligation rather than best practice. Chinese enterprises with overseas operations would be required to establish compliance programs. Failure to meet the prescribed requirements would result in administrative penalties under Article 45, regardless of whether any corrupt act has occurred.
  
  
• Discovery of corruption would prompt mandatory reporting. Article 31 would require cross-border enterprises that discover suspected corruption to report to the supervisory or public security organs. This differs from the FCPA’s voluntary self-disclosure model and could compress the timeline for internal investigations, potentially limiting a company’s ability to fully assess its exposure before engaging with regulators. Several key questions remain open in the current draft: the monetary or evidentiary threshold that triggers the obligation, the required timing of a report, whether the obligation extends to overseas companies that do business with China but have no presence there, and whether a report compelled by Article 31 can qualify as voluntary surrender or active cooperation for purposes of the mitigation factors in Article 43. Notably, Article 110 of the Criminal Procedure Law already imposes a general duty to report criminal facts but without a specific penalty for non-reporting. Until implementing rules clarify these points, companies are encouraged to document their assessment of whether and when the reporting threshold has been met.
  
  
• Individual officers would face dual penalties. Article 36 provides that when an enterprise is penalized for cross-border corruption, its directly responsible supervisory personnel and other directly responsible persons would also face individual administrative penalties. This may create potential conflicts of interest during internal investigations, including with respect to legal representation.

Looking ahead

The Draft Law remains under public consultation and may undergo revisions. However, the first reading indicates that China aims to build a comprehensive, enforcement-backed anti-corruption regime for cross-border conduct – one that parallels, and in some respects exceeds, the compliance demands of the FCPA and the Bribery Act. Companies with China exposure are encouraged to assess their readiness in light of the proposed framework.

For more information, please contact the authors.