China sinks in corruption rankings

The country fell four points in Transparency International’s annual index, while bumps in scores for the UK and the US indicate that transparency is on the rise.

China’s score in Transparency International’s Corruption Perceptions Index suffered one of the steepest falls of this year’s ranking, dipping to 36 in 2014 from 40 in 2013. The decrease comes despite the recent anti-corruption campaign launched by the Chinese government targeting corrupt public officials, according to the report.

Based on expert opinion from around the world, the index ranks countries and territories depending on how corrupt their public sector is perceived to be. A country’s score indicates the perceived level of corruption on a scale of 0 (highly corrupt) to 100 (very clean).

China’s ranking this year corresponds with news from earlier this week, when Li Liang, chief of the Investor Protection Bureau at the China Securities Regulatory Commission, was placed under investigation for political corruption. In addition, all eight of the country’s largest public companies scored less than three out of ten in Transparency International’s recent report on corporate disclosure practices.

China experienced the biggest decline of the BRIC countries in the corruption perceptions ranking. India, with a two-point increase, ranked higher than China at 38, while Russia fell by one point, coming in at 27, and Brazil gained a point with this year’s score of 43.

Fortunately, other private equity markets fared better in this year’s index. The UK jumped two points and is now ranked 14 out of the 175 countries at 78 points, while the US rose one point to 74, tying with Hong Kong, Ireland and Barbados for the 17th spot in the rankings.

Denmark maintained the top spot for the third year running with 92 points, while more than two-thirds of countries in the index scored below 50. A poor score is likely a sign of widespread bribery, lack of punishment for corruption and public institutions that don’t respond to citizens’ needs, according to the report.

The findings come at a time when Western governments have signaled a crackdown on bribery and corruption abroad. In the US, the Foreign Corrupt Practices Act is being more heavily enforced, while in the UK and Canada, similar anti-corruption campaigns are being launched by officials. Private equity firms are being advised to increase their due diligence on portfolio companies exposed to industries and sectors more prone to corruption or risk being held liable for violations.