Belts, roads and robots

Compliance management, the Belt and Road initiative, and artificial intelligence (AI) are the topics most discussed among corporate counsel this year. On 7 March 2017, Zhongxing Telecommunication Equipment Corporation (ZTE) announced that it had entered into a settlement with the US government regarding its conduct under investigation relating to US export controls and sanctions.

According to the announcement, ZTE agreed to a criminal and civil penalty of about US$892 million (RMB6 billion). Payment of an additional penalty of US$300 million to the US Department of Commerce’s Bureau of Industry and Security (BIS), currently suspended, will depend on how ZTE complies with the settlement agreement and how results of the independent compliance regulation and audit on the company come out in the next seven years. On 29 March, ZTE was formally removed from the Department of Commerce’s trade blacklist.

As a landmark event concerning compliance management, the ZTE case is expected to have a profound impact on the compliance management policies of Chinese companies. With extraordinary consequences that include a hefty penalty, officer accountability, institutional adjustment, and reconstruction of the work system, the case makes Chinese companies realize, for the first time, the strategic importance of compliance management.

Ye Xiaozhong is the president of SENIOR, a think tank for corporate counsel, and the director of the China Enterprise Legal Management Research Centre at the China University of Political Science and Law