Many of the cases we deal with begin with the same problem: a global HQ lacking control or insight into its own operations in China. To many outside the country, the China organisation is a sort of black box where things operate in a completely different way. Often, focus lies on the organisation’s KPIs, without much further insight.

The forms this takes are familiar. The person in charge of suppliers takes deals for their own benefit, or quietly owns the supplier company. Friends and family get hired. Bonuses no one at HQ approved go to the boss or their allies. Costs get booked in one entity while revenues sit in another. Working conditions are kept out of sight. None of this tends to get noticed, especially when the Chinese organisation is performing well and KPIs are met.

And why would it matter, if targets are still being hit? Strong KPIs can conceal significant leakage, liabilities and risks that only become visible later. And strong KPIs despite a fraudulent environment might be even stronger in a compliant one. Certain practices may also expose the company to legal or regulatory consequences, not just the individual involved. More importantly, it is not really a China problem; it happens anywhere control is lost and too much trust is placed in those on the ground.

Things don’t have to be this way. Control can and should be established early, in two dimensions: governance and IT. Governance means a culture of cooperation and genuine insight: procedures fit for the local environment, built on a global policy. It means separation of duties, so no single person selects suppliers, approves payments and holds the chop. It also means verifying key hires and suppliers before trust is extended; whether a supplier shares an owner or an address with your own staff can be checked before the first order, not just after the damage is done. And IT: establishing control of the IT environment, which can sometimes be quite daunting due to China’s Great Firewall.

At PSU we don’t handle everything ourselves; we work with a network of long-term partners. One of them is JET IT Services, in China since 2018, providing managed IT, IT audits and cybersecurity for international companies across Greater China and APAC. In several cases we have worked on together, these patterns were able to continue for years precisely because headquarters had no insight into the local IT environment: email, files and financial records sat in systems controlled by the same people running the scheme. JET IT Services’ role was to audit what was actually in place and help restore independent oversight and access to headquarters.

If you cannot say with confidence where power is concentrated in your China organisation, it is worth finding out before someone demonstrates it for you.