It’s Time for China to Show Its Foreign Bribery Law is Not a Paper Tiger

In May 2011, China criminalized the bribery of foreign public officials. More specifically, the 8th Amendment to China’s Criminal Law, among other things, added Article 164(2), which prohibits both natural persons and units (i.e. companies and other organizations) under Chinese criminal jurisdiction from giving “property to any foreign public official or official of an international public organization for the purpose of seeking illegitimate commercial benefit.” This legislative action, intended in part to fulfill China’s obligations as a State Party to the United Nations Convention Against Corruption, was considered an accomplishment given the under-criminalization of foreign bribery in Asia Pacific at the time. Many commentators devoted substantial attention to questions about the law’s meaning, including the definition of almost every term in the provision (“property,” “foreign public official,” “international public organization,” “illegitimate commercial benefit,” etc.—for a sampling, see here, here, here, here, here, or just search for “China Criminal Law 164” using any search engine).

However, almost seven years have passed, and nothing substantial has happened, except for some minor movements related to the law as observed by the media and commentators in some official and unofficial statements (see, for example, here, here, and here). Not a single enforcement action has been brought (or at least publicized) under Article 164(2). Even after President Xi Jinping launched in 2013 the most extensive anti-graft campaign China has ever seen, there have been no foreign anti-bribery enforcement actions.

There are several possible explanations for China’s non-enforcement of 164(2). One possibility, discussed previously on this blog, is that China’s traditional “non-interference” foreign policy might make China reluctant to go after transnational bribery; more generally, China might not be interested in devoting resources to fighting forms of corruption that don’t have domestic effects. Some have also suggested that China has little incentive to enforce its foreign anti-bribery law because bribery of foreign officials gives Chinese firms a competitive advantage in certain jurisdictions. It’s also possible that simple inertia is part of the story: It’s worth keeping in mind that although the U.S. Foreign Corrupt Practices Act (FCPA) was enacted in 1977, almost 80% of the FCPA enforcement actions (amounting to 95% of the total FCPA sanctions) occurred after 2007. Similarly, the UK Bribery Act came into force in 2011, but the first foreign bribery case under that act wasn’t resolved until 2014. South Korea enacted its foreign bribery law in 1999 but didn’t prosecute its first case until 2003, while Japan took even longer, enacting a foreign bribery law in 1998 but not bringing its first case until nine years later, in 2007. In fact, Transparency International observed in 2015 that about half of the then-42 countries taking part in the OECD Convention on Combating Foreign Bribery (to which China is not a party) have not yet prosecuted a single foreign bribery case since the Convention came into force in 1999. So China’s inertia is hardly unique.

Yet regardless of the reasons why China has not enforced its foreign bribery law, and regardless of whether this inaction renders China unusual or typical, it is now high time for China to start enforcing this law aggressively. Doing so is in China’s long-term strategic interests, for three reasons:

  • First, foreign bribery is detrimental to China’s foreign policy. Just as the U.S. acknowledged that its companies’ corrupt payments abroad constituted “a serious foreign policy problem” when the U.S. Congress adopted the FCPA, China should recognize the adverse foreign policy ramifications of its transnational bribery issues. China’s outward investment is substantial and likely to increase, with the Belt and Road initiative and other numerous projects—in Africa, Southeast Asia, and elsewhere. Perhaps, as some have suggested, China’s outbound investment has flourished in part because of China’s reluctance to prosecute transnational bribery. Yet as more allegations regarding Chinese nationals or corporations bribing foreign officials have made headlines (see, for example, here, here, here, here, here, and here), Chinese corruption abroad is no longer just “something academics, politicians, and business people have long suspected existed but found difficult to prove.” It’s out there—foreign media reports about it, and foreign courts rule about it. If Chinese firms, with the tacit approval of the Chinese leadership, keep on corrupting local governments and engaging in other shady practices, local perceptions of China in the places where it invests will deteriorate. And this is costly, as it is in China’s long-term political and strategic interests to build its reputation as a responsible global power. For example, as many have observed, the Belt and Road initiative is part of China’s answer to the issues regarding Xinjiang, Tibet, and the South China Sea (see here, here, and here). By injecting investments into, building infrastructure in, and benefiting the economy of these regions, China desires to create a more stable neighborhood for its restive western provinces and bolster its claims in the South China Sea. These goals are undermined if the investments are tainted by bribery and China is perceived as a country that exports corruption. When President Xi quoted ancient Chinese philosophers and urged Chinese officials to “earn the trust of the people with moral excellence,” he should know that the same philosophy applies to China’s policies concerning those troubled regions as well. China could “earn the trust of the people” dwelling in the regions with its overseas initiatives only if the Chinese companies that bring in the investments conduct business with “moral excellence.”
  • Second, prosecuting foreign bribery could promote a culture of corporate integrity at home. When companies develop corrupt corporate cultures overseas, that lack of integrity could bleed back into the domestic operations, and generally fosters an attitude that the rules are not serious. China’s anti-graft campaign should aim at cultivating a culture of integrity and ethics as a whole, rather than going after only those instances of misconduct that take place domestically. When large Chinese conglomerates operate with the understanding that anti-bribery enforcement matters at home but not abroad, employees working within China might refrain from engaging in unethical conduct only because of heightened enforcement, not because they believe it is morally wrong. After all, they may well be aware of what their overseas colleagues are doing, and observe that the government doesn’t seem to mind. These employees and managers might even believe that the Chinese government thinks bribery is okay under certain circumstances, as long as it “helps” the country carries out its overseas investment initiatives. Moreover, when those working abroad return to China, their business practices wouldn’t change overnight. They might introduce corrupt practices to their colleagues or, if they are executives, set an inappropriate “tone at the top.” All these factors hinder the establishment of an ethical corporate culture that could truly prevent corruption. Prosecuting foreign bribery could alleviate these factors.
  • Third, committing to prosecuting foreign bribery will demonstrate goodwill that will encourage other countries to assist China’s anticorruption efforts. As China extends its domestic enforcement campaign to the global arena and strives to hunt corrupt officials who fled abroad in such operations as Foxhunt and Skynet, scholars have urged that the international community should cooperate with China on extradition in return for “substantive Chinese commitments” on, among other things, better controls over Chinese companies’ ethical behavior abroad. Accordingly, implementing China’s foreign bribery law could pave the way for repatriation of corrupt fugitives and recovery of embezzled assets, thereby enhancing its domestic enforcement.

China needs to start enforcing its foreign bribery law now to establish the influence it needs to emerge as a responsible global leader and bolster its domestic efforts to root out corruption. Further delay would undermine its economic and diplomatic efforts in the international field and render the President’s most important campaign vulnerable to charges of hypocrisy.

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