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: Continue reading

The Chinese Corruption Crackdown and Political Maneuvering

China’s broad anticorruption drive, spearheaded by President Xi Jinping, has been making splashy headlines over the last five years. The scale of this effort has been huge, with hundreds of thousands of Chinese Communist Party (CCP) officials punished in the first half of 2017 alone, and recent reports of nearly a million officials under supervision as of December 2017.  Yet while China’s anticorruption efforts have been met with some qualified praise from the beginning, many critics have been troubled by signs that the anticorruption crackdown is being used for political purposes. These purposes include consolidating President Xi’s power, particularly in light of rule changes that allow him to serve indefinitely, and also protecting the CCP’s reputation (see, for example, here and here). And because so many top Chinese officials have been involved in some kind of illicit activity (perhaps because in the current system bribery and patronage is essential to advancement), selective enforcement of anticorruption and related laws could allow President Xi to take out anyone sufficiently disloyal or threatening.

A recent example of the political considerations of the anticorruption campaign is found in the story of Guo Wengui, a Chinese billionaire currently residing in the US. Continue reading

National Digital Currencies Raise New Risks of Grand Corruption

In 2017, you may have heard of this thing called blockchain. The technology, which works by creating a decentralized, encrypted, and independently verifiable ledger of transactions distributed over a network of computer systems, has allowed innovations in the design of secure systems for recording votes, registering land ownership, and confirming digital identity. The most famous application of the blockchain, however, has been the creation of digital currencies such as Bitcoin, Ethereum, and Ripple. Many private individuals consider these currencies to be the way of the future, and the death knell of the central banker: universal, transparent, and valued according to mathematical laws rather than political preferences, cryptocurrencies—according to their proponents—will bring with them immeasurable benefits, among them making the fight against corruption easier by allowing all interested parties to “see the entirety of any transaction instantly and accurately.”

But private citizens aren’t the only ones who have heard of the blockchain: the same central bankers who are meant to be rendered irrelevant by the advent of cryptocurrencies have also taken notice. Several governments, including those of Israel, Russia, China, Estonia, Sweden, and Venezuela, have announced plans to create their own national digital currencies (NDCs) based on blockchain technology. While there are several sound economic reasons for introducing an NDC, governments frequently cite the same anticorruption benefits mentioned above.

However, there are crucial differences between NDCs and cryptocurrencies like Bitcoin. Rather than open architectures enabling full financial transparency, most NDCs currently plan to use some form of centralized ledger, giving government authorities (and only them) the ability to see and police transactions. While such centralized transparency will give honest governments a much-needed boost in the fight against corruption, it will also give oppressive and kleptocratic regimes another tool with which to steal from and oppress their populations. Continue reading

How Can We Assess the Sincerity of Anticorruption Campaigns?

The first step to solving a problem is admitting you have one. And many countries plagued by corruption did just that over the course of 2017, with Venezuela, China, Russia, Ukraine, the Philippines, Saudi Arabia, and several other nations launching (or in some cases continuing) high-profile anticorruption campaigns. Yet outside observers often have difficulty distinguishing sincere, well-intentioned anticorruption campaigns are well-intentioned from politically-motivated purges. Moreover, this dichotomy may be too simple, as many anticorruption campaigns may have mixed or complex motives. (Very often, for example, individuals targeted by an anticorruption campaign may have both engaged in misconduct and also be political opponents of the ruling faction.) Yet even though it is difficult for outsiders to assess the motives of foreign countries’ anticorruption campaigns—especially in real time—such an inquiry is often necessary, especially when outsiders must decide how aggressively to assist with things like asset freezes, extradition of fugitives, and other sorts of aid and support for anticorruption efforts.

While there is no definite set of criteria that can be used to determine the sincerity of an anticorruption campaign, it is nonetheless possible to develop a set of questions than can serve as reference points and  channel our attention to certain key issues, or “red flags,” that might help us distinguish sincere and genuine anticorruption efforts from those that are mainly political vendettas. Such questions might include the following: Continue reading

China’s Anticorruption System 2.0: A Harbinger of Rule of Law?

In his three-and-a-half-hour speech at China’s 19th Party Congress last month, President Xi Jinping demonstrated his determination to maintain his vigorous anticorruption campaign. But he also proposed a number of significant changes, including (1) the creation of a new National Supervision Commission (NSC), along with supervision commissions (SCs) at the provincial, municipal, and county levels, to spearhead China’s anticorruption efforts, (2) the adoption of new national legislation, the Supervision Law, that includes improved procedural protections for the accused, and (3) the integration of China’s obligations under international anticorruption treaties into domestic law.

For the most part, Western commentators were unimpressed (for example, see Tom’s previous post). The establishment of the NSC was characterized as “essentially another power expansion of the Central Commission for Discipline Inspection (CCDI),” while the reforms related to protections for the accused were seen as little more than the “replace[ment of] one abusive detention system with another.” I beg to differ. This reform plan, while incomplete and inadequate in some respects, is a big step forward from where China stands now. While it would be a mistake to be overly optimistic before any positive change actually takes place, it would also be a mistake to dismiss these new reforms out of hand as insignificant or cosmetic. Any movement toward greater judicialization and respect for the rule of law in China is likely to be incremental and face pushback. Understood in that context, the three announced reforms noted above seem quite significant, and mark a notable break with China’s previous approach to anticorruption enforcement.

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Who’s at the Wheel of China’s Anticorruption Drive?

Since China’s anticorruption drive kicked off five years ago, it has had a tremendous impact on the country’s politics. The Central Commission for Discipline Inspection (CCDI), until recently led by President Xi Jinping’s close ally Wang Qishan, has targeted officials both high and low—so-called tigers and flies. According to the CCDI’s own data, more than 70,000 officials at or above the level of county head have been investigated, and close to two million officials have been punished in some way. The drive has also ensnared a few senior figures who, during their days of freedom, where among the most powerful men in China, including Zhou Yongkang and Bo Xilai. The CCDI’s power does not stop even at China’s borders: According to official statistics, by the end of August 2017, over three thousand fugitives had been repatriated from more than 90 countries.

But the drive is now shifting gears. Last October, in his speech opening the Chinese Communist Party’s (CCP) 19th Party Congress, President Xi laid out plans to “deepen reform of the national supervisory system” and establish a new body, the National Supervisory Commission (NSC), to spearhead anticorruption efforts. The NSC is expected to consolidate and institutionalize the hitherto campaign-style anticorruption efforts of the CCDI. (While the exact structure of the NSC is still unknown, it will be based on lessons learned from pilot projects – the so-called Provincial Supervisory Commissions (PSCs) established in the city of Beijing, as well as Shanxi and Zhejiang provinces.) The new anticorruption system outlined by President Xi for the national level is likely to have four major effects: Continue reading

China’s Anticorruption Campaign Adds Popular Culture Entertainment Into its Toolbox

A TV series called In the Name of the People, featuring China’s current fight against high-level government corruption, has gone viral in China. Dubbed the Chinese House of Cards, the show reached an 8% TV viewing rate (the highest in 12 years) and by the end of April 2017, had been watched over 20 billion times across major Chinese online video platforms. The show is widely acclaimed for its quality production, intriguing storylines, and, more importantly, for its bold, vivid depiction of the ugly side of China’s political and social reality. Shows like this are not merely entertainment: popular culture, including TV shows, can be an important tool in the fight against corruption.

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