Guest Post: The One Belt, One Road Initiative Needs a Centralized Anticorruption Body

Today’s guest post is from Edmund Bao, a lawyer with King & Wood Mallesons who works principally in the areas of international arbitration and anticorruption:

The “One Belt, One Road” Initiative (OBOR), spearheaded by China, is an enormous and ambitious infrastructure development project (or series of integrated projects) involving an inland economic “belt” and a maritime silk “road” that together will include approximately 65 countries across Eurasia and parts of Africa, require a total capital expenditure of approximately US$4-8 trillion dollars, and affect around 4.4 billion people (63% of global population). Given the size of the initiative—as well as the fact that infrastructure projects are often considered especially high corruption risks, and the fact that so many of the countries involved are known to suffer from high levels of public corruption—ensuring integrity in this project must be a top priority if it is to succeed. Some projects have already been affected by corruption, including the cancelled US$2.5 billion Budhi Gandaki Hydro Electric Dam Project in Nepal (irregularities in the project bid phase) and the temporary funding halt for the flagship China-Pakistan Economic Corridor Road Project (due to graft).

The countries participating in OBOR have acknowledged this concern. At the opening of the Belt and Road Forum in June 2017, President Xi Jingping called for countries to “strengthen international counter-corruption coordination so that the Belt and Road will be a road with high ethical standards.” And in the joint communique released at the conclusion of the Forum, the leaders of OBOR countries in attendance agreed to “work together to fight against corruption and bribery in all their forms.” Yet it is not yet clear what measures can or will be put in place to achieve the sort of coordination that President Xi and the other OBOR country leaders recognized is necessary.

I suggest that one way—perhaps the best way—to achieve the requisite level of anticorruption coordination in the context of the OBOR initiative is to establish a supranational anticorruption body with oversight for OBOR projects. That is, I advocate the creation of a “Silk Road Anticorruption Body” that would have four primary functions: Continue reading

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

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

When and Why Do Corrupt Politicians Champion Corruption Reform? A Character Study

Can corrupt leaders enact effective anticorruption reform? The brief answer seems to be yes: Leaders who are (perceived as) corrupt can initiate and support effective anticorruption reform efforts. For example, as this blog has previously discussed, President Peña-Nieto (who has repeatedly been accused of corruption and graft) supported constitutional anticorruption reforms in Mexico. Egypt’s current President, Abdel Fattah al-Sisi, has similarly launched various anticorruption campaigns, even while fending off numerous corruption allegations.

But why do corrupt leaders institute anticorruption reforms? While there’s no universal explanation, there appear to be at least three archetypes that might help anticorruption activists identify and push unlikely reformers: The Power Player, The Top-Down Director, and The Born-Again Reformer. Continue reading

Why Does the Chinese Communist Party Tear a Hole in its Own Democracy Cloak?

The People’s Republic of China recently uncovered the biggest vote-buying scandal since its founding in 1949. On September 13, 2016, the Standing Committee of the National People’s Congress (NPC), the national legislature, dismissed 45 of the 102 NPC representatives from Liaoning province for securing their seats in the NPC through vote buying. These NPC representatives had apparently bribed representatives to the Liaoning provincial Congress, which elects NPC representatives; 523 out of the 619 Liaoning provincial congress representatives were also implicated in this scandal, and have either resigned or been removed for election rigging, rendering the Liaoning provincial legislature inoperable. The central authorities stated that the “unprecedented” bribery scandal challenged the “bottom line” of China’s socialist system and the rule of the Chinese Communist Party (CCP).

For many observers, reports of this vote-buying scandal came as a surprise. Some commentators wondered why people would risk getting caught and punished for corruption, just to secure a seat in a legislature that has been derided as little more than a rubber stamp. The most plausible explanation is that a seat on the NPC facilitates access to the rich and powerful, and it is this consideration, rather than the mostly symbolic power of the legislature itself, that motivates candidates to buy votes in NPC elections. (See here, here and here). There is, however, a second puzzle about the recent vote-buying scandal—one that is in fact more puzzling and important, though it has not received as much attention: Why do CCP leaders care about electoral corruption in NPC elections, if the NPC merely rubber-stamps party decisions? True, the CCP under President Xi Jinping has made the fight against official corruption a top priority—but given the prevalence of corruption in so many areas of Chinese government, many of which have immediate practical consequences, why target electoral corruption in the NPC?

The question becomes even more interesting when one considers that calling attention to vote-buying in NPC elections—a form of corruption that might otherwise not attract much attention—poses certain risks to the CCP. First, even if the NPC is mostly a rubber stamp legislature, it represents the symbolic core of state power, and is central to the CCP’s “socialist democracy,” a model the Party has long used to resist the Western-style multi-party democracy. As one commentator put it has observed, the exposure of the NPC vote-buying scandal has torn a large hole in the country’s “democracy cloak.” Second, exposing widespread corrupt practices could also increase pressure for systemic reforms. So why did CCP leaders choose to crack down on corruption in the legislature so openly? Continue reading

The Reform of the One-Child Policy Will Help Reduce Corruption in China

Imagine being pregnant with a second child in a country with a one-child-per-family limit. The penalties for violating the policy are severe-forced abortions, sterilizations, and crippling fines. This was, of course, the grim reality for many Chinese citizens before October 30, 2015. That day, China’s Central Communist Party issued a short announcement that all Chinese couples will be allowed to have two children, ending 35 years of the notorious one- child policy.

The official reason for ending this policy lies in its troubling effects on China’s demographics: After decades of successfully curbing population growth, the one-child policy has caused China to become a country with a rapidly aging population (that is enjoying more longevity) and a corresponding shrinking young work force, which together put enormous pressure on the country’s labor industry and public service resources. Commentators have overlooked the fact that the new two-child policy may also have important implications for President Xi Jinping’s anticorruption crackdown (covered from different perspectives here, here, and here ). The one-child policy (perhaps inadvertently) fostered at least two forms of corruption, and the end of that policy will therefore make a non-negligible contribution to reducing corruption in China.

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