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« Distributor doldrums – How deep do they want us to dig? | Main | TI report: Most EU nations lack adequate whistleblower protections »
Monday
Nov252013

A year on in China: New leadership and its impact on anti-corruption enforcement

Last November, I wrote a post analyzing how the leadership transition in China’s Communist Party might affect anti-corruption enforcement in that country and offering a few observations and predictions. The most recent Central Committee meeting of the Party, held in mid-November in Beijing, provides an opportunity to see how those predictions have borne out.

Personalities. Last year’s post noted that Wang Qishan, who was given the anti-corruption portfolio as secretary of the Central Commission for Discipline Inspection (CCDI, the body that oversees discipline for Party members), had been known as “the fire chief” or “Mr. Fix-It” by some for his work in earlier positions handling crises related to the economy. In the last year, Wang has brought that same vigor to his new position, coordinating a high-profile campaign against high-ranking officials and executives of large, state-owned enterprises (see below) as part of two “inspection tours” in what some observers have called the largest anti-corruption crackdown in China in 30 years.

Demand-side Enforcement. Last year’s post predicted more “big-name” prosecutions of government officials and senior Party members. In addition to the very high-profile Bo Xilai case, a significant number of senior government and Party officials have been detained and/or prosecuted in the last year for corruption violations, including the Minister of Railways, deputy Party secretary of Sichuan Province, deputy director of the National Development and Reform Commission, deputy governor of Anhui Province, head of the State-owned Assets Supervision and Administration Commission, four senior executives of energy giant China National Petroleum Corporation, a leading executive at shipper COSCO, and others.

In a January 2013 speech, President Xi Jinping noted that prosecutions for corruption would be brought against “the tigers and the flies” -- both high-ranking government and Party officials as well as lower-level officials. In addition to the “tigers” listed in the paragraph above, there has been a steady stream of investigations and prosecutions of mid- and lower-level Chinese officials, as evidenced by near-daily stories in Chinese newspapers (nicely summarized in the FCPA Blog's regular China Corruption Blotter feature).

Enforcement Against Multinationals.  Last year’s post predicted an increase in anti-corruption enforcement against multinationals. The high-profile case against GSK this summer, and reports of investigations into other companies in the pharmaceutical and other industries, seems to bear out that prediction.

Commercial Bribery. Last year’s post predicted that an uptick in commercial bribery cases in 2011 and 2012 would continue after the leadership transition. Reliable numbers on commercial bribery cases in China are difficult to come by, as many settlements and penalties are not publicized. But anecdotal evidence from assisting many clients in this area suggests that the number of commercial bribery investigations brought by local Administrations for Industry and Commerce (AICs) has continued to increase, particularly in the pharmaceutical, medical device, and construction sectors.

Prosecution of Overseas Bribery. Last year’s post opined that one way that the new Chinese leadership could send a strong message against corruption would be to bring a significant corruption case against a Chinese company for bribes paid outside of China, using the 2011 amendments to the Criminal Law. We have not seen indications of investigations or prosecutions under this clause in the last year, despite a goodly number of press reports of bribes paid by Chinese companies outside of China. 

Five-Year Plan. Finally, last year’s post noted announcements of a forthcoming “Five-Year Plan” on preventing corruption that would provide additional information on the Party/government’s top enforcement priorities.  The government has not to date released this plan.

(After the plenum the two weeks ago, the Party released the “Resolution Concerning Some Major Issues in Comprehensively Deepening Reform” (unofficial English translation here), which, among other proposed reforms, previews some structural modifications to the CCDI, the Party’s internal discipline mechanism.  These changes, which are intended to allow CCDI entities more independence from local Party bodies to prosecute corruption violations, would apply to discipline against Party members but not to government-led prosecutions.)

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Eric Carlson, a contributing editor of the FCPA Blog, is a Beijing-based partner at Covington & Burling LLP.  He specializes in anti-corruption compliance and internal investigations, with a particular focus on China and other regions of Asia.  He speaks Mandarin and Cantonese and can be contacted here.