Toothless laws are no match for
China graft By Catherine Jiang
SHENZHEN - Though former Wall Street
Journal China bureau chief and now successful
corporate executive James McGregor wrote in his
book on doing business in China - One Billion
Customers: "China is a nation always cramming
for final exams, but it will take innovation, not
prescribed solutions to pass the global business
test," he could have as easily written ... "to
pass the global corruption test", instead.
McGregor's observation came to mind with
Beijing's recent announcement that it has
officially launched a National Bureau of
Corruption Prevention (NBCP).
Chinese officials said it took four years
to launch the NBCP. It is headed by the new
Minister of Supervision, Ma Wen, who said one of
her graft-busting bureau's new duties is to
"enhance international cooperation in the fight
against corruption and fulfill responsibilities
laid out in the United Nations Convention Against
Corruption".
China was one of the
convention's sponsor nations and even the host
nation in 2003 for the first conference of the
International Association of Anti-Corruption
Authorities, the group that created the UN
convention.
Ma's announcement, not
coincidentally, also dovetailed with Chinese media
spotlights on bribery allegations involving
foreign multinational corporations in China:
singled out included Seimens of Germany and the
French-based retail chain giant Carrefour. It was
also followed by a warning in a commentary in the
official China Daily with the byline "Yufu, a
Communist Party corruption fighter", which vowed
that "China will strengthen its cooperation with
other countries to expose and punish
multinationals who are engaged in commercial
bribery in the country."
As if to further
show how serious China is about stamping out
corruption, just prior to the ongoing 17th
National Congress of the Chinese Communist Party
in which President Hu Jintao pushes his anti-graft
mantra, the Supreme People's Court announced that
China's courts had dealt with 4,406 commercial
bribery cases in the first seven months of this
year, an 8.2% increase from the same period in
2006.
News about corrupt foreign companies
in China isn't exactly new - Lucent and McDonald's
have taken some Sino-heat in the past. But in
cases of corruption scandals involving
multinationals, there are few official
announcements, and reports and details are
somewhat hazy. Furthermore it seems that China's
current laws dealing with corruption are more
targeted at domestic firms and individuals than at
foreign companies.
In Carrefour's case,
Chinese media reported that eight Chinese managers
from Carrefour Beijing and seven staff workers
from the fresh and raw food division of other
Carrefour outlets in Beijing were detained over
unspecified corruption charges. Some staffers from
a store in Shenzhen, in southern China's Guangdong
province, were also detained and seven stores are
under investigation.
Details about
Siemen's problems haven't been released officially
in China and, according to Caijing magazine, an
independent Beijing-based business and economics
publication, they were originally revealed in
August when Germany's weekly newsmagazine Der
Spiegel described three alleged bribes paid
through an account with a code word, "Waogaoqiao"
- the name of a coal-fueled power plant in
Shanghai. Allegedly six payments totaling 4.1
million euros were deposited in a Lichtenstein
bank after September 1998 and Der Speigal
speculated that the money may have been meant for
illegal payments linked to a Waigaoqiao contract.
Further investigation by Caijing and a
report by Shanghai Securities News alleged that an
unspecified number of present or previous Siemens
employees in Germany, China and nine companies (or
shell companies) were involved with corrupt
transactions through overseas bank accounts that
may have totaled more than 100 billion euros for
kickbacks or "collection fees".
Siemens
China CEO Richard Hausmann told Der Spiegel that
20 employees had been fired for "improper actions"
- though not all the dismissals were related to
corruption.
Caijing also noted that the
Siemens investigation is currently being led by
prosecutors in Germany - but "apparently ignored
by authorities in China".
A Hong
Kong-based American businessman who asked to
remain anonymous but who represents a large
Western multimedia company in Asia, including
China and Hong Kong, said he believes China is
serious about dealing with corruption, but not
"100% serious".
"China does things that
will get media headlines and coverage, but they
are at the stage of making examples of a few,
hoping that others will follow and be honest, but
they are not seriously digging deep and going
after everyone," he said. "That's partly because
there are still people in relatively high and
untouchable positions who are corrupt."
He
cited DVD piracy as a major example. "One example
- many of the plants that illegally manufacture
pirate DVDs are thought to be owned in whole or in
part by high ranking officers of the Chinese
military," he said.
"China is not entirely
serious about protection of intellectual property
because they figure that piracy provides
employment," he said. "But they are getting more
serious now because they are seeing the impacts on
Chinese citizens who are also trying to develop
new technology and suffering from piracy. There is
improvement every year, but minor. It will still
take a long time before they take consistent and
substantial measures," he said.
Kent
Ewing, a China analyst and teacher at Hong Kong
International School, said he didn't feel Beijing
makes a habit out of singling out foreign groups
unless foreigners point fingers at China.
"When China was under worldwide attack for
exporting shoddy and tainted goods, they hit back
by blocking imports of American meat and other
foreign products that they said were not up to
standard. Tit-for-tat. Highlighting corruption at
foreign businesses operating in China goes to show
that corruption is not just a Chinese disease; the
whole world is suffering from it," Ewing said.
Ewing observed that "through talking a tough
new game and making examples of a selected group
of public officials and businesses, the Chinese
leadership hopes to reduce corruption. But it is
going to take more than tough talk and selective
prosecution to make a real difference. When the
odds of getting caught are greater than the odds
of not getting caught, then there will be real
progress."
And many corruption cases are
not brought to the spotlight, only quietly dealt
with behind the scenes. A Chinese buyer working
for a Western megastore chain in China said that
after discovering a kickback scandal the
management of the store simply sacked an employee
involved instead of pressing charges.
"After they launched their first store in
China, a woman in the business development
department who had worked there for six years was
alleged to have taken bribes from real estate
developers for sites for other stores in the
chain," she said. "They couldn't find enough solid
evidence, though, so they fired her."
There is also the problem of relevant
laws. China still lags behind much of the rest of
the world when it comes to criminal law. According
to Caijing, currently all Chinese criminal law
relating to bribery targets only domestic forms of
graft, with no international angle. When the
Standing Committee of the National People's
Congress (NPC), China's parliament, ratified the
UN Convention Against Corruption in 2006, the
convention's Article 16 stipulated that offering
"improper benefits or promises to foreign
governments or public organizations' employees
shall be regarded as crimes". The UN convention
also urged that all domestic laws have similar,
relevant regulations.
However, Articles
385 and 389 of Chinese criminal law concerning
bribery does not expand the area of the crime to
include foreigners. It still only applies to
Chinese legal entities and officials. The People's
Congress won't meet again for another five years,
and it is anybody's guess if the laws will be
amended in the meantime.
Catherine
Jiang is a freelance writer based in Shenzhen,
China.
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