Tuesday, March 22, 2011

Origins of China's New Anti-Corruption Law

The Chinese National People's Council has passed a landmark amendment to its corruption legislation that makes foreign corrupt practices illegal. Yesterday Ted Moran, blogging at the Center for Global Development attributed this move to efforts by a G-20 coalition. He wrote:
The Toronto Summit in June 2010 established a working group “to make comprehensive recommendations on how the G-20 can take practical steps to combat corruption.” During the Seoul Summit in November, a coalition of emerging market members of the working group (including Brazil, Argentina, South Africa, and Mexico) quietly joined with the United States to urge China to adopt an anti–foreign bribery law. That effort has now borne fruit!
I respect Ted Moran's knowledge of corporations (in fact I've assigned portions of his new book to my students). And it would be nice to think that Chinese legislation moves that quickly, or that the United States and the G-20's quiet urging led to this result.

Yet in fact, as I pointed out in a chapter written three years ago for Transparency International's Global Corruption Report 2009, "When China goes shopping abroad: new pressure for corporate integrity?" (p. 69), this amendment has been in the works for years
Legal changes now under way may boost efforts to combat bribery by Chinese firms outside the country. China was a sponsor, and has signed and ratified, the UN Convention against Corruption (UNCAC), which stipulates that bribery overseas be made a crime. Chinese officials have repeatedly said that China will modify its laws to comply with all the convention’s obligations.14 In September 2007 China set up the National Corruption Prevention Bureau, tasked to improve international cooperation against corruption and fulfill China’s responsibilities as an UNCAC signatory. The agency was not made autonomous, however. In June 2008 the Communist Party’s Central Committee included the prohibition of commercial bribery overseas in its five-year anti-corruption work plan.15
I think we have the UN Convention Against Corruption (which was ratified and entered into force on December 14, 2005) to thank, and before that, the OECD Convention Against Corruption, not the quiet urging of the US or the G-20.

These Chinese reforms were already well under way before June 2010. It's important to get this analysis right if we want to understand how China's efforts to "go global" are likely to evolve, the factors that will influence them, the way the Chinese government works (still a work plan!) and the time involved in moving through reform.
14 Li Jinzhang, vice minister of foreign affairs, statement at the First Conference of the State Parties to the UN Convention against Corruption, Amman, Jordan, 10 December 2006; Caijing Magazine (China), 25 July 2007.
15 Central Committee of the Chinese Communist Party, ‘Work Proposal of Establishing and Improving the Anti-corruption System 2008–2012’, June 2008.


Matthew Robertson said...

This is quite interesting. How possible would it be to monitor the implementation of this legislation?

Deborah Brautigam said...

It's brand new ... but if cases are going to arise out of this, they'll be selected for impact and I'm sure we'll hear about them. I wouldn't expect it any time soon. A Washington Post article this morning (March 24, 2011 "The Price of Global Business (in a Briefcase full of Cash)") pointed out that the US Justice Department had only taken two enforcement actions under our Foreign Corrupt Practices Act in 2004, and 48 in 2010. I doubt businesses suddenly got more corrupt under Obama. In China, too, there clearly will have to be a signal from high up that enforcement of the law is going to get serious.

masana.mulaudzi said...

Hi Deborah, do you perhaps know how effective China's laws on copyrights and Africa's implementation of copyrights is? I refer to an article: http://www.businessweek.com/magazine/content/08_33/b4096062676521_page_2.htm

Anonymous said...

Bonjour Deborah
I agree with you on the origins
fight against public officials corruption is now included in the chinese communist party program but I found nothing about "private" corruption laws. Do you confirm ? Didier

Deborah Brautigam said...

Hi Didier -- What China is required to do, according to the UN Convention, is to make bribery of foreign government officials a crime. The language of the convention is reproduced below. Bribery by private companies of public officials is included here, but money paid by private companies to people in other private companies to gain some advantage would not be considered illegal. Is this what you are talking about? I don't know that this is illegal in other countries either, but perhaps it is?

Text of UN Convention:
Each State Party shall adopt such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally,
the promise, offering or giving to a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties, in order to obtain or retain business or other undue advantage in relation to the conduct of international business.