When Chinese whispers become shouts!
Article Type: Editorial From: Journal of Financial Crime, Volume 20, Issue 2
Attitudes to corruption in China are about as mixed as a good chop suey! Some of the oldest and draconian laws against corruption – in many forms are found in China and over the long and very rich tapestry of Chinese cultural development there have many instances where dramatic and occasionally effective action has been taken against individuals and even the system. The Chinese Communist Party has since its inception recognised that corruption undermines the credibility of its objectives and works against cohesion and the development of meaningful collective norms. It has launched innumerable initiatives against corruption and self-dealing and devoted considerable resources to the problem. However, today there is a widespread perception at all levels of Chinese society that corruption is rampant. There have been a large number of high profile cases in recent years, but a far greater number involving officials and others who are not politically exposed or for whatever reason the system has decided to treat with discretion. A good many of these cases have resulted in lengthy prison sentences and an undisclosed number of executions. The Supreme Peoples’Procuratorate has also attempted in a few cases to recover assets that represent misappropriated property or bribes. It has even instructed Western law firms to trace and attempt to recover such property out of jurisdiction.
The agencies concerned to fight corruption in China have themselves not been free from allegations – in some cases resulting in discreet but effective action. However, despite such efforts the cancer of corruption has remained virulent and the opening of the economy has in many cases provided unscrupulous individuals with an even greater array of opportunities to exploit the state but increasingly fellow investors. Theft of state enterprise assets, which has at least during the modern period of China been in many ways a greater problem than traditional forms of corruption, has with securitization and the development of reasonably liquid markets been replaced by insider trading and insider manipulation. At the same time those who have accumulated ill-gotten gains have become even more sophisticated in retaining control. Of course, within China there have always been considerable opportunities for obscuring the control of wealth and informal transfer systems are not limited by national boarders. While China has attempted for a variety of reasons, but primarily as a result of pressure from the international community, to take basic steps against money laundering the agency within the Peoples’ Bank of China primarily responsible has very limited resources and has made very little impact,particularly in regard to non-banking operations. It is clear that officials have no problem in transferring very substantial sums out of China through traditional and not so traditional techniques to London, Hong Kong and Singapore and increasing the Middle East. The extent to which, for example, new apartments in Hong Kong are being acquired, seemingly with the tacit support of the Hong Kong Government, by serving officials in China – is but one illustration. Indeed, the effect that this has had on the availability of accommodation in Hong Kong for in particular young couples has been one of the complaints voiced in the anti-People’s Republic of China demonstrations.
Recent cases and police action in the UK has also indicated the extent of the problem. Indeed, editorials in this journal have referred to the cultural tradition of Chinese wishing to hold substantial amounts of money in cash and the fact that there have been cases where this, perhaps unjustifiably, has aroused suspicion. However, there have also been cases involving money transfer businesses where the amounts involved are very significant. Concern has been exacerbated by the suspected organised crime association of some of those seeming involved and their ability to penetrate the financial system. While the Chinese authorities often complain that they receive little meaningful co-operation from overseas police agencies, it has to be said that the level of assistance extended to investigators seeking information in China is limited. Indeed, in one recent case involving allegations of serious organised crime and money laundering in China involving a number of foreign jurisdictions, including the UK and the USA, the main target in China was made aware of the inquiries within three hours of them being made. It is also the case that attitudes and sympathies in China may vary from district to district. Of course, local loyalties are not a new issue, however, it cannot be assumed that even in the case of seemingly national agencies in China their writ runs far outside the comfort of Beijing or very far up the party ladder.
The Chinese have recognised this and former President Hu Jin Tao gave his personal support to the establishment, with Chinese money and personnel, of the Association of Anti-Corruption Agencies. However, while this organisation’s objectives are worthy, there remains, particularly in the west, caution. This has not been helped by serious allegations having been made in China against some of those involved in running it. Indeed, an own goal by any standards– particularly, as it turned out that this was really little more than office politics and personal jealousy. A more serious issue is the unwillingness of the Chinese system to accommodate external concerns about human rights and,of course, the prospect in many cases of capital punishment. These concerns spill over even into non-traditional criminal investigations. A case a few years ago involving the tracing of substantial sums taken out of a state enterprise in Jilin had to be abandoned when the main witness was executed, possibly to save embarrassment to his wife who was a media celebrity.
The depth and urgency of the concerns about corruption voiced in the last meeting of the Peoples Congress in November 2012 came as a shock to many commentators both in China and outside. Delegate after delegate complained that all that had been achieved in China was at risk and support for China’s economic and social development was being undermined. Of particular note was the criticism made of and accepted, to some degree, by the Party itself. It was also noteworthy that several instances of corrupt officials working with recognised organised crime groups were acknowledged – something that the Chinese authorities have long been coy about. Indeed, the unwillingness of the authorities to recognise the treat presented by criminals tainting especially the senior leadership has manifested itself in embarrassment as we have referred to in the pages of this journal (see “A tale of two cities!” 19 JFC(2012) 4).
The clamour for action against corruption and abuse may have been orchestrated to some degree, but the willingness of party and state officials to call for change and the tremendous sympathy that this has found in civil society within China, is genuine enough. Indeed, President Xi Jin Ping left no one in any doubt as to how seriously the new political leadership considers the situation. He stated that corruption was one of the most serious threats facing the stability,security and development of China. Indeed, his concern and the strength of his words could not have been stronger if they had been drafted by Transparency International! Of course, it remains to be seen whether the complex and in some respects dysfunctional apparatus of the state can address the issues with sufficient vigour and alacrity to retain public confidence. A proposal from senior Party officials that perhaps the best way forward is an amnesty but predicated on full disclosure, is still being considered. While similar initiatives have worked – at least arguably, in regard to specific issues such as tax evasion, it is questionable where a problem as complex and widespread could be managed in this way. However, what is clear is that those at the helm are now not only prepared to recognise the risks, but are prepared to publically and politically acknowledge the threat.
Barry Rider
