China Corruption & White Collar Crimes Watch: China Strengthens Supervision Over Civil Servants

In a June 2011 report issued by the People’s Bank of China (and as prepared by the China Academy of Social Sciences) the PRC government found 18,000 Party and government officials fled the country since 1990 with over US$120 billion in government funds missing. The leadership has had significant challenges in stamping out corruption at multiple levels. Foreign companies should be aware of these efforts in dealings with officials and management of state-owned enterprises.

On February 28, 2012, the Ministry of Supervision reported that 36,000 government officials were punished for violating laws and regulations in 2011. The MOS found that 8,500 individuals were found guilty of embezzlement and bribery. The government also sought to crackdown on illegal forced demolition and misappropriation of land (11 cases involving 57 officials) and issues concerning food and drug safety (13 cases involving 269 officials). The ministry has also focused on dealing with commercial bribery cases involving state-owned enterprises, and matters involving the misuse of government property and vehicles.

Hand in hand with the government’s own investigations, the Party also has its own disciplinary system to check corrupt officials. In this regard, the Central Commission for Discipline Inspection (CCDI) of the Communist Party of China issued its annual report on February 19, 2012, found that the Party punished 142,893 officials, and with 5,334 officials referred for criminal prosecution. The CCDI report also proposed special campaigns to root out corruption in key areas, such as the construction sector, government-funded events and the use of public vehicles. The Party also called for greater transparency in public affairs, better protection of witnesses in corruption cases, and to use social media platforms for fighting corruption.

In addition to the MOS and CCDI reports, on February 22, 2012, regulations jointly issued by the Organization Department of the CPC Central Committee and the Ministry of Human Resources and Social Security jointly issued regulations that are intended to control nepotism and corruption in the civil service. The new regulations provide that civil servants and their spouses/relatives are barred from holding positions that have a director-subordinate relationship or from holding two separate positions that report to the same director. Civil servants are also asked to avoid situations such as recruitment, promotion or demotion of staff, taxation and approval for overseas travel that involve their relatives. If two civil servants marry or form a familial relationship, their posts are required to be adjusted. A failure to comply with the regulations may result in penalties including the removal from office. These anti-nepotism rules may check the ambitions of the mom and pop teams that seek to control the village coffers, but unlikely to impact the appointment of Party princelings to posts at major State-owned enterprises.

The quarterly China Corruption & White Collar Crimes Watch is an on-the-ground review of updates in the law or policies concerning China’s anti-bribery activities, and is prepared by the Beijing office of Sheppard Mullin. Any questions regarding these issues or this blog can be directed to Becky Koblitz at BKoblitz@sheppardmullin.com or James Zimmerman at JZimmerman@Sheppardmullin.com in Beijing.