Chinese Law Prof Blog

Editor: Donald C. Clarke
George Washington University Law School

Saturday, June 28, 2008

Seeking government information about the South China tiger photograph: Hao Jinsong's odyssey

The Economic Observer Online has a very interesting story about the efforts of lawyer Hao Jinsong (郝劲松) to uncover government information about the notorious "South China tiger photograph" both in court and through administrative processes, including the new Regulations on the Disclosure of Government Information. Here are the links: English | Chinese. (Hat tip: China Digital Times.)

June 28, 2008 in Commentary, News - Chinese Law | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 24, 2008

Punishment for perpetrators in corporate scandals

I came across a great paper the other day: Peng Sun and Yi Zhang, "Is There Penalty for Crime: Corporate Scandal and Management Turnover in China" (March 2006). The authors are trying to figure out whether top executives suffer when they perpetrate corporate frauds. [UPDATE: A correspondent has noted that, strictly speaking, the paper is talking about what happens to executives when the company or the executive perpetrates a fraud. Thus, the sample could include cases where we would not want to say that the executive had actually perpetrated the fraud.] They discover, somewhat to their surprise, that CEOs and board chairmen (COBs) do tend to lose their jobs after a scandal. But then the authors take an interesting extra step that, surprisingly, few studies in this area seem to take: they track what happened to the executives after they lost their jobs. And here's the amazing result: fully 70% of COBs and 66% of CEOs actually get promoted to higher positions in industry or government, or move across to positions no worse than the ones they had. Only a tiny number suffered severe administrative sanctions (banned from the market, barred from serving as officer of listed company, or recommended for dismissal by CSRC) or legal sanctions (prison time). Finally, Party membership was positively correlated with milder sanctions.

Here are the numbers and a graphic I put together:



June 24, 2008 in Commentary | Permalink | Comments (0) | TrackBack (0)

RMB problems and the foreign investment approval process

Here’s an interesting story about the foreign investment approval process in China, and in particular about how the RMB valuation problem is infecting policy in strange ways all across the board.

A lawyer for a foreign law firm in China told me about his experience negotiating with the foreign investment approval authorities in a certain large, commercially sophisticated city. His client was acquiring a privately owned Chinese firm in that city. In accordance with relevant regulations, a valuation report had been prepared by an independent appraiser. The price negotiated by the parties (unrelated parties negotiating at arm’s length), however, was 50% than the appraised valuation.

A market price higher than an appraised value is not surprising or indicative of anything wrong; Chinese appraisers often rely on book values that take no account of certain intangibles and future earning power. In the past, foreign acquirers have run into difficulties with approval authorities when the negotiated price was lower than the appraised price; the authorities, who have more faith in the solidity and apparent objectivity of book numbers than in evanescent and subjective market valuations, would suspect that assets were being sold off cheaply to crafty foreigners, or that kickbacks or other underhanded dealings were involved.

In this case, however, the authorities objected that the negotiated price was too high. The foreign buyers should pay less money. When asked what an acceptable margin on either side of appraised value might be, they responded, “10 percent.”

What’s going on here? The problem is that apparently approval authorities are now more worried about hot money inflows than they are about Chinese sellers getting taken to the cleaners by crafty foreigners. They just don’t want all this money coming into the country. Surely there is something wrong with an exchange rate policy that leads to this kind of result. Michael Pettis over at the China Financial Markets blog has written frequently about the dog-wagging effect on monetary policy of the tail of exchange rate policy; here’s another dog being wagged.

By the way, the resolution of the lawyer’s problem is as interesting as its original cause. The lawyer insisted that the negotiated price couldn’t be changed; it was the product of four months of hard bargaining between the parties. (Who could have imagined that a lawyer would be put in the position of saying, "My client insists on paying more than you want it to pay!") Eventually the approval authorities were convinced that the price was reasonable. The agreed solution? Amend the appraisal report!

June 24, 2008 in Commentary, News - Chinese Law | Permalink | Comments (0) | TrackBack (0)

Monday, June 23, 2008

New Chinese visa policies explained, sort of

Chinese visa policies are something of a moving target these days - and the target itself is in part well lit, in part camouflaged, and in part completely invisible. Here's a web site with some updated information, gathered from here and there, on current Chinese policies. The information here is unofficial, subject to change, and possibly inaccurate, but it's more comprehensive than anything the Chinese government has chosen to make available so far.

June 23, 2008 in News - Chinese Law | Permalink | Comments (0) | TrackBack (0)

Sunday, June 22, 2008

Chinese chafe under tightened rules about (it seems) everything

Readers of this blog will probably already be familiar with the litany of complaints about the Olympics-related tightening of rules on visa issuance, among other things. I am not a security expert, but I can't disagree with the general notion that those in charge have lost all sense of proportion. The other day when I went back to my apartment - an ordinary apartment in an ordinary apartment complex, just like hundreds or thousands of other complexes in Beijing - I had to walk through a double line of camouflage-suited young men (quite friendly, however) at the entrance. I don't know what threat they were guarding against, or who had the idea that wearing green leafy-colored clothing in Beijing would make you blend in with your surroundings. In any case, here's an interesting Chinese view: an essay [Chinese | English] on an MP3 player that could not be sent through the mail. (HT: China Digital Times.)

June 22, 2008 in Commentary, News - Chinese Law | Permalink | Comments (0) | TrackBack (0)

NGOs in China

Here's an excellent article on NGOs in China by Amy Gadsden in the latest issue of the Far Eastern Economic Review.

June 22, 2008 in Commentary | Permalink | Comments (0) | TrackBack (0)