January 27, 2013
More on the timing of the Bo Xilai trial
Now we're being told (Global Times story here) that it will be after the March meetings of the National People's Congress and the Chinese People's Political Consultative Conference. According to the report, unnamed insiders say that the case is complicated and that the trial might last ten days.
Ten days would be extraordinarily atypical in a criminal trial. A recent study of a large sample (non-random, but those are the limitations of research in China) of criminal cases found that two thirds of Basic Leval court cases and one third of Intermediate Level court cases were completed within one hour, including adjournments. Of course, that's hardly surprising - in the vast majority of cases, the defendants admit most or all of the prosecution's case, so these trials are functionally similar to a US court's processing of a plea- bargained deal. (This is by no means to claim they are identical or problematic in the same way.) What empirical research shows, however, is what anecdotal evidence has long suggested: that matters of importance are almost never decided at the trial stage, and that the mere fact that the case has gotten that far is evidence that a guilty verdict will be forthcoming. (The acquittal rate is below 1%.)
But the Bo case is of course an atypical case. Still, if he’s not contesting the charges (Chinese criminal procedure doesn’t have a formal guilty/not guilty plea), one wonders what can be so complicated about it. If he is contesting the charges, then going forward with the trial really is atypical. Possibly he is being allowed to contest some minor aspects of the charges – for example, did he take $10 million in bribes or was it only $9 million – and the court will reject a few elements of the prosecution’s case in an attempt to show that it wasn’t all pre-ordained from the start.
Stuart Schram, 1924-2012Last July, Stuart Schram, a giant in the field of modern China studies, passed away. He was my professor when I did an M.Sc. degree at SOAS, and he left an indelible impression - truly a brilliant man. The Dec. 2012 issue of the China Quarterly carries a terrific obituary by Roderick MacFarquhar that is not a simple hagiography but captures him in all his complexity. I'm very lucky to have known him.
January 26, 2013
Law and economics in the Beijing taxi industry
Some years ago I read a fascinating law-and-economics analysis of the Beijing taxi industry [available here; thanks to a commenter for the link] written by a Chinese graduate student under Prof. Fang Liufang; as a piece combining empirical research, economics, and law it really stood out among the usual crop of dreary statutory exegeses. I was reminded of it today when I came across a pair of articles discussing well known (at least, well known to those of us who spend time in Beijing) problems getting taxis in Beijing.
The Global Times reports that the Beijing government recently passed rules designed to address the problem: if a taxi company is the subject of too many complaints (for example, about drivers refusing to pick up during peak times), then it will be punished. This attempt at a cure obviously reflects a particular diagnosis: that the reason drivers refuse to pick up fares is just simple cussedness.
But of course that's ridiculous. Like most of us, Beijing cab drivers hope to earn money from their occupation. And as anyone who has talked to a Beijing cab driver about this knows, a cab driver loses money by taking fares during rush hour and other times when traffic is jammed (which is a lot of the time in Beijing). The meter simply ticks over too slowly for them to recover their fuel costs; they're better off parking of-road with the engine off instead of parking on the Third Ring Road with the engine running.
One obvious solution is to raise the permitted rate, which has stayed the same now for (I believe) over a decade, although fuel surcharges of one or two yuan per trip (totally unrelated to distance) have been around for a while. Another solution is to return to the good old days of the 90s, when different classes of taxis were allowed - some were nice cars that cost more, some were in ... let's say, less nice vehicles, and cost less. A third alternative is to subsidize taxi drivers - this is suggested by Prof. Meng Bin, a professor of urban planning quoted in the Global Times story. (This seems like the worst solution to me; subsidies are always tremendously hard to administer and vulnerable to cheating, and it's hard to see why (relatively well-off) taxi riders should be supported by (less well-off) non-taxi riders. In addition, Prof. Meng suggests this because he's opposed to any increase in fares; it's hard to see the basis for thinking that somehow the current fare structure, in January 2013, by some amazing coincidence is exactly what it should be and mustn't be changed.)
For a more detailed analysis of the economics of it all, see this article by Michael Cormack.
January 25, 2013
Bo Xilai trial scheduled for Jan. 28th in Guiyang, to last three days
That at least is what's being reported in Hong Kong's PRC-affiliated Ta Kung Pao (大公报). His defense lawyers are Li Guifang and Wang Zhaofeng of Beijing's Deheng Law Firm. I don't know anything about Wang, but Li is a respected figure.According to some reports, Bo's son Guagua had previously attempted to retain another lawyer - Li Xiaolin, who had defended Gu Kailai's accomplice, Zhang Xiaojun - but Bo had nixed it. Li Xiaolin is quoted in the Ta Kung Pao as saying he didn't mind: "The less I know [about this case], the better."
UPDATE: The Duowei news site says that the Guiyang Intermediate People's Court states that it has "received no plans" for the trial of Bo. This is kind of a strange locution to use if an outright denial was intended. On the other hand, they're going to look pretty silly if the trial does indeed go ahead on the 28th and they insist they knew nothing about it a mere three days earlier, and they must know that, so maybe the denial is accurate. Wheels within wheels!
January 24, 2013
China's new Mental Health Law - an interview with Guo ZhiyuanHere's an informative interview with Prof. Guo Zhiyuan of the China University of Political Science and Law on China's 2012 Mental Health Law. Well worth reading is this subject interests you at all.
January 04, 2013
The approval process for FDI in China
The US Chamber of Commerce has produced an excellent and comprehensive report on the approval process (actually, many processes) for foreign direct investment in China. It includes both details and big-picture perspective. I don’t think I’ve ever seen this kind of information all brought together in a single report before, at least at this level of detail. It should be on the reading list of all courses about doing business in China.
January 02, 2013
SEC vs. Deloitte: Chinese law aspects
US securities regulators have been engaged in a long struggle to obtain the workpapers of auditors of Chinese companies listed in the US, and last month the SEC initiated administrative proceedings against the Chinese affiliates of five big accounting firms (NYT story, plus useful background, here.)
In related proceedings, the SEC subpoenaed documents from Deloitte Touche Tohmatsu CPA, Ltd. (DTTC), the Chinese auditors of Longtop Financial Technologies, a Chinese company whose financial statements were apparently less than totally accurate.
DTTC has been fighting the subpoena on the grounds that it is liable to punishment under Chinese law if it provides the documents the SEC is seeking. Below are links to relevant court filings that look at the Chinese law issues here. I produced an expert witness declaration in support of the SEC's position in this matter and so my own views are stated there. The expert witness declarations in support of DTTC's position were produced by my colleagues (and as it happens my good friends) Prof. Tang Xin of Tsinghua University Faculty of Law and Prof. James Feinerman of Georgetown University Law School.
- DTTC's brief in opposition to the subpoena (April 11, 2012)
- SEC's brief in reply to DTTC's brief (Dec. 3, 2012)
- Regulation 29 (This is a key document relevant to the Chinese law issues and discussed in the filings)
November 07, 2012
How are China's courts doing? A blogger debate.
Stan Abrams: They're better than you think.
Siweiluozi: No, they're not.
November 05, 2012
CSRC to relax rules on Chinese companies listing in Hong Kong
Caixin and other media report that the China Securities Regulatory Commission plans to drop its requirement that Chinese companies listing in Hong Kong meet certain size criteria: 400 million yuan in net assets, an offering size of US$50 million, and 60 million yuan in profits in the year before listing. This is in line with what I've heard is the CSRC's intention to move away from merit regulation and toward US-style disclosure regulation.
It's not clear to me why it was ever the CSRC's business to worry about overseas listings by Chinese companies. The shareholder-protection concerns are surely the business of the overseas jurisdictions, not China, and the foreign-ownership concerns, if any, would apply to all Chinese companies, not just ones with stock market listings, and so should be handled by the Ministry of Commerce. In any case, however, this is a step forward in Chinese business law and, I hope, another blow to the cult of bigness that dominates official thinking about corporate law.
It's also good news for the Chinese economy. To the extent that economic activity requires organizations like corporations to undertake it, anything that makes corporations run better is good for economic activity. And generally, flexibility in corporate organizational law is good. (I'll just leave it at that, since this is not the place for an extended discussion of the proper balance between mandatory and default rules in corporate law.) My pet theory of barriers to innovation in China is that problems with intellectual property law and enforcement are only part of the story. Another part is that problems with corporate organizational law - essentially, its rigidity, obsession with bigness, and supreme confidence that legislators know what's good for business better than business people do - prevent entrepreneurs from designing the type of business entity that can get their ideas funded. Thus, anything that removes barriers to small businesses getting funding - and lowering the threshold to listing in Hong Kong does that - is good.
I think it's problems in Chinese corporate law that explain why we still see round-tripping of investment (Chinese money going offshore and then returning to China dressed up as foreign investment) even though the regime of special preferences for foreign investors has more or less disappeared. People aren't going offshore to take advantage of tax preferences. They're going offshore to take advantage of foreign organizational law, which allows them to do things that Chinese corporate law doesn't. Think about the complex set of claims on a pre-IPO start-up in the US. To get funding from different kinds of people with different goals and different risk preferences, that company will probably have had to cook up different classes of preferred and common stock, with different conversion rights, rights to board seats, rights to profits, veto rights over particular corporate actions, etc. That kind of structuring is completely impossible under Chinese corporate law, which (for example) doesn't even provide for preferred stock.
Allowing smaller Chinese companies to list in Hong Kong does not, of course, reduce any of the rigidity problems in Chinese corporate law, but it's a step forward toward more flexibility in general.
November 03, 2012
Transition of railway security apparatus to civilian control completedThe Global Times reports the completion of a process started in 2004 whereby the railway system lost its special system of courts. prosecutors, and police. This marks an important milestone in China's transition to being what we might call a normal modern state. Some people may cavil at the use of a value-laden term like "normal". What I mean is a state where the administration of law and the use of force is relatively centralized and rationalized, instead of being wielded by a variety of duchies and baronies answerable in practice to nobody but themselves. We've seen this in the gradual switch - now virtually complete - in the administration of people on the basis of where they live instead of where they work. The system of railway courts has been an anachronism for a long time, but somehow has managed to persist. As it seemed to produce a lot more scandals than justice in recent years, it won't be missed.
October 31, 2012
What would happen if Wen family members sued the New York Times in China?
Yesterday I talked about what might happen if Wen Jiabao or his relatives tried to sue in the United States over the recent New York Times story on the Wen family forture. Today I’ll talk about the legal standards that would apply if they tried to sue in China. Please note that this issue is distinct from two other issues:
- Would they win if they sued? Almost certainly. I can’t imagine a Chinese court handing a defeat to a sitting or former premier or his immediate family in a case like this.
- Will or should they sue? Very possibly not. Although the family might have a lock on the outcome, a lawsuit means more publicity and unforeseeable further consequences. They might win the battle and lose the war.
Having gotten that out of the way, let us proceed.
As I’m not an expert in this area, a key source for me is Benjamin Liebman’s article Innovation Through Intimidation: An Empirical Account of Defamation Litigation in China, 47 Harv. Int'l L.J. 33 (2006). Prof. Liebman has also kindly shared his thoughts in some further communications and I’ve done a bit of my own research as well. (Needless to say, Prof. Liebman is not responsible for the conclusions I draw in this post.)
With Prof. Liebman’s permission, I am posting here an extract from the Innovation article in which he explains the legal framework. Here’s the key part:
“[There are] three general circumstances under which defamation will be found: (1) where the content of news reports is ‘seriously mistaken’ or, in the case of critical news reports, where the ‘basic content’ of such reports is incorrect, and such mistakes or inaccuracies result in harm to reputation, (2) where insulting or slanderous language results in harm to reputation, or (3) where unauthorized revelation of personal details causes harm to reputation. [This suggests] that, although the truth of a media report may be a defense to a claim of harm to reputation, truth is not a defense where the alleged defamation results from insulting words or from revelation of personal details.” (Internal footnote omitted.)
Although China promulgated its Tort Law after Prof. Liebman’s article was published, it doesn’t change the accuracy of this summary. The Tort Law protects the right to reputation and dignity, but with no details, so presumably pre-existing interpretations still apply.
Here are the key refinements to this summary:
- “There is no public person doctrine in Chinese defamation law (although some within China have called for the adoption of such a standard, and a small number of courts have in effect adopted such a standard in individual cases).” (Liebman, personal communication.)
- “[The rule] that the media shall not be liable for critical reports that are ‘basically correct’ has permitted courts both to overlook significant errors in reporting and to base liability on minor errors.” (Liebman, Innovation.)
- “[J]ournalists complain that courts generally place the burden of proof on the media, forcing them to attempt to prove that even small details in their reports were correct.” (Liebman, Innovation.)
- Truth is a defense to a criminal libel charge. (Criminal Law, Art. 246; 《刑法学》，黎宏著，2012年版，第689页到第690页，北京，法律出版社; 《刑法各论》，周光权著，2008年版，第75页，北京，中国人民大学出版社.)
And what about the law in practice? Here’s the bottom line:
- “Chinese defamation law generally is pro-plaintiff, both in formal law and in application. Truth is not always a defense, and courts have often in effect required that the media prove the veracity of statements. There is also significant wiggle room in the relevant Supreme People’s Court Explanation when it comes to defining whether the ‘basic content’ of media reports was correct or not. Chinese journalists have often complained that the legal framework governing defamation claims puts them at a significant disadvantage when they are sued.” (Liebman, personal communication.)
- “Defamation has often been used by officials in response to negative media reports. However, officials who have brought such suits have virtually all been low-ranking, and the targets of such lawsuits have been domestic media. I am not aware of prior suits brought by senior officials or of suits against foreign media.” (Liebman, personal communication.)
So where does this leave us?
- Truth is a defense to criminal liability.
- Truth is sometimes a defense to civil liability.
- Truth is not a defense where insulting language has been used.
- Truth is not a defense where the complaint is of harm to reputation caused by the unauthorized revelation of personal details.
- Even in the absence of political considerations, Chinese defamation law is generally sympathetic to plaintiffs. The countervailing value of free speech just doesn’t cut a lot of ice; Chinese law doesn’t worry much about overbreadth and chilling effects.
- No officials of Wen’s stature have brought defamation suits against foreign media before. I suspect, but do not know for sure, that this holds true for immediate relatives of officials of Wen’s stature.
Thus, if Wen or his relatives were ordinary folks without political influence (impossible to imagine, of course, given that we are not relaxing the wealth condition in the hypothetical), it seems to me that it could go either way. It’s possible although by no means certain that they could win a suit in China even if the statements in the NYT article are accurate. A court might plausibly find that the amount and nature of one’s wealth are protected personal information. (I have not checked, however, to see if there are any cases that address this particular question.) If not, though, then the other conditions for liability don’t seem to be met; it’s hard to argue that the article uses insulting language of the kind that has gotten defendants into trouble before.If, of course, the statements are not accurate, then their chances of winning go up quite a bit. The courts are already sympathetic to plaintiffs, and there is no public figure doctrine that gives the press extra leeway to make mistakes. Finally, there is no cost to courts in making a foreign press organization liable in tort, whereas domestic press organizations have a certain amount of clout.
China and the international human rights systemHere's a Chatham House report on the subject by Sonya Sceats with Shaun Breslin. I haven't looked at it myself, but it is recommended by a colleague as an excellent and comprehensive treatment of China's performance under the international human rights system in the last two decades in particular, as well as the first time that China's voting patters at the UNHRC and those of others voting with it have been looked at in depth.
October 30, 2012
What would happen if Wen family members sued the New York Times in the US?
More notes on the continuing saga of the Wen family fortune, which I've blogged about here and here. Lawyers retained by undisclosed members of the Wen family issued a statement denying parts of the story and containing a veiled threat of a lawsuit at the end. (The Want China Times reports that the lawyers have since stated they are acting on behalf of Wen's son, Wen Yunsong (Winston Wen).)
What would happen if Wen or his family members tried to sue in the US? Here's an analysis by my colleague, Jonathan Turley, an expert in these matters. Best line: "The Chinese government regularly responds to such corruption stories with executions but they are viewed as little more than a lethal form of public relations." One caveat: his analysis states that the Wen family has already retained US lawyers, which to the best of my knowledge is not accurate, but I think we can forgive him this slight misreading of the NYT story because he wrote his post in the middle of trying to drive from New Orleans to Washington in a hurricane. It doesn't affect the analysis.
What would the legal analysis be if the Wen family sued in China? Stay tuned - I hope to have something on that shortly. Of course, the political analysis is pretty easy - it's unimaginable that they would lose if they went so far as to bring suit. This does not mean it would be wise for them to do so, however - there would be costs.
October 29, 2012
Official guidelines for legal research in China
Rogier Creemers, a member of the Chinalaw listserv, recently had an interesting post on legal research in China. With his permission, it's reproduced here:
Through a discussion with colleagues, I became
interested in the question of what China's policy is in terms of conducting and
supporting legal research, with a few people. Personally, I found that, over
the years of dealing with Chinese researchers and graduate application, most
proposals I would get are remarkably similar, and in the vein of: "I want
to research the function of [insert doctrinal concept] in a number of advanced
jurisdictions, such as the US, UK, Germany and [insert country to which application
is made], and write a chapter on how this should be implemented in China.] In
other words, very instrumental and positivist. So I decided to look fora few
documents on this, and one thing I found was an Opinion on legal research of
the China Law Society, China's academic association for the legal sphere. It
includes interesting passages on the context of legal research, its connection
to practice and the function of international exchange.
I thought this might be useful for some list members as well, so please find it here:
Will the Supreme People's Court have original jurisdiction in the Bo Xilai case?Hasn't happened since the Gang of Four trial, but may be in the works. Here's blogger Siweiluozi's take.
The Wen family fortune and Party disciplinary rules
Here’s an interesting twist to the recent New York Times story on the family fortune of Wen Jiabao. (I blogged about it here.) The story at no point accuses Wen or his family members of doing anything illegal. But what about Party disciplinary rules? Here there may be a problem, even though (as I’ll explain) it’s because the rules as written are arguably tighter than is reasonable.
The bottom line is that Wen appears to be in violation of a Party rule requiring senior officials to prevent their close relatives from engaging in business in areas (geographical or subject-matter) under their jurisdiction or, failing that, to resign. Since Wen is the premier, all of China falls within his geographical jurisdiction, and pretty much all areas of business would be within his subject-matter jurisdiction as well. This, of course, means that his close relatives can’t engage in any business in or even relating to China at all. I don’t claim that this is a reasonable or practical result, or that it was intended by those who wrote the rule, but that’s how I read it. My reasoning is below.
In 1997, the Party promulgated a set of disciplinary rules called the “Chinese Communist Party Several Principles on Clean Administration of Government by Party Member Leading Cadres (for Trial Implementation)” (中国共产党党员领导干部廉洁从政若干准则（试行）) (the “1997 Principles”). Article 5 of the 1997 Principles states:
The spouse, children, and spouses of children of leading cadres at or above the level of province (ministry) may not personally engage in business, set up enterprises or work in a wholly foreign-owned enterprise within the region and the subject-matter scope of that leading cadre’s jurisdiction. 省（部）级以上领导干部的配偶、子女及其配偶，不准在该领导干部管辖的地区及管辖的业务范围个人经商办企业和在外商独资企业任职。
Obviously, there are many questions here.
- In terms of substance, what does it mean to “engage in business” or “set up enterprises”? The term I’ve translated as “set up” is particularly vague; it just means “do” in a general sense, so it’s overly restrictive to interpret it as just meaning “to establish” in some formal way. Perhaps “to be involved in” is better.
- Does the term “personally” qualify the forbidden activity in any important way? Is it OK to do it through proxies?
- In terms of logical structure, are “engage in business”, “set up enterprises”, and “work in a wholly foreign-owned enterprise” three distinct activities, each of which is prohibited? Or does the lack of a serial comma between “engage in business” and “set up enterprises” suggest that the meaning is ““engage in business by setting up enterprises”? I believe three distinct activities are covered here. In other places – indeed, in Art. 2 of this very regulation – we see a serial comma between “engage in business” and “set up enterprises”, making it likely that they are intended to be distinct activities and that the absence of a serial comma here is just a mistake or is otherwise insignificant. On the other hand, we could also read them as a single activity that essentially captures the idea of investing and getting profits as opposed to simply being a company employee.
- Is the prohibition only against activities that satisfy both criteria of being in the leading cadre’s geographic and subject-matter jurisdiction? I believe this would be a silly interpretation; I translated the relevant conjunction as “and” instead of “or” only to avoid hiding the possible problem, but the correct English translation would be “or”. The grammar of Chinese Party rules is just not so strictly logical as the grammar of English legislation. Clearly what is intended is that where the leading cadre jurisdiction is defined by region, the relatives can’t do business there, and when it’s defined by subject-matter, the relatives can’t do business in that field.
- What’s the enforcement mechanism?
Later the same year, the Party issued a set of implementing measures (《中国共产党党员领导干部廉洁从政若干准则试行》实施办法) (the “1997 Measures”). These explain some of the concepts of Article 5 of the 1997 Principles.
- “Personally” “engage in business” and “set up enterprises”: Art. 31 of the 1997 Measures refers you back to Art. 10, which defines what it means for the leaders themselves to “personally” “engage in business” and “set up enterprises” (also forbidden under Art. 2 of the 1997 Principles). Art. 10 states that this means “to engage in business and set up enterprises with one’s sole investment, to engage in business and set up enterprises in joint venture, joint stock, cooperative, or partnership form, or to engage in business and set up enterprises oneself through subcontracting, leasing, being hired, or other forms.” (个人独资经商办企业，与他人合资、合股、合作、合伙经商办企业，私自以承包、租赁、受聘等方式经商办企业。) It seems clear here that “engage in business” and “set up enterprises” are just general terms that should not be read too strictly. Very possibly, however, the idea of “setting up enterprises” is there as a way of implying that equity ownership is the key to what’s forbidden, and that merely being the employee of an enterprise without a significant interest in its profits is not forbidden.
- The enforcement mechanism is spelled out in Art. 31 of the 1997 Measures: if you can’t get your relatives to stop doing the forbidden things, then resign or ask for a re-assignment. (拒不纠正的，领导干部应当辞去现任职务或者由组织上调整其职务.) Moreover, the matter should be handled in accordance with Art. 88 of Party’s Regulations on Disciplinary Punishments (纪律处分条例). In the linked version of these regulations, Art. 88 is about retired cadres, so perhaps there has been a subsequent renumbering; I’m not positive the cross-reference is still correct.
In subsequent years, the Party issued further clarification of the forbidden activities of the spouse, children, and spouses of children of leading cadres at or above the level of province or ministry (hereinafter, “Covered Relatives”):
- In 1998, a “Supplementary Rule” provided that Covered Relatives could not work for the foreign side in joint ventures.
- In 2000, an “Interpretation” of a different rule defined “personally engage in business and set up enterprises” as ”engaging by oneself or together with others in a private economic organization; personally serving in a senior management position in a private economic organization; personally engaging in compensated social middleman services; personally registering companies outside of mainland China and then returning to the mainland to engage in economic activities; etc.” (个人经办或与他人合办私营经济组织；个人受聘担任私营经济组织的高级职务；个人进行有偿社会中介活动；个人在国（境）外注册公司后回国（境）从事经营活动等。) This Interpretation is worth looking at because it also spells out in detail a number of substantive prohibitions applicable to the close relatives of senior leaders. Interestingly, the Interpretation does not by its terms apply to officials such as Wen who are above the ministry level.
In 2010, a new version of the 1997 Principles (the “2010 Principles”) was issued and the old version superseded. The nepotism provision in the 2010 Principles, also in Art. 5, makes a key change: the senior official is no longer presumed to control, and made responsible for, the activities of his relatives. Instead, he is required not to help them out in their business activities. But he is not required to resign simply because they are engaging in business in areas that might be within his jurisdiction. It’s not clear whether the 2000 Interpretation noted above survives; it’s about the activities of relatives of senior officials that conflict with the public interest and significantly overlaps the 1997 Principles. Thus, the following conclusions apply only to things that happened before 2010.
Here are a few conclusions we can draw from all this – and remember the qualification I just made about timing.
- The 1997 Principles cover no activities by Wen’s mother or siblings.
- The 1997 Principles cover only activities by Wen himself, his spouse, his son, and his son’s spouse.
- These statements from the NYT story describe
activities by Winston Wen that, if they occurred before 2010, would be covered
by the 1997 Principles:
- “The couple’s only son sold a technology company he started to the family of Hong Kong’s richest man, Li Ka-shing, for $10 million, and used another investment vehicle to establish New Horizon Capital, now one of China’s biggest private equity firms, with partners like the government of Singapore, according to records and interviews with bankers.”
- “Winston Wen and his wife, moreover, have stakes in the technology industry and an electric company, as well as an indirect stake in Union Mobile Pay, the government-backed online payment platform.”
- “Winston Wen’s earliest venture, an Internet data services provider called Unihub Global, was founded in 2000 with $2 million in start-up capital, according to Hong Kong and Beijing corporate filings.”
- “[Winston Wen] made an even bolder move in 2005, by pushing into private equity when he formed New Horizon Capital with a group of Chinese-born classmates from Northwestern.”
- I can’t find in the article a statement about
Wen’s wife that unambiguously indicates a violation of the 1997 Principles.
Many of the investments attributed to her seem in fact to have been made by
entities of which she was an executive, not necessarily an owner. Of course,
she may have been in a position to extract benefits by means of her position
just like any other official in a government agency or state-owned enterprise,
but that’s not a per se violation of
the rule I’m discussing here.
October 27, 2012
The Wen family fortune and the denial
Lawyers purporting to speak on behalf of the family of Wen Jiabao (and I have no reason to doubt that they do) have issued a statement challenging certain aspects of the blockbuster expose recently published in the New York Times [English|Chinese]. Although the headline of the Times's report on the statement is "Chinese Premier’s Family Disputes Article on Riches," in fact the statement disputes remarkably little.
Let's look at what it says:
I. The so-called “hidden riches” of Wen Jiabao’s family members in the New York Times’ report does not exist.
This is way too vague to constitute a denial of anything.
II. Some of Wen Jiabao’s family members have not engaged in business activities. Some were engaged in business activities, but they did not carry out any illegal business activity. They do not hold shares of any companies.
(1) Well, of course some of Wen's family members have not engaged in business. The Times did not claim they all had. Thus, no dispute. (2) The Times article did not claim anyone had done anything illegal. Again, nothing to dispute. (3) Are they saying that no members of Wen's immediate family hold any shares in any companies? There is of course nothing wrong with anyone owning stock in some company. This part of the statement is, however, a genuine dispute, since the article does assert that "Mr. Wen’s relatives accumulated shares in banks, jewelers, tourist resorts, telecommunications companies and infrastructure projects". Maybe there is some "it depends on what the meaning of 'is' is" going on around the difference between "relatives" and "family members". But it would be hard to claim that his mother is not a family member, and the article did assert that she owns shares. OK, one genuine dispute here.
III. The mother of Wen Jiabao, except receiving salary/pension according to the regulation, has never had any income or property.
Another genuine dispute. This flatly contradicts what the article asserts.
IV. Wen Jiabao has never played any role in the business activities of his family members, still less has he allowed his family members’ business activities to have any influence on his formulation and execution of policies.
No dispute here; the article does not make this claim.
V. Other relatives of Wen Jiabao and the “friends” and “colleagues” of those relative are responsible for all their own business activities.
This is almost true by definition. Again, it doesn't contradict anything the article says.
All in all, then, the lawyers' statement really challenges only one specific assertion - that Wen's mother is a multi-millionaire - and one general assertion - that several of his relatives own shares in various corporations. It may be that in many cases it is literally true that the relatives don't own shares in companies; instead, they may hold interests in partnerships or some other entity that doesn't have shares, and the entities in turn hold the corporate shares. But I wonder whether you can go through life as a wealthy person and not own any shares in any companies.
October 02, 2012
A comment on Edward Alden's "Obama's misguided China slapdown"
Edward Alden of the Council on Foreign Relations has published a piece called “Obama’s misguided China slapdown.” I’m not sure I understand his point. The basic idea seems to be that the Obama administration, in blocking through the CFIUS process a Chinese acquisition of a small Oregon wind farm project, has damaged the US economy by sending discouraging signals to Chinese investors. But his argument seems to have some looseness in the joints.
Alden starts by implying that the rejection is something remarkable: he says twice that it’s the first presidential rejection of a foreign acquisition on national security grounds since George H. Bush did it 22 years ago. Well, stop right there. If something like this happens only once every 22 years, it’s a bit implausible to argue that it’s going to be a major discouragement to investors.
But of course just looking at formal rejections makes no sense. To gauge the foreign investment climate, we should also be including potential investments that were ultimately scrapped before they even got to the point where they could be reviewed and denied because the investors were put off by the reaction they had already elicited – for example, CNOOC’s proposed acquisition of Unocal, or just about anything connected with Huawei. If we did that, it would strengthen the argument that the US was hostile to foreign investment, but it would weaken the argument that the Obama administration did something extremely rare and thus presumptively improper. You can’t have it both ways.
OK, so let’s add in all those scrapped potential investments and get a kind of maximum hostility index. We still don’t know if Chinese investment is being discouraged. It might be that the blocked and scrapped investments were a tiny proportion of total investment and that most Chinese investors were having no problems. Indeed, Alden admits as much: he quotes David Marchik of the Carlyle Group as saying, “the vast majority of Chinese investments in the United States have either been approved or have not required any approval.” Under the circumstances, is a single formal denial going to have a big impact?
We might, by way of comparison, look at foreign investment in China. Barriers to foreign investment there are surely by almost any measure greater than barriers to foreign investment in the United States, and yet the foreign investment community has not been notably discouraged. Are Chinese investors are more skittish than their developed-world counterparts and are more easily frightened off?
Finally, as noted above, Alden agrees that existing barriers to Chinese investment in the US are, in fact, trivial. His piece turns out to be a concern about a perception – or more accurately, a misperception – on the part of Chinese investors that America might not be a good place to invest. I wouldn’t say that perceptions don’t matter, but still, I wonder if it’s really worth writing a whole piece to slam the Obama administration just for creating or encouraging a misperception of this kind.
For the record, I, too, find it hard to find a national security threat in a wind farm acquisition, but what do I know?
September 30, 2012
Prof. Margaret Lewis on the new Criminal Procedure LawHere are Part 1 and Part 2 of an interview with Margaret Lewis, an expert on Chinese criminal law and procedure, on the new Criminal Procedure Law.
September 27, 2012
The Bo Xilai/Gu Kailai pot gets stirred some more
The latest bombshell from China is a blog post from Wang Xuemei, a forensic doctor at the Supreme People's Procuratorate, who claims that the prosecution's story of Neil Heywood being poisoned by cyanide can't be correct. (Unfortunately, I don't know enough about cyanide poisoning to assess her story.) Here's the news report in the Guardian.
None of this can necessarily be taken at face value. Wang may have her own agenda; some speculate that this is part of an effort to defend Bo Xilai. She blames it all on a Svengali-like Wang Lijun leading the weak-minded Gu Kailai down the path to perdition, and speculates that Neil Heywood was actually suffocated with a pillow. She ends by asking, "Who benefited from Heywood's death?"