THE PROBLEM OF ECONOMIC CRIME IN THE PEOPLE'S REPUBLIC OF CHINA At a conference on economic crime held in August 1986 in Peking, many of the papers presented for discussion touched upon the general features of economic crime in the People's Republic of China (PRC) today. The overall consensus reached was that economic crimes are "duo (many ), da (large-scale ), and guang (widespread )," that is, there are many cases of economic crime and the number of cases is on the rise; the sheer magnitude of crimes committed is unprecedented; and the extent of individual personnel, government units, and localities involved is widespread.¹/ The seriousness of the problem of economic crime was also addressed by both Zheng Tianxiang, president of the Supreme People's Court, and Yang Yichen, procurator-general of the Supreme People's Procuratorate, in their annual reports delivered at the Sixth National People's Congress in April. The reports stressed that fighting economic crime had become a top priority. According to Zheng, from 1982 to the end of 1985, the courts handled more than 183,000 cases of economic crime involving corruption, bribery, smuggling, profiteering, fraud, and theft of government property and more than 224,000 persons were sentenced.²/ Moreover, there was a 30% increase in the number of cases handled in 1985 ----------------- ¹/ See "A Preliminary Inquiry Into Economic Crime," Zhongguo fazhi bao [China Legal News], Sept. 5, 1986, at 3. ²/ For these figures, see Zheng's report, translated in Foreign Broadcast Information Service (FBIS), Daily Report: China, Apr. 28, 1986, at K6. 2 1985 compared to 1984.³/ It seems that major offenders are often those who hold high positions and wield a lot of power. In Canton alone, for example, of 2,500 persons implicated in economic crimes as of the end of March of this year, over a third were cadres.⁴/ Thus, despite the fact that the Standing Committee of the Fifth National People's Congress had on March 8, 1982, adopted the "Resolution on Severely Punishing Criminals Who Serious Disrupt the Economy," economic crimes both major and minor continue to plague the implementation of the four modernizations in the PRC. There are two major reasons why the problem has escalated. First, there is an ethical vacuum in present-day China. In traditional China, Confucian ethics provided guidelines for proper behavior; in Maoist China, purist Communist ideology prevailed, and the ethical norm that held sway was embodied in the phrase "to serve the people." As a result of the Cultural Revolution (1966-1976), however, there was widespread disillusionment with Communist ideals, and China has since been faced with the lack of a strong ethical system. The second major reason for the dramatic increase in economic crime is the current regime's economic policy, with its central focus on bold economic gains. This factor has several broad implications. The old Maoist dichotomy of redness versus expertise is now weighted in favor of expertise, so that the majority of people are ignoring Communist ideology and ethics and ³/ See Chu Yan, "The Public Order in the Mainland Society at Present Time," 1986:7 Chung kung yen chiu (Studies on Chinese Communism Monthly) 99 (July 15, 1986) (title as translated). ⁴/ Id. at 100. 3 concentrating instead on finding the means to get ahead financially in society. The economic policy under Deng Xiaoping is referred to as: duiwai kaifang he duinei gaohuo jingji de zhengce that is, "the policy of opening to the outside world and taking flexible measures to invigorate the domestic economy." The first part of this policy, opening to the outside world, has meant that Chinese now know how other people, especially those from Hong Kong and the West, live. As a result, they want to lead more comfortable lives and possess more material goods. However, the income of the average Chinese, compared to that of the average wage-earner in the West, is pitifully meager, and so some elements in Chinese society believe that the only way for them to attain a comfortable lifestyle is to engage in corruption, smuggling, fraud, and the like. In addition, while the open policy was inaugurated with a view to fulfilling China's need for Western technology, along with that technology have come various aspects of bourgeois thinking that are viewed as undesirable; in particular, a "money-first" mentality. This attitude has become so prevalent that the Maoist slogan yiqie xiang qian kan, "be idealistic" or "be unselfish" in all things, in which the qian "ahead" (i.e., "beyond oneself") is used, is now punned upon by the substitution of the homophone qian, "money," so that the phrase becomes "be greedy" or "be selfish" or "money first" in all things. In regard to the second part of Deng's policy, "taking flexible measures to invigorate the domestic economy," the key words are gao huo, "taking flexible measures." At present, China has serious problems with an 4 entrenched bureaucracy. Bureaucratic red tape interferes with the kind of approach that underlies taking flexible measures, namely, being creative and innovative and finding short cuts in order to get things done. Because the PRC has 1) too many unreasonable laws and regulations that hinder economic reforms and 2) too few reasonable laws and regulations that would facilitate the carrying out of economic reforms, some people use ingenious means to cut the red tape, to achieve greater efficiency, and to save money. In the process, some of them have, technically speaking, violated certain laws. These individuals are praised by some as "enterprisers decked with laurels" (gua guiguan de chuangyezhe ), characterized by a readiness to engage in daring action, a willingness to tackle difficult, complicated, and risky tasks, and in general an independent, energetic spirit. They are also referred to as "meritorious persons engaged in invigorating the economy" (gaohuo jingji de gongchen ). Others, however, regard such enterprisers as economic criminals (jingji zuifan ). The key question is whether the activities engaged in by the enterpriser develop the country's productive forces, or disrupt them. Examples of such activities may shed light on the problem. First, there is the question of the permissibility of unauthorized part-time work, be it a second job or work done on the side for a different work unit, which thus far has not been regulated by law.⁵/ If a person without authorization does work on the side that results in saving the ⁵/ See Zhang Xin, "China's Structural Reform of the Economy and the Decisions by Courts on Economic Criminal Cases," 7-8, an unpublished paper written for the Research Center on Modern Asia of the Chinese University of Hong Kong, for this and the following examples. 5 government money, technically speaking he would not be guilty of any crime, since there is no law against doing such extra work. In the past, however, with certain exceptions, someone who did outside work could still be prosecuted on the vague charge of engaging in illegal activities, despite the fact that the law contained no specific provisions against unauthorized work. As a recent example of changing attitudes in regard to unauthorized part-time work, there is the case of an engineer who, by doing some outside work for another government agency, for which he was paid 15,000 renminbi (rmb) for "expenses," saved the government money and was regarded not as an economic criminal but as someone who helped advance economic reform. Another example involves the case of truck repairs carried out by a factory in Shanghai. For the authorized plant to repair two trucks would have taken two to three months and cost the plant 10,000 rmb. Instead, the factory head asked some friends to repair the trucks in their spare time. It took them only about two weeks to do the job and cost a little over 1,000 rmb. According to regulations, a factory is not supposed to pay for unauthorized repairs of this sort, but the judicial organ handling the case determined that the factory head would not be held liable for payment, for if the court adhered too rigidly to the rules, it might be viewed as obstructing economic reform. Yet a third example has to do with a case of falsification of documents. Factory A made an agreement with Factory B to the effect that if Factory A was able to do a certain amount of work above its quota, Factory B would give A a bonus. When Factory B later reneged on the agreement, Factory A somehow obtained through the back door documents from Factory B that would 6 secure A its bonus. Obviously, falsification of documents, a crime punishable by law, had been carried out by the Factory A workers. Yet the cadres involved were not charged with corruption, because their original aim had been to support the reform effort, and they had succeeded in going beyond the average production quota. The examples cited would seem to indicate that at present there is a predisposition to regard enterprising activity favorably, even in cases when such activity might have been frowned upon in the past or when it slightly infringes the bounds of legality. In curbing serious economic crime, however, there has been a notable lack of success. There are several reasons for this. First, there is a paucity of trained legal personnel properly equipped to handle cases of economic crime. Sometimes the personnel now in place use administrative sanctions, such as fines, as a substitute for criminal sanctions. Supreme Court President Zheng commented on this problem of yi fa dai xing in his 1986 work report: First, it is necessary to rationally solve the question of 'substituting the payment of fines for serving time.' In other words, if we must investigate a person and affix criminal responsibility for his serious economic crime according to law, it is necessary to take him down to judicial organizations for punishment instead of simply imposing a fine on him as a disciplinary sanction.⁶/ Another reason for the difficulty in stemming economic crime is the lack of judicial independence in the PRC. Zheng Yianxiang also stated in his work report that "We must thoroughly investigate major economic crimes and handle them in a comprehensive manner" and that the party should exercise its ⁶/ Supra note 2, at K7. 7 leadership over judicial organs in order to insure that offenders are pun- ished. 7/ However, it appears that in most important cases of economic crime, party members are involved. In these instances, the case must ini- tially be handled by the Communist Party organs for discipline inspection; the courts and procuracy cannot touch the case until this preliminary party investigation has taken place. Thus, the Communist Party's central and local commissions for discipline inspection are first to handle the economic crime cases involving party members, and only those cases deemed to require court action are turned over to the courts. Judicial organs, moreover, must follow the decisions rendered by the commissions for discipline inspection; as a result, some high party officials and their relatives who are convicted of committing economic crimes can and do receive lighter punishments or no punishment at all. This participation of party officials or their relatives in economic crime is in itself yet a third factor that makes prosecution of economic crime difficult. Statistics indicate that a relatively high percentage of economic crimes involve party members and that the number is rising. For example, in the Peking metropolitan area alone, in 1984 25% of the criminal elements involved in economic criminal cases were party members; by the first half of 1985, the number had increased to 41%. 8/ It has been pointed out that the units or individuals who are supposed to serve as models to others in observing party principles and the law are often the ones who -------------------------------- 7/ Id. at K9. 8/ Lo Lin, "The Economic Crime on the Mainland at Present Time," supra note 3, at 112 (title as translated). 8 are most corrupt. According to an article in a Chinese legal periodical, Faxue [Jurisprudence Monthly], corruption persists because leadership organs "only swat the flies [buzzing around the tiger], not daring to touch the tiger itself"; because they "have a tiger's head but a snake's tail," that is, even though at first they may try to pursue a case, once they learn that a 'bigshot' is involved, they stop pressing the matter and simply let things slide; and because in general they are too easygoing about enforcing Party rules and the law of the land. 9/ Chinese newspapers have been filled with accounts of the children and relatives of prominent Communist Party officials who have been implicated in economic criminal activities. These include, among others, the daughter of NPC head Peng Zhen, the son of party secretary Hu Qiaomu, the grandson of Marshal Ye Jianying, and the daughter of General Ye Fei, Ye Zhifeng, whose case probably received the greatest attention in the press. Ye Zhifeng, deputy director of the Import and Export Bureau under the State Economic Commission, and Zheng Changsheng, son of a senior army cadre and an employee of the Minority Nationality Economic and Cultural Development Corporation, divulged privileged information about China's automobile imports, especially information having to do with contract negotiations, to foreign and Hong Kong businessmen, and received bribes for their efforts. 10/ Although Ye Zhifeng ----------------------------------------------------- 9/ See Wen Lie, "Determination, Trust, and Hope," 52 Faxue [Jurisprudence Monthly], no. 3, 30 (1986). 10/ For a description of the case, see FBIS, May 14, 1986, at W3-5. 9 was the principal offender and Zheng her accomplice, she was sentenced to 17 years' imprisonment while Zheng received the death penalty and was executed. The decision gave rise to a wave of public indignation when it was pub- licized; people even wrote letters of protest to the highest levels of government. Official attempts to explain away the discrepancy in punishments remained unconvincing. One legal commentator recently addressed the problem of the courts showing leniency to leading officials or their relatives who commit crimes. 11/ He noted that such treatment goes against the principle of you fa bi yi (when there is a law, it should be followed), for instructions from the party leadership organs often take precedence over legal strictures. Thus, when judicial organs handle serious criminal cases, they frequently receive expressions of "concern" from certain non-judicial leaders or responsible cadres couched in the form of directives or instruc- tions, which makes it that much more difficult for the organs affected to adhere to the law as it is written. For example, in a bribery case that involved a group of leading cadres in a certain locale, the guilty parties should have been sentenced to at least three years' imprisonment according to law. However, an important party official expressed the view that the cadres should just be kept under party observation for a year and each have a de- merit entered on their record. The commentator remarks that this sort of -------------------------------------- 11/ See Xu Jingen, "Rectifying Party Spirit in Relation to 'If There Is a Law, It Should Be Followed,'" supra note 9, at 31. 10 instruction is obviously not in accordance with the law, but that the judicial personnel were constrained to follow the Party leader's instructions even against the dictates of conscience. Conclusion One of the conclusions reached by the August conference on economic crime, referred to in the beginning of this paper, was that simply 'dealing a blow to economic crime' was not enough; there was a need to reaffirm lost values, to uphold a "socialist spiritual civilization." The government, too, views the problem of reducing economic crime in relation to social reform and regards reliance on severe sentencing alone to be an inadequate deterrent. However, China under Deng has disallowed the use of campaigns, or yundong, as a means of carrying out large-scale reform. As a result, the new movement to create a "socialist spiritual civilization" is being initiated as a small-scale campaign that is not called a campaign. It may be remembered that the campaign against "spiritual pollution," launched in 1983 by party ideologue Deng Liqun, was stopped by other Communist Party leaders because it had begun to shake people's confidence in Deng's program of economic reform. 12/ The dilemma, it seems, lies in creating a balance between the current regime's desire on the one hand to promote a sweeping propaganda effort that will fill in the ethical and ideological vacuum and on the other to avoid dampening the spirit and momentum of its economic reform program. In order to resolve the dilemma, the Party Central Committee has adopted a resolution on the creation of a socialist spiritual civilization that is 12/ Noted in The Washington Post, Sept. 28, 1986, at A29. 11 designed to provide the ideological justification for the continuance of Deng's reforms. It may succeed in striking the right balance, but there remains the problem that the non-campaign campaign, being necessarily smaller in scale, may not be very effective. In any event, it will take time for people to develop the new sense of ethics envisioned by Party leaders as the underpinning of the nationwide economic reform program. Thus, while the PRC is adopting broad measures to combat economic crime, the reduction of such crime is inextricably tied to the nature of the outcome of those very economic reforms that have engendered the increased criminal activity. If the reforms are successful, there may be more institutionalized procedures and more laws and regulations to help prevent economic crime and cause its current high rate to decrease. But it will take time for the PRC to enact the necessary legislation. It will take time to train judicial personnel in the handling of cases of economic crime and in understanding the new legislation. It will take time to train cadres to respect and obey the law. And it will take an even longer time for China to achieve judicial independence and the separation of party and government. Prepared by Tao-tai Hsia, Chief and Wendy I. Zeldin, Senior Editor Far Eastern Law Division Law Library, Library of COngress October 1986 TTH:WIZ:wz 11/20/86 Transcribed and reviewed by contributors participating in the By The People project at crowd.loc.gov.