China’s anti-corruption actions in 2022 and what they portend for 2023
2022 was notable in China for the growing emphasis placed on battling corruption – not least via lowered filing standards for prosecuting white-collar crimes, heightened enforcement actions against bribers, and expanded corporate compliance pilot programs.
China’s Central Commission for Discipline Inspection (CCDI) said in January that this greater emphasis on rooting out corruption last year is a preview of further action this year.
Heightened enforcement against bribers
The overall number of prosecutions for bribery remained high in 2022. According to the Supreme People’s Procuratorate (SPP), 8,380 individuals were prosecuted for accepting bribes, and 2,563 were prosecuted for providing bribes.[1]
Throughout 2022, China continued to pursue criminal and administrative enforcement actions against bribery after the joint issuance of a guidance in September 2021 by the Central Commission for Discipline Inspection (CCDI), the Supreme People’s Court, the SPP and other governmental entities, which requires law enforcement agencies to investigate both bribe-receivers and bribers. Notably, for the first time in April 2022, the SPP and the National Supervisory Committee (NSC) jointly published five cases as illustrations of providing bribe cases.
The CCDI calls China’s anti-corruption campaign “a protracted war” at the national policy level and says the country is determined to “investigate and deal with new types of corruption and hidden corruption.”
There is a parallel trend of active administrative enforcement actions against bribers in commercial bribery. For example, in April 2022, the State Administration for Market Regulation (SAMR) launched a special law enforcement campaign against unfair competition, including those that engaged in providing commercial bribes. SAMR also published five cases as illustration of providing commercial bribe cases relating to the life sciences, tourism, food, and insurance sectors.
Moreover, in November 2022, SAMR published a draft revision to the Anti-Unfair Competition Law for public comments.[2] The draft revision clarified that instructing others to pay bribes is also a violation of the law.
Reinforced enforcements against bribery in multiple dimensions
With respect to criminal enforcement, in April 2022, China lowered the filing standards for prosecuting an array of white-collar crimes. Notably, the new standards halved the monetary thresholds for prosecuting crimes of giving or accepting bribes involving “non-state functionaries” to CNY30,000.[3]
Besides SAMR, industry-specific regulators also actively pursued enforcement actions. For example, since 2022, the National Healthcare Security Administration (NHSA) has published four sets of unethical and highly unethical cases as part of the Drug Pricing and Procurement Credit Evaluation System. Some pharmaceutical or medical consumable companies were rated unethical and highly unethical for providing kickbacks or improper benefits to hospitals or doctors. When a company is rated “highly unethical,” it will be restrained or disqualified from submitting tenders, distributing products, and listing any products on the government procurement platform.
In the life sciences sector, we have observed increased whistleblowing activity on social media by employees of pharmaceutical and medical device companies relating to misconduct of their supervisors and employers. Between August 2021 and April 2023, we noted, 17 multinational and 15 domestic companies were implicated in dozens of allegations and complaints posted on WeChat – most of these claims were made anonymously. A likely incentive for such accusations is the latest Chinese whistleblowing regulations that reward the whistleblower up to CNY1 million (USD157,000) for reporting major violations of market conduct regulations.
Expanded application of corporate compliance pilot programs to white collar crimes
Between June 2021 and April 2022, China set up the Compliance Reform Pilot Programs (CRPPs) for companies involved in criminal proceedings. The establishment and improvement of a corporate compliance program may exempt companies from criminal prosecution or allow companies to receive lenient treatment under certain circumstances.[4]
In the third and fourth sets of corporate compliance cases published between June 2022 and January 2023, the CRPPs were to be applied to fraud, insider trading, bid rigging, and other white-collar crimes. Moreover, as part of the fourth set of cases, the SPP advised that the procuratorates may help Sino-foreign joint ventures and wholly foreign-owned companies establish tailored compliance programs to take advantage of the CRPPs.
New data laws and regulations bringing challenges to compliance investigations
In recent years, China has introduced a number of major data protection laws and regulations which bring new challenges to compliance investigations in China.
Compliance investigations of multinational corporations may involve the transfers of personal information hosted in China to foreign headquarters and other parties outside of China. The investigations team often discusses investigation strategy with, and reports investigation findings to, the company’s overseas headquarters, outside counsel, or external auditors. During this process, transfers of personal information or sensitive data out of China might occur. Companies should determine whether such a transfer is necessary and adopt the correct approach to meet compliance requirements.
Based on data processing activities, volume and type of data, and other factors, companies must determine which option they should adopt for the cross-border transfers of personal information, including certification by the Cyberspace Administration of China (CAC), CAC security impact assessment, standard contractual clauses, or other mechanisms provided in laws or by the CAC.[5] Companies should ensure that their data collection and transfer comply with the latest Chinese data laws and regulations.
Key takeaways
In January 2023, the CCDI stated that China’s anti-corruption campaign is “a protracted war” at the national policy level and the country is determined to “investigate and deal with new types of corruption and hidden corruption.” Moreover, bribery investigations must be conducted against those who provided and received bribes.[6]
CCDI’s January 2023 report and China’s 2022 anticorruption enforcement and development offer a preview of continuous anticorruption measures to be taken by China in 2023. Accordingly, we strongly advise companies to take opportunity and conduct a review of their compliance programs, and to the extend needed, further enhance internal controls.
Similarly, it is important for companies to remain aware of the important new laws that have changed the legal landscape for whistleblowing and for data privacy in China.
In this evolving legal landscape, with its growing focus on fighting corruption and its stricter laws, being proactive about doing business in China makes sense. Learn more about the implications of these developments by contacting the authors.
[1] See https://www.ccdi.gov.cn/yaowenn/202301/t20230108_240484.html.
[2] See http://www.gov.cn/hudong/2022-11/27/content_5729081.htm.
[3] Under certain circumstances, the threshold is CNY50,000. See Article 272 of the PRC Criminal Law.
[4] See the Guiding Opinions on Establishing a Third-Party Supervision and Evaluation Mechanism (for trial implementation) (https://www.spp.gov.cn/spp/xwfbh/wsfbh/202106/t20210603_520224.shtml).
[5]See CHINA: CBDT routes now all clear – Draft guidelines for CAC Certification route published (https://blogs.dlapiper.com/privacymatters/china-cbdt-routes-now-all-clear-draft-guidelines-for-cac-certification-route-published); CHINA: major developments on CAC assessment for cross-border data transfers – the task is now clear, but the urgency remains (https://blogs.dlapiper.com/privacymatters/china-major-developments-on-cac-assessment-for-cross-border-data-transfers-the-task-is-now-clear-but-the-urgency-remains); and CHINA: Final China SCCs for CBDT published – What you need to know (https://blogs.dlapiper.com/privacymatters/china-final-china-sccs-for-cbdt-published-what-you-need-to-know).
[6] See https://zgjjjc.ccdi.gov.cn/bqml/bqxx/202301/t20230118_242547.html.
