Mainland corruption crackdown poses risks for foreign investors
Every cloud, as the saying goes, has a silver lining. Xi Jinping's corruption crackdown has been bad news for those that were caught up in the 53,085 investigations by the Central Commission for Discipline Inspection that occurred in 2014 alone. As a result of these investigations, the CCDI has disciplined 71,748 cadres and "severely disciplined" a further 23,646.
Every cloud, as the saying goes, has a silver lining. Xi Jinping's corruption crackdown has been bad news for those that were caught up in the 53,085 investigations by the Central Commission for Discipline Inspection that occurred in 2014 alone. As a result of these investigations, the CCDI has disciplined 71,748 cadres and "severely disciplined" a further 23,646.
But the crackdown is surely good news in a sense for the likes of Steve Vickers & Associates that specialise in advising businesses how to navigate through this minefield. In a report that contained a stark warning to businesses, SVA said yesterday the campaign was without precedent in recent Chinese history and was a major risk for foreign businesses, "as it is rooting out longstanding patronage networks, altering accepted working practices and dampening sentiment in key markets." Crucially, "It has turned some well-connected individuals into liabilities."
In addition to the penalties incurred in China, these investigations can trigger further investigations by the US and UK authorities among others, SVA warns. The report points to businesses such as Kaisa Group that have run into difficulties after losing political protection. The troubles encountered by GlaxoSmithKline last spring were important, "because GSK's activities were illegal but had been topical."
SVA chief executive and founder, Steve Vickers told Lai See that the crackdown was a major source of concern for businesses, and that his company had seen an increase in enquiries. "Companies are asking, 'okay, we went into China with the support of a Chinese official, are we still good or has something changed?'" He added that the enquiries were mainly at board level, looking for independent advice since the accountants and managers on the ground were inclined to maintain the status quo.
Foreign investors therefore need to identify how exposed any current business partner or corporate executive might be. A second step is to identify upcoming risks such as a new investigation: who it involves and which businesses will be affected? On the flip side it would obviously be handy to see who benefits from the campaign. "Any business that can identify winners could easily forge links providing a real competitive advantage," says SVA.
We hear of some dismay in legal circles at the Home Affairs Department advertisement for a part-time Licensing Assistant (Enforcement). It is a curious advertisement offering a 12-month contract at HK$140 per hour to candidates that have completed form 5 or equivalent, working experience in a law enforcement or government department is preferred. It asks for native speaking skill in a foreign language or dialect such as English or Putonghua, not that Putonghua can be regarded as a foreign language or a dialect, and candidates should be foreign passport holders.
The duties according to the advertisement mainly involved posing as a "decoy agent" to assist in conducting law enforcement duties or regulatory work under the scope of the Miscellaneous Licences Ordinance, and assisting in preparing court documents for prosecution of illegal establishments and attending court hearings to give oral testimonies.
This has had some legal people wondering why HAD thinks this kind of front-line law enforcement and court preparation is best conducted by part timers on an hourly sum. It is a mystery as to why foreign passport holders are required unless HAD is about to start the long rumoured crackdown on Airbnb members who let out their homes to paying guests.
