An amendment to China’s Criminal Law seeks to toughen anti-bribery provisions by increasing penalties and expanding the scope of implementation to include private companies. In addition to improving rules on anti-corruption in China, the amendment is seen as part of the government’s wider effort to boost the private sector by addressing issues commonly faced by private companies. We discuss the possible impact of the amendment on private companies.
On December 29, 2023, the Standing Committee of the National People’s Congress (NPC), China’s legislature, passed an amendment to the country’s Criminal Law. The new amendments to the Criminal Law aim to “toughen punishment for bribery”, according to an announcement from the Ministry of Justice (MOJ).
An explainer released by the NPC states that the “amendment focuses on further improving provisions related to bribery and corruption involving internal personnel of private enterprises.”
The amendments to the Criminal Law, formalize anti-bribery regulations for private enterprises and increase punishments for some bribery-related violations.
See also our article on How to Prevent and Deal with Corruption in Your China Business.
Key amendments to the Criminal Law
Private enterprises added to anti-bribery articles
Many of the amendments to the Criminal Law involve adding clauses clarifying that the anti-bribery provisions for state-owned enterprises (SOEs) also apply to private companies. Previously, the law did not explicitly state whether these clauses applied to private companies or not.
For instance, Article 165 of the Criminal Law prohibits and penalizes senior-level employees of SOEs for taking advantage of their positions to operate businesses similar to that of the company they work for and profit therefrom. The individual involved may be liable to a fine, and, if the profits obtained are particularly large, may be sentenced to fixed-term imprisonment of between three and seven years.
A clause has been added to this article stating that this article also applies to senior-level employees of private enterprises who engage in this type of behavior if it causes “significant losses to the interests of the company or enterprise”. The individuals involved are liable for the same penalties as those working in SOEs.
Similar clauses expanding the scope to include private companies and their employees have been added to the following articles:
- Article 166, which prohibits employees from engaging in nepotism related to the handing over a profit-making business, purchasing or selling of goods and services at above or below market prices, respectively, or purchasing and accepting substandard goods and services; and
- Article 169, prohibits and penalizes persons in charge of a company from engaging in malpractice or favoritism for personal gain and converting company assets into shares or selling them at a low price.
Increased penalties for bribery
Four articles related to punishments for bribery in Criminal Law have been amended, adjusting and increasing penalties for criminal behavior.
Increased prison sentences for illegally accepting other people’s property
Article 387 of the Criminal Law stipulates the penalties for when state agencies, SOEs, enterprises, institutions, or people’s organizations solicit or illegally accept other people’s property and seek benefits for others. In the previous version of the Criminal Law, units found guilty of this crime will be fined, while persons found to be directly responsible will be sentenced to fixed-term imprisonment of up to five years or criminal detention (detention of between one and six months).
Following the amendment, the article now reads:
- In serious circumstances, the unit shall be fined, and the directly responsible person in charge and other directly responsible personnel shall be sentenced to fixed-term imprisonment of up to three years or criminal detention (detention of between one and six months); and
- In particularly serious circumstances, the individual shall be sentenced to fixed-term imprisonment of between three and 10 years.
Addition of fines for bribery and provision of property for illegal benefits
Three articles have been amended to add fines for acts of bribery. Some of the sentence terms have also been adjusted, and penalties for particularly serious violations have been added in some cases.
They are as follows:
- Article 390, which penalizes the act of bribery, has been amended to impose fines on persons who commit bribery. It also adds specific circumstances in which severe punishment can be meted out. The addition of fines has been made in the following instances:
- For persons who commit the crime of bribery, the fixed term sentenced has been reduced from up to five years to up to three years; however, they are now also liable for a fine;
- For persons who seek improper benefits through bribery, and the circumstances are serious and result in heavy losses to national interests, they will be liable for a fine in addition to a fixed-term prison sentence of between three and 10 years (prison term remains unchanged).
- For persons who seek improper benefits through bribery, if the circumstances are particularly serious, or result in particularly heavy losses to national interests, the offender shall be liable to a fine, in addition to a fixed-term prison sentence of between 10 years and life, and have their property confiscated (prison term and confiscation of property remains unchanged).
- Article 391, which stipulates penalties for persons who give property to state agencies, SOEs, enterprises, institutions, or people’s organizations to seek illegitimate benefits, or who violate state regulations and provide kickbacks or handling fees (under various guises) during economic transactions. Persons found guilty will be fined and given a prison sentence of up to three years. In serious circumstances, a new addition will be fined and given a fixed-term prison sentence of between three and five years.
- Article 393, which deals with companies that pay bribes to obtain illegal benefits or violate state regulations by giving kickbacks or handling fees to state workers, states that in serious circumstances, the entity shall be fined. Meanwhile, the persons directly responsible shall be sentenced to a fixed-term prison term of up to three years (previously five) or criminal detention and be fined.
If the circumstances are particularly serious (a new addition), they shall be sentenced to prison for between three and 10 years and receive a fine.
Addition of severe punishment for bribery and reduced penalty for early confessions
Meanwhile, Article 390 has a new clause stipulating the circumstances in which someone can be subject to a “heavier punishment” (从重处罚):
- Giving bribes multiple times or paying bribes to multiple people;
- Bribery committed by state functionaries;
- Paying bribes in national key projects or major projects;
- Paying bribes to obtain positions, promotions, or adjustments;
- Paying bribes to supervision, administrative law enforcement, and judicial staff;
- Bribery and illegal and criminal activities in the fields of ecology and the environment, finance, production safety, food and medicine, disaster prevention and relief, social security, education, medical care, etc.; and
- The use of illegal gains to pay bribes.
Article 62 of the Criminal Law stipulates that “If a criminal offender falls under circumstances for a heavy or light punishment as stipulated in this law, the punishment shall be imposed within the limits of the statutory penalty.”
Under this definition, it is understood that a “heavier punishment” means, for instance, a prison sentence that is closer to or at the upper limit of the permitted term of imprisonment for a given crime.
Finally, the article has also been amended to allow for reduced punishment for people who take the initiative to confess to committing bribery before being prosecuted. Specifically, in the case where the crime is relatively minor and plays a key role in making a breakthrough in the investigation or solving a major case and have conducted themselves in a way deemed worthy of merit, then they may have their punishment reduced or be exempted from punishment.
Impact of the amendments on private companies in China
The scope of amendments to the Criminal Law is relatively limited, and therefore in practice will not make a big change to how private companies can deal with bribery within their own ranks.
However, it does signal that the government is taking seriously issues faced by private companies and taking another step toward providing equal treatment for private and state-owned companies. As noted by policy research firm Trivium China, the amendment’s “importance is symbolic. It shows that the legislature is doing its part to fulfill Beijing’s private sector support campaign.”
The Chinese government has been striving to boost the country’s private sector and encourage more foreign investment since the country’s reopening after the COVID-19 pandemic. Efforts have thus far mostly involved improving the business environment to remove obstacles for private companies. These include the National Development and Reform Commission’s (NDRC) measures to boost private investment, and the State Council’s guidelines to boost foreign investment.
The amendments to the Criminal Law signal that the government is also looking to support the private sector by improving their legal rights and protections and could mean further improvements to related legislation is to come.
