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China’s Corruption Clean-Up. Get On Board Or Go To Jail.

Posted in China Business, Legal News

Our law firm’s lead China lawyer, Steve Dickinson, is based in China. Those who know Steve know that he does not pull punches. Ever.

Our China law team (based as we are in at least three different cities at a time, but usually far more than that due to travel schedules) are constantly communicating via Yammer, Skype, text, and email, depending on the nature of the communication, the urgency of the communication, the people involved in the communication, and even the time of the communication.

I woke up this morning with the following team email from Steve, and though we usually edit (i.e. weaken) Steve’s emails, this one needs to be seen in its (nearly) unvarnished state:

1. Here is a news article on the metals probe. [Which our China lawyers had been discussing]

2. The investigation is taking place in Qingdao. [Where Steve is located]

3. The investigation has come from the PRC authorities.

4. The whole thing [allegedly] concerns a corrupt illegal system that makes use of fake import/export documentation. This system is now being attacked by the government and is being unwound.

5. The point: the days are over where companies can assume that this kind of illegal activity will be tolerated in the name of business as usual. The days where American companies can even think of making the claim that fake import/export documentation is just “doing business as usual in China” are over.

6. As a peripheral matter, this also shows that much of China’s reported trade in commodities is falsely reported and as this whole thing unwinds, it could have a major impact on the analysis of world trade flows. If all that copper comes on the market, it could destabilize the metals markets. Other commodities markets will follow: for example, soybeans and corn.

7. The current problems we are facing with [client A and client B] is part of the same theme: China is getting serious about cleaning up. These are real issues. The old notion of: “everyone in China acts illegally, so no one will get arrested,” is no longer applicable. This is not a matter of the occasional arrest of a random person. This is a systematic move by the authorities to clean up.

8. We need to keep emphasizing this to our client and to our readers and if they do not want to listen, they will be making that choice at their own peril. At least we can take comfort in having tried to protect them.

What do you think? Alarmist or prescient?

  • On the Corner

    absolutely prescient!!

  • Ward Chartier

    Yep, prescient. In primary school, and at home, my parents and teachers railed against the “Everybody’s doing it!” excuse. I did try it once, and was punished seriously enough that I remembered the lesson.

  • lacompacida

    Other then get on board and go to jail, there is another option: get out.

  • Devin Petty

    Prescient and representative of what I like to call the NEW business in China. The country can’t afford the corrupt systems any longer. Literally. There is a need for legitimacy to provide sustainable support of the economy and the infrastructure build out. How the shift will relate to China’s next explosion/implosion cycle is the question.