Criminal law pays: penal law's contribution to China's economic development.

Author:Lewis, Margaret K.
Position::III. The Historical View C. Market Stability through V. Conclusion, with footnotes, p. 408-450
  1. Market Stability

    Beyond a state effort to protect property from private theft and government corruption, the PRC government has used criminal law to target a broader array of activities that are detrimental to economic growth. In China, this third layer of stability is more precisely understood as promoting stability of the "socialist market economy"--the official terminology adopted by the CCP in 1992--(213) but "market stability" is used here as shorthand. Although the PRC government did not openly embrace the term "socialist market economy" until the early 1990s, (214) as explained below, criminal law was used to support the fledgling market economy far earlier.

    As previously noted, a comprehensive criminal law and criminal procedure law were part of the initial legal reforms adopted when Deng ushered in the policy of "Reform and Opening." (215) Shortly after issuance of these laws in the late 1970s, "the politico-legal authorities began to launch anti-crime drives that targeted crimes against the economic and social order." (216) Deng himself emphasized the need to attack economic crimes: "In a 1982 speech against economic crime, Deng Xiaoping advocated that the 'struggle will have to be waged daily for 18 years' to be won before the end of the millennium." (217) The term economic crime is not defined by law but is generally understood to include at least "graft, bribery, misappropriation of public property, copyright theft and fraud, tax evasion and tax resistance." (218) The term overlaps with, but is not coextensive with, the term white-collar crime, which is fraught with its own definitional issues. (219)

    A comprehensive survey of individual provisions in the 1979 Criminal Law is beyond the scope of this Article. Nonetheless, even a few examples illustrate the connection between the formal criminal laws and economic goals in the early days of the reform era. The 1979 law included a chapter on Crimes of Undermining the Socialist Economic Order and specifically criminalized speculation on monetary affairs, smuggling, counterfeiting ration coupons, and tax evasion. (220) As early as 1980, media reports stated that "Government officials specifically emphasized that economic crimes threatened the four modernizations" and went so far as to use the colorful language that economic criminals were "maggots that devour the people's property." (221)

    China, like every other country in the world, has been less than wholly successful in suppressing economic crimes, but issues with efficacy do not undermine the argument that the leadership's goal when criminalizing activities like monetary speculation was at least in part to support the burgeoning economy. Looking beyond the blackletter law to actual implementation, the government's efforts to combat economic crimes, though far from perfect, have had bite: "Between 1980 and 2006, the People's Procuratorate, the judicial institution responsible for investigating and prosecuting criminal activity, has filed criminal charges in more than 1.1 million cases involving 'economic crime' and indicted approximately 30,000 senior officials, including roughly 60 officials holding the rank of deputy minister or above." (222)

    As the 1980s wore on, it became increasingly clear that "the deepening of economic reform also led to certain economic crimes that were not anticipated in the 1979 Criminal Law." (223) This prompted the government to supplement the Criminal Law with subsidiary legislation adopted by the NPC Standing Committee, which is convened between plenary sessions of the NPC. (224) In 1982, the Standing Committee issued the Decision on Severely Punishing Criminals Who Gravely Endanger the Economy. (225) The Decision supplemented the Criminal Law's provisions on offenses like smuggling and larceny and even allowed for use of the death penalty. (226) Thereafter, "[i]n 1985, the Resolutions of the Supreme People's Court and the Supreme People's Procuratorate Concerning Certain Questions on the Practical Application of the Law in the Present Adjudication of Cases of Economic Crimes (Trial Implementation) [(the 1985 Resolution)] expressly affirmed the

    criminal liability of legal persons guilty of certain economic crimes." (227) During a press conference, representatives of the issuing bodies noted the importance of using legal measures to strike at economic crimes in order to safeguard the policies of opening China to the world, improving the domestic economy, and supporting the smooth operation of the economic system. (228) Official statements during this period by high-ranking officials involved with criminal justice further highlighted the government's emphasis on economic crimes: "Over the past year, procuratorial organs at all levels across the country have strengthened their work against economic crimes, there has been new progress in the fight against serious economic crimes, and they have achieved notable results." (229)

    During the 1980s, the government also stepped up its rhetoric regarding corruption. As previously discussed in Part III.B, the detrimental impact of a corrupt seizure on the individual, or collective, who had the lawful right to the seized assets is readily apparent; the loss is often more diffuse, and thus less easily perceived, when officials misappropriate state assets. (230) Put simply, it is generally harder to detect when an official is taking a cookie from the state's gigantic cookie jar than when he grabs a cookie from a citizen's hands. Difficulties in drawing lines between what is acceptable grey income and what is a corrupt taking of state assets further complicates matters. (231) And, despite calls for anticorruption drives in various countries as a means of spurring development, "the connection between eliminating corruption and 'development' remains obscure." (232) While there is debate regarding the actual effect of corruption on economic growth, official statements underscore that the PRC government saw corruption as having a deleterious impact on China's economic prospects. For instance, a 1989 report by the Supreme People's Procuratorate emphasized that guiding principles for their work in 1990 included resolutely punishing embezzlement and bribery as well as promoting economic stability and development. (233) In 1988 rules regarding corruption-related offenses, the government included a provision on illicit enrichment--a significant increase in the assets of a public official that he or she cannot explain in relation to lawful income. (234) China later added the crime of illicit enrichment to the 1997 Criminal Law. (235)

    Writings by scholars in the China Law Yearbook during the 1980s further emphasize the use of formal criminal law to support economic growth. Professors Gao Mingxuan and Zhao Bingzhi listed the need to combat economic crimes and ensure the smooth operation of the economic system as the first issue of debate among criminal law circles in 1986.236 An article in the 1989 China Law Yearbook by the secretary-general of the NPC called for using "legal weapons" to strike at economic crimes so as to put the economic environment in order. (237) Similarly, a report on a meeting of the Supreme People's Court regarding economic crimes celebrated the courts' contributions in building the economy. (238) Concurrently, growing concerns about crimes committed by business entities--under the general heading of danwei ("unit") crimes--prompted the government to augment the criminal law. (239) The 1985 Resolution further clarified that legal persons could be guilty of certain economic crimes. (240)

    Turning to the 1990s, as China ramped up efforts to join the World Trade Organization (WTO), the PRC leadership introduced a number of reforms aimed at expanding the role of market forces and "emphasized the importance of a privatized economy and its inextricable link to China's modernization and other economic reform efforts." 241 Professor Fu Hualing explains the impact of these changes: "After China initiated market reform in the 1990s, the rule of law was revived to serve primarily the economic function." (242) More specifically of interest to this Article, the 1990s brought vocal calls to overhaul the increasingly outdated 1979 Criminal Law. (243) Members of the drafting committee of the 1997 Criminal Law explained, "The guiding principle for the reform has been clear: a new criminal law should serve economic restructuring rather than politics; and it should be democratic, scientific and consistent with international standards." (244)

    The 1997 Criminal Law included a number of new offenses aimed at nurturing the socialist market economy. (245) Among the death-eligible offenses in the 1997 Criminal Law were fifteen under the heading "Crimes of Undermining the Socialist Market Economic Order." (246) The revised law also included twelve new articles under the heading "Crimes of Undermining Company and Enterprise Administrative Orders." (247) Originally formulated in an NPC Standing Committee decision following adoption of the PRC Company Law in 19 93, (248) the new provisions included possible imprisonment for people in charge of state-owned enterprises who acted deceptively for their own benefit and consequently caused "large damages to the state's interests"; (249) people who made false declarations regarding registered capital when applying for company registration; (250) and people who concealed material facts when writing share-soliciting prospectuses. (251)

    After overhauling the Criminal Law in 1997, China repeatedly revised the Law to address specific areas of economic concern. For example, the first amendment in 1999 sought to strengthen the economic order by imposing more severe punishments on economic crimes. (252) The fifth amendment in 2005 targeted credit card fraud. (253) And the sixth amendment in 2006 revised a number of provisions, including increasing punishments for crimes connected with undermining the financial management...

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