China has this month established a new anti-corruption authority, the National Supervisory Commission (NSC). The body was formed at the 13th National People's Conference and Yang Xiaodu has been appointed its first director. The NSC will enjoy a status close to the cabinet and will be ranked higher than the Supreme Court and Prosecutor’s Office. It will be regulated under China's new Supervision Law.
The authority's formation represents the high watermark of Xi Jinping's five year anti-corruption campaign. The NSC will monitor misconduct by China's 90 million Communist Party members but also managers of state-owned enterprises, hospitals, educational and cultural institutions, sports organisations and provincial and local government organs. This places an additional 60 million people under the organisation's remit compared to the old Central Commission for Discipline Inspection (CCDI) regime. The CCDI will continue to exist but its investigation and case handling tasks will transfer to the NSC. Personnel will be shared between the CCDI and NSC and Yang Xiaodu will effectively head both agencies.
The NSC has been granted wide-ranging powers including rights to interrogate, detain, freeze assets and search premises. Human rights activists have raised doubts about the liuzhi detention process, the new system introduced in October 2017 to replace the previous shuanggui system (which allowed the CCDI to detain suspects for six months without charge).
We expect to see an uptick in corruption surveillance and supervision as a result of the NSC and Supervision Law. Although multinational companies will not be directly under the NSC's purview, the proposed regime may increase the risk that such companies will become caught up in NSC investigations targeting the business dealings of state-owned entities.
Companies should remain cognisant of the heightened anti-corruption environment when investing in or setting up operations in China and should be particularly careful in their interactions with public officials and managers of state enterprises or bodies.
China anti-graft drive sees 100 top officials tried in five years
Chinese courts have tried more than 100 top officials in corruption cases in five years as President Xi Jinping continues to pursue a relentless anti-graft campaign. Xi has presided over a much-publicised drive against corrupt party officials since coming to power in 2012. An estimated total of 195,000 corruption and bribery cases involving over 250,000 individuals have been heard between 2013 and 2017. It is reported that of these individuals, over 100 held positions at or above ministers or heads of provinces.