With the development of the Chinese economy, corruption by bribery becomes more and more complicated in China. It is no longer confined to direct cash payment but appears more in disguised forms by other kinds of “legitimate” activities. According to the current PRC Criminal Law and other related laws and regulations, it is fairly vague on whether such kinds of “secret” briberies shall be deemed as criminal offences. On July 8, 2007, China’s Supreme People’s Court and Supreme People’s Procuratorate jointly promulgated a Circular on the Opinions to Address the Issues in Handling Criminal Cases Involving Bribery Taking (Circular), which provides detailed guidance on how to deal with various kinds of “secret” briberies. Under the new Circular, activities such as concealing, offering and accepting the bribes, are explicitly being categorized as an act of bribery even though no direct cash is offered and accepted.

I. Accepting Bribery Through Obtaining Margins During Commercial Transactions

Any State Functionary who takes advantage of his or her position to secure any benefits for an entrusting person, and accepts the entrusting person's money or property through the following transaction activities, shall be an act of acceptance of bribes under the new Circular:

(i) Purchasing houses, automobiles or other commodities from the entrusting person at a price obviously much lower than relevant fair market value;

(ii) Selling houses, automobiles or other commodities to the entrusting person at a price obviously much higher than relevant fair market value;

(iii) Other transaction activities to illegally accept the entrusting person’s money or property.

It must be noted that it shall be considered that a crime has been committed even though the title of the property involved thereof is not changed under the name of the State Functionary. Concerning the amount of bribery, it shall be calculated based on the margin between the actual payment and the fair market value at the time of such transaction.

The Circular also differentiates the normal business transactions and the transactions which are concealing briberies. According to the Circular, transactions in which a State Functionary purchases the commodities at a preferential price or condition which is offered to the public and was set by the seller in advance shall not be treated as acceptance of bribes

II. Accepting Bribery Through Receiving the Corporate Shares Without Payment of Consideration

Any State Functionary who takes advantage of his or her position to secure any benefits for an entrusting person, and accepts the corporate shares from the entrusting person without payment of consideration shall be an act of acceptance of bribes under the new Circular. If such shares have been transferred after acceptance, the amount of bribery shall be calculated based on the value of the shares at the time of share transfer, and the dividends of the shares shall be regarded as the interest of the bribery; if such shares are not transferred and retained by the State Functionary, the amount of bribery shall be calculated based on the dividends of the shares that the State Functionary actually obtained.

III. Accepting Bribery in the Name of Cooperative Investment

Any State Functionary who takes advantage of his or her position to secure any benefits for an entrusting person, and cooperates with the entrusting person to carry out the investment, (such as establishment of a company, but solely using the money of the entrusting person without his or her own capital contribution) shall be an act of acceptance of bribes under the new Circular. The amount of the bribery shall be calculated based on the amounts of the booked capital contributions under the name of the State Functionary.

IV. Accepting Bribery in the Name of Entrust Financing

Any State Functionary who takes advantage of his or her position to secure the benefits for an entrusting person, and gain the profits without capital contributions, or obtain obviously much higher profits than his or her actual contributions in the name of entrusting others in stocks, futures and other entrusted financing or investment activities, shall be an act of acceptance of bribes under the new Circular. The amount of bribery shall be calculated based on the amounts of the profits if the State Functionary has not contributed, or, if the State Functionary has contributed, the margin between the actual profits and the due profits of his or her capital contribution shall be regarded as the amount of bribery.

V. Accepting Bribery Through Gambling

Any State Functionary who takes advantage of his or her position to secure any benefits for an entrusting person, and accepts the bribery in the form of gambling shall be an act of acceptance of bribes under the new Circular. The Circular also identifies that the key factors to differentiate gambling concealing bribery, real gambling and other kinds of entertainment activities include: the background, place, time and amount of gambling; the source of the fund used for gambling; whether other participants have conspired in advance; the circumstances and the amount of the money or property changing.

VI. Accepting Bribery Through the Specific Concerned Person(s)

Any State Functionary who secures the benefits for an entrusting person by taking advantage of his or her position, and then instructs the entrusting person to give the relevant money or property to the specific concerned person(s) in any means listed in the Circular, shall be considered an act of acceptance of bribes under the new Circular, even though he or she is not directly involved in relevant activities.

For example, the Circular states that if any State Functionary who secures the benefits for an entrusting person by taking advantage of his or her position and then requests or accepts that the entrusting person places the specific concerned person(s) in a job position and ensures that the specific concerned person(s) are paid the salary without actual work, he or she shall be guilty of acceptance of bribes.

The scope of the specific concerned person(s) as mentioned above is very broad, which includes the State Functionary’s relatives, lovers or other persons who have common interest with the State Functionary.

VII. Accepting Bribery After Leaving Relevant Positions

Any State Functionary who secures any benefits for an entrusting person by taking advantage of his or her position, and agrees with the entrusting person on accepting money or property from the entrusting person after leaving his or her position and actually does so, shall be an act of acceptance of bribes under the new Circular.

The issuance of the new Circular by China’s highest judicial body and prosecuting body has demonstrated that China is getting more and more serious in its battle against corruption and will further strengthen the enforcement of its anti-corruption laws. It is therefore advisable for all companies, including the international corporations operating in China, to adopt relevant compliance policies and manuals in educating and ensuring that their employees, especially those who deal with the governmental officials, comply with all applicable anti-corruption laws.