China Enhances Anti-Bribery Regulations for Private Companies Through Amendments to Criminal Law

A revision to China’s Criminal Law aims to bolster anti-bribery measures by imposing harsher penalties and extending the application scope to encompass private enterprises.

Apart from enhancing regulations concerning anti-corruption practices in China, this amendment is viewed as a component of the government’s broader initiative to support the private sector by addressing common challenges encountered by private companies. We examine the potential implications of this amendment for private enterprises.

On December 29, 2023, the Standing Committee of the National People’s Congress (NPC), China’s legislative body, approved an amendment to the country’s Criminal Law. The Ministry of Justice (MOJ) announced that the aim of the new amendments is to “strengthen penalties for bribery”.

According to an explanatory document released by the NPC, the amendment primarily focuses on enhancing provisions concerning bribery and corruption involving internal personnel of private enterprises.

These amendments to the Criminal Law are scheduled to take effect on March 1, 2024. They formalize anti-bribery regulations for private enterprises and introduce stricter penalties for certain bribery-related offenses.

Private enterprises added to anti-bribery articles

Many of the amendments to the Criminal Law involve the addition of clauses explicitly stating that anti-bribery provisions applicable to state-owned enterprises (SOEs) also extend to private companies. Previously, these clauses did not explicitly specify whether they applied to private companies.

For example, Article 165 of the Criminal Law prohibits and penalizes senior-level employees of SOEs who exploit their positions to conduct businesses similar to those of their companies and profit from them. Such individuals may face fines, and if the profits are substantial, they may receive fixed-term imprisonment ranging from three to seven years.

A new clause has been introduced to this article, stating that it also applies to senior-level employees of private enterprises engaging in similar behavior, causing “significant losses to the interests of the company or enterprise.” These individuals are subject to the same penalties as those in SOEs.

Similarly, clauses extending 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 transfer of profit-making businesses, purchasing or selling goods and services at above or below market prices, or purchasing and accepting substandard goods and services.
• Article 169, which prohibits and penalizes company officials from engaging in malpractice or favoritism for personal gain and converting company assets into shares or selling them at a reduced price.

Increased penalties for bribery

Four articles related to punishments for bribery in the 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 outlines the penalties for instances where state agencies, state-owned enterprises (SOEs), enterprises, institutions, or people’s organizations solicit or illegally accept property from others and seek benefits for third parties. Under the previous version of the Criminal Law, units found guilty of this offense would be fined, while individuals directly responsible could face fixed-term imprisonment of up to five years or criminal detention (detention ranging from one to six months).

Following the amendment, the article now states:

• In cases of serious circumstances, the unit will be fined, and the directly responsible person in charge and other directly responsible individuals will be subject to fixed-term imprisonment of up to three years or criminal detention (detention ranging from one to six months).
• In cases of particularly serious circumstances, the individual will face fixed-term imprisonment ranging from three to 10 years.

Addition of fines for bribery and provision of property for illegal benefits

Three articles have undergone amendments to introduce fines for acts of bribery, adjust sentence terms, and include penalties for particularly serious violations. They are outlined as follows:

1. Article 390, which addresses bribery offenses, now includes fines for individuals convicted of bribery. Notable changes include:

• The maximum fixed term sentence for bribery has been reduced from up to five years to up to three years, with the addition of fines.
• Individuals seeking improper benefits through bribery, under serious circumstances resulting in significant losses to national interests, will face fines alongside a fixed-term prison sentence of three to 10 years (unchanged).
• In cases of particularly serious circumstances or severe losses to national interests, offenders will be subject to fines, a fixed-term prison sentence of 10 years to life, and property confiscation (unchanged).

1. Article 391, addressing penalties for individuals offering property to state agencies, SOEs, enterprises, institutions, or people’s organizations for illicit benefits, or violating regulations by providing kickbacks during economic transactions, now includes fines. Key revisions include:

• Individuals found guilty will be fined and sentenced to up to three years in prison. In serious circumstances, a new addition, offenders will face fines and fixed-term prison sentences of three to five years.

1. Article 393, which concerns companies offering bribes or violating regulations by providing kickbacks to state workers, has been amended to introduce fines and adjust prison sentences. Noteworthy changes include:

• In serious circumstances, entities will be fined, and directly responsible individuals will face fixed-term prison sentences of up to three years (previously five) or criminal detention, alongside fines.
• In cases of particularly serious circumstances, offenders will be sentenced to three to 10 years in prison and fined.

Addition of severe punishment for bribery and reduced penalty for early confessions

Meanwhile, Article 390 now includes a new clause outlining circumstances warranting a “heavier punishment” (从重处罚). These include:

• Giving bribes repeatedly or to multiple recipients.
• Bribery committed by state officials.
• Offering bribes in national key projects or major endeavors.
• Providing bribes to secure positions, promotions, or adjustments.
• Bribery directed towards supervisory, administrative law enforcement, and judicial personnel.
• Bribes associated with illegal activities in various sectors such as ecology, finance, production safety, food and medicine, disaster prevention and relief, social security, education, and healthcare.
• Using illicit gains to facilitate bribery.

According to Article 62 of the Criminal Law, if a criminal offense falls under circumstances warranting a heavier or lighter punishment as specified in the law, the penalty should fall within the statutory limits. Consequently, a “heavier punishment” typically entails a prison term closer to or at the upper limit allowed for the particular crime.

Furthermore, the article has been revised to allow for reduced penalties for individuals who voluntarily confess to bribery before facing prosecution. Specifically, in cases where the offense is relatively minor and the individual’s cooperation leads to a breakthrough in the investigation or resolution of a major case, and they have demonstrated meritorious conduct, their punishment may be reduced or waived entirely.

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 signifies that the government is addressing the challenges faced by private companies and taking steps toward providing equitable treatment for both private and state-owned enterprises. As noted by policy research firm Trivium China, the significance of the amendment lies in its symbolic representation, demonstrating the legislature’s commitment to supporting Beijing’s private sector initiative.

The Chinese government has been actively promoting the country’s private sector and attracting more foreign investment since the reopening following the COVID-19 pandemic. Efforts have predominantly focused on enhancing the business environment to eliminate barriers for private enterprises. These efforts include measures by the National Development and Reform Commission (NDRC) to stimulate private investment announced in July 2023, as well as guidelines by the State Council to boost foreign investment released in August of the same year, among others.

The amendments to the Criminal Law indicate the government’s intention to bolster support for the private sector by enhancing their legal rights and protections. This could potentially lead to further enhancements in related legislation in the future.