Enhancing Punitive Provisions for Commercial Bribery Crimes

1. (Art. 390, para. 2) The crime of bribe-offering

Strengthening punishments for bribe-offering committed by individuals: seven aggravating circumstances have been added to Article 390, triggering harsher penalties for individuals involved in bribery. These circumstances include multiple instances of bribery, bribery of state functionaries, bribery in national key projects, and criminal activities involving bribery in critical areas such as finance, safety production, food and drugs, and healthcare, etc.

2. (Arts. 387, 391 and 393) The crime of bribe-taking by entities, the crime of bribe-offering to entities, the crime of bribe-offering by entities

Adjusted and increased penalties for bribery offenses involving entities: Amendment XII imposes more severe penalties on bribery offenses involving entities, including bribe-taking of a state-affiliated entity (Art. 387), bribe-offering to a state-affiliated entity (Art. 391), and bribe-offering to a state functionary by an entity (Art. 393).

Specifically, concerning bribe-taking by a state-affiliated entity, the maximum sentence for individuals directly in charge and those directly responsible for the offense has been raised from five years to ten years. Additionally, the maximum sentence for individuals offering bribes to a state-affiliated entity has been elevated from three years to seven years. Likewise, for culpable individuals within an entity responsible for offering bribes to a state functionary, the maximum sentence has been extended from five years to ten years.

3. (Arts. 387, 390 and 391) The crime of bribe-offering, the crime of bribe-taking by entities, the crime of bribe-offering by entities

Balancing severity and leniency: while Amendment XII emphasizes stricter governance of commercial bribery, it also introduces provisions allowing for more leniency.  These include lowering sentencing thresholds for the crime of bribe-offering, the crime of bribe-offering by entities and the crime of bribe-taking by entities, and permitting reduced or exempted punishment for individuals who cooperate during the investigations of major cases conducted by the supervisory authorities.

Expanding Criminal Liability for Corruption related Offenses within Private Sector

In recent years, corruption among personnel within private enterprises has become increasingly prevalent and prone to occurrences.  This is primarily manifested in acts of embezzlement, misappropriation, bribery, and breach of trust.  Among these, breach of trust particularly stands out, with instances such as engaging in illegal operations similar to those of the business, or unlawfully profiting for the benefit of friends and family being particularly noteworthy. 

To rectify the substantive flaw of the Criminal Law, which only protected the property of state-owned companies, enterprises, and institutions without extending this protection to private enterprises, Amendment XII has broadened the scope of charges to include those within private enterprises.  This ensures that equal protection is afforded to the property of both state-owned and private enterprises, addressing the previous unfairness in safeguarding property.  It should be noted that for the three crimes listed below, violation of laws and regulations such as the Company Law is a prerequisite for holding individuals criminally accountable. Moreover, the relevant criminal thresholds are to be clarified by the authorities.

1. (Art. 165) The crime of illegal operation of similar business

Directors, supervisors, or senior management personnel of state-owned companies or enterprises who exploit their positions to engage in or facilitate others to engage in business similar to that of the company or enterprise they serve, for the purpose of gaining illegal profits, shall be sentenced to imprisonment of up to three years or criminal detention, along with a fine, or solely a fine, if the amount is significant. If the amount is particularly large, they shall be sentenced to imprisonment of more than three years but less than seven years, along with a fine.

Directors, supervisors, or senior management personnel of other companies or enterprises who violate laws and regulations by committing the acts described in the preceding paragraph, resulting in significant losses to the interests of the company or enterprise, shall be punished in accordance with the provisions of the preceding paragraph.

2. (Art. 166) The crime of illegally profiting for the benefit of friends and family

Employees of state-owned companies, enterprises, or institutions who, exploiting their positions, engage in any of the following actions, resulting in significant losses to the interests of the state, shall be sentenced to imprisonment of up to three years or criminal detention, along with a fine, or solely a fine, if the losses are significant. If the losses are particularly severe, they shall be sentenced to imprisonment of more than three years but less than seven years, along with a fine:

i. Entrusting profitable business operations of their own unit to their relatives or friends.

ii. Purchasing goods or services from units managed by their relatives or friends at prices significantly higher than the market rate, or selling goods or providing services to units managed by their relatives or friends at prices significantly lower than the market rate.

iii. Purchasing or accepting substandard goods or services from units managed by their relatives or friends.

Employees of other companies or enterprises who violate laws and regulations by committing the acts described in the preceding paragraph, resulting in significant losses to the interests of the company or enterprise, shall be punished in accordance with the provisions of the preceding paragraph.

3. (Art. 169) The crime of favoritism and embezzlement in selling assets at a low price or selling equity at a discount

Directors or senior managers directly responsible for state-owned companies, enterprises, or their superior supervisory departments, who, out of personal interests, engage in favoritism and embezzlement by selling state-owned assets at a discounted price or selling equity at a discount, causing significant losses to the interests of the state, shall be sentenced to imprisonment of up to three years or criminal detention. If the losses are particularly severe, they shall be sentenced to imprisonment of more than three years but less than seven years.

Directors or senior managers directly responsible for other companies or enterprises who, out of personal interests, engage in favoritism and embezzlement by selling company or enterprise assets at a discounted price or selling equity at a discount, causing significant losses to the interests of the company or enterprise, shall be punished in accordance with the provisions of the preceding paragraph.

Key Takeaways

The recent Amendment XII has reinforced criminal liability for commercial bribery in China, highlighting the growing focus on private sector bribery and bribe-offering acts. For enterprises operating or planning to operate in China, it is essential to stay updated on relevant legislation and policies and take proactive measures to prevent commercial bribery, including:

1. Conduct periodic compliance checks on key personnel, focusing on divisions, positions, or individuals exposed to high risks.

2. Update compliance policies to align with the revised Criminal Law.

3. Provide comprehensive compliance training, especially for senior management.

4. Establish effective whistleblowing mechanisms and conduct prompt internal investigations to identify potential risks.

5. If potentially facing the risks of unit crimes, engage in leniency programs under corporate compliance initiatives for favorable outcomes, such as exemption from prosecution.