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Wealth, Crime And Property Rights In A Booming China

The entrance of Chengu's Chunxi street
The entrance of Chengu's Chunxi street
Lan Rongjie*

CHENGDU — It's common practice in every country to confiscate property that criminals attained illegally. In China, criminal law stipulates three concrete measures: confiscation of the instruments of crime and contraband, recovery of illegal gains from criminals, and confiscation of the personal property of criminals who commit certain offenses.

It's worth recognizing that the law tries to deter criminals in every possible way by reclaiming "ill-gotten gains." The greatest controversy with regard to confiscating property often comes down to technical aspects and the actual definition of "illegal gains."

China’s criminal law interprets "illegal gains" as "all of the perpetrators' belongings obtained through illegal acts." Such a general statement almost inevitably leads to confusion in practice. For example, should this include property yields such as dividends and interest, or investments in real estate and company shares? And how is the criminal's own legitimate property, or property jointly owned with others, to be divided?

These questions not only relate to how much property should be confiscated, but they also affect the degree of conviction and penalty in cases such as smuggling. But so far in China, it is all largely left to the discretion of the authorities handling the cases.

Of course, it is impossible for legislators to foresee everything in advance, and law enforcement discretion can never be fully avoided. But China has a particular problem: Far too often the authorities handling the cases enrich themselves in the process of confiscating assets.

One principle that is often brushed aside is that confiscation revenue should be separated from the expenditure accounts of law enforcement agencies. It is common for financial departments to return a portion of confiscated properties to the authority handling the case, and certain individual local law enforcement officials even profit directly from what they have obtained, sometimes helping themselves to forfeited vehicles or houses.

Original sin

The mentality in many public offices is to simply take as much advantage as possible, which is often explained away by tight budgets and pressure to find new revenue sources. The Chongqing gang trials aimed at private entrepreneurs a few years ago largely resulted from this mentality.

China's rapid economic development over the past 30 years has produced a large number of successful businessmen and a growing affluent class. Some, we know, didn't gain wealth in a totally clean way.

The so-called "original sin of the rich," the practice of utilizing public resources to accumulate wealth quickly, thus becomes their unavoidable historical stain even if later success is clean.

It is true that political and legal authorities have tremendous power to take away what people own in China, but it is also true that "original sin" indeed exists far too often with the rich, private entrepreneurs. So once the political and legal authorities have a strong profit motive, property owners are inevitably subject to aggressive prosecution and confiscation.

Improvements include increased clarity about which public office is handling property confiscation, as well as new legislation to refine the definition of "illegal gains" and "personal assets."

In short, confiscation should remain a strong deterrent to illicit behavior by China's wealthy or would-be wealthy. But even criminals deserve property rights. Every penny should be confiscated if it is legally justified, yet not even a single extra cent should be taken when it's not.

*Lan Rongjie is an associate professor of the School of Law at China's Southwestern University of Finance and Economics.

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Globalization Takes A New Turn, Away From China

China is still a manufacturing juggernaut and a growing power, but companies are looking for alternatives as Chinese labor costs continue to rise — as do geopolitical tensions with Beijing.

Photo of a woman working at a motorbike factory in China's Yunnan Province.

A woman works at a motorbike factory in China's Yunnan Province.

Pierre Haski


PARIS — What were the representatives of dozens of large American companies doing in Vietnam these past few days?

A few days earlier, a delegation of foreign company chiefs currently based in China were being welcomed by business and government leaders in Mexico.

Then there was Foxconn, Apple's Taiwanese subcontractor, which signed an investment deal in the Indian state of Telangana, enabling the creation of 100,000 jobs. You read that right: 100,000 jobs.

What these three examples have in common is the frantic search for production sites — other than China!

For the past quarter century, China has borne the crown of the "world's factory," manufacturing the parts and products that the rest of the planet needs. Billionaire Jack Ma's Alibaba.com platform is based on this principle: if you are a manufacturer and you are looking for cheap ball bearings, or if you are looking for the cheapest way to produce socks or computers, Alibaba will provide you with a solution among the jungle of factories in Shenzhen or Dongguan, in southern China.

All of this is still not over, but the ebb is well underway.

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