Monday, January 16, 2012

Corporate Social Responsibility Report from China.

From sina.com.cn -- Jan 15, 2012:

On January 15, 2012, the first Chinese Entrepreneurs Crime Prevention and Control Reporting and Conference took place in Beijing. Under the guidance of Legal Daily (Chinese Government's official mouthpiece), sponsored by Legal Person Magazine and the Kyoto (Governance and Capital) law firm, the Conference also included notable scholars such as Professor Chen Guangzhong.

The Legal Daily’s chairman Jia Jingping spoke on the rule of law and market economy in China. He pointed to the 33 years of reform and gradual opening up to market economy that has created wealth, employment opportunities, and the improved quality of product and services; however, he notes, in pursuit of profits, entrepreneurs have risk the unimaginable by illegal means; many of them are now in jail.

The purpose of the Entrepreneur Crime Prevention and Control Report is to encourage an in-depth look at the issues. According to 2009 data, China’s white-collar crime rate is on the rise. In 2011, majority of the cases involved state-owned enterprise (SOE) managers. There is an interesting age correlation to note: where white-collar criminals’ age in the SOE sector averages at 53 years-old, in the private sector the average age of white-collar criminals is 46. The Report indicates the defendants are often very prominent members of the community and there is a general trend shifting from brutal, what Chinese people refer to as “Black,” methods to more frauds and complicated schemes. The Report also notes increase conviction rates and death penalty with a two year suspension have been more frequently handed down.

The Report found, since 2000, 38% of the white-collar crimes occurred in accounting (with no statistical data on SOEs); 30% are contract frauds and loan frauds; 22% come from illegal businesses, smugglings, and others; 5.2% come from tax evasion; 2.4% from registered capital crimes; and intellectual property only taking up 1%.

Surprisingly the large amount of SOE enterprises involved are unexpected and the lack of data still on some of their practice suggest further investigations and studies are necessary. The average economic loss per incident in the SOE sector is 33.8 MM Yuan (a little over $5 MM); and the most loss from criminal acts of one person is 7.9 Billion Yuan. At a time when China's economy seems to be slowing, this kind of economic loss and rampant corruption problem spells a need for change. 

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