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The plague of corruption is more virulent than ever before in China's economic field. The central government has sensed this, and has begun to put more effort into beating it back.
 
After the trial of Guo Jingyi (we have a detailed report in our October edition), several high-ranking officers in China lost their positions for corruption. Some were even arrested.
 
On the afternoon of October 27, 2008, officer of State Administration for Industry and Commerce (SAIC)Liu Wei was placed under criminal detention. Liu was the Deputy Director of the Bureau for Registration of Foreign-Invested Enterprises of the SAIC.
 
The spokesman of the SAIC said on October 20 that the procuratorate authorities have already begun their investigation in Liu's case. This quick response shows that China intends to conduct the fight against corruption with determination and confidence.
 
This was also the first time that China's central government made an official statement to the media with regard to the Guo Jingyi Case. Several officers in the Ministry of Commerce (MOC) and the SAIC have had their corrupt proclivities revealed since this August alone.
 
According to the report, on September 26, 2008, Deng Kan, the former Deputy Director of Department of Foreign Investment Administration of the MOC, was shoved into criminal detention. On October 24, the relevant authorities arrested Du Baozhong, Head of the Administration Law Section of Department of Treaty and Law of the MOC.
 
Complicated Social Network
 
An insider from the MOC said: "This case [the Du Baozhong Case] is very complicated. We are actively cooperating with the procuratorate authorities on the investigation. We cannot say with certainty that Du Baozhong Case is related to the Guo Jingyi Case."
 
Zhang Yudong, college classmate of Guo Jingyi and lawyer of Beijing Seafront Lawyer Office, was also involved in Guo's case. So was Liu Wei, who was the former underling of Guo and partner of Seafront Lawyer Office.
 
Actually, Guo Jingyi had begun to work in the Department of Treaty and Law of the MOC after graduation from college. He was then promoted to the Deputy Director of this department, where he rapidly rose to a position of immense power. Deng Kan also had great power in the Department of Foreign Investment Administration when he seized a position as the Deputy Director of this department.
 
The main responsibility of the Bureau for Registration of Foreign-Invested Enterprises of the SAIC, the bureau for which Liu Wei once worked, is stipulating detailed measures for the management of the registration of foreign-funded enterprises. It is also responsible for the registration of the standing committee of foreign enterprises and institutions in China and the supervision of foreigners' registration. In addition, it is responsible for analyzing and publishing information about foreign invested enterprises' registration.
 
Reports suggest that Liu Wei and Guo Jingyi were very familiar with each other. Their joint villas in Beijing were intimate neighbors.
 
An insider said: "Guo Jingyi had worked in the MOC for a long time. He was arrogant. Some people inside the MOC were severely dissatisfied with his ways and attitude of working. Guo's case might well be the result of a leak from the inside."
 
However, this insider also said: "The case is not as simple as it appears. Complications abound. We can't expect it to be a cakewalk."
 
MOC's Cooperation
 
Rumors on Guo's case tend to divide into three basic stories. The first is that Guo's case was related to the business of some foreign direct-sale enterprises in China, like Avon. On October 20, the USA cosmetics giant published a statement to the effect that its company had indeed received a report on commercial bribery by its division in China. Avon, under the supervision of the audit commission, began an interior investigation on its Avon (China) Co., Ltd in accordance with the US Foreign Corrupt Practices Act.
 
Another version is tied to the laws on foreign investment passed in recent years, including the Provisional Regulations on the Mergers and Acquisitions of Domestic Enterprises in China by Foreign Investors in 2003 and the Regulations on the Mergers and Acquisitions of Domestic Enterprises in China by Foreign Investors passed in 2006.
 
It has been claimed that the regulations in 2003 were drafted by Liu Wei, who was at that time the underling of Guo Jingyi. And the regulations in 2006 were reported to have been drafted by Zhang Yudong. However, we do not yet have proof of these rumors.
 
The third version has to do with the property dealers' selling houses at extremely, some say suspiciously low prices. Before the case, Guo Jingyi lived in a joint villa in a luxury residence community in Beijing. The price of each house in that residence community was at least 1.5 million Yuan (USD 214.3 thousand). Guo, as a civil servant, could not afford such a high price. When asked by colleagues or friends, Guo claimed the house was bought with his wife's money.
 
The above-mentioned insider from the MOC said that people should not deny China's efforts in foreign investment legislation in China just because of one bad apple.
 
The Regulations on the Mergers and Acquisitions of Domestic Enterprises in China by Foreign Investors was issued jointly by six ministries of China. So it would be irresponsible to change the regulations only because of problems in one or two ministries.
 
According to Li Zhiqun, Director of the Department of Foreign Investment Administration of the MOC, the mergers and acquisitions by foreign investors in China can bring new opportunities for China to capitalize on foreign investment. However, there is a lack of concrete understanding of the details of the mergers and acquisitions in China. The relevant authorities tend to be cautious in dealing with these problems. So the government faces competing and to some extent contradictory needs: to hurry the consummation of relevant laws and regulations to promote fair competition, to encourage healthy development of mergers and acquisitions by foreign investment, to prevent mergers and acquisitions that may result in monopoly, to guarantee the state's dominant power in important industries and key fields. and to ensure the economic safety of the state
 
According to a lawyer from a foreign-funded legal office, generally speaking, the regulations concerning the mergers and acquisitions by foreign investors in China were quite strict. Many lawyer offices in China need to provide intensely detailed consultation and suggestions about this for their clients.
 
An Unusual Lawyer Office
 
The above-mentioned Seafront Lawyer Office has its origin in the Great Wall Lawyer Office, which used to belong to the Ministry of Foreign Trade and Economy (present MOC). Many of its lawyers had relations with employees of the former Ministry of Foreign Trade and Economy. Besides Zhang Yudong and Liu Yang, Seafront Lawyer Office had many lawyers or consulters who resigned from the MOC. Most of them were from the Department of Treaty and Law.
 
According to the introduction of Seafront Lawyer Office available at time of publication at chinalawedu.com, this office has provided legal services for more than half of the 200 investment companies in China funded by foreign investors. It has also provided many foreign investors legal services in the "green space" investment projects (i.e. "creation investment", which means the enterprises which are set by the main investment bodies in the host country in accordance with the host country's laws and regulations and whose entire or partial assets belong to the main investment bodies. The projects include the auto industry, the electronics industry, the telecommunication industry, the high-tech industry, the petroleum and chemistry industry, the tobacco industry, light industry, mechanism, infrastructures (like electric power, roads and ports), the services and finance industry, etc.
 
However, by the middle of this November, the matter of whether the Guo Jingyi Case has ties to the Seafront Lawyer Office remains a muddlesome mystery.
 
The above-mentioned lawyer from a foreign-funded lawyer office said that many foreign-funded lawyer offices in China had special persons responsible for public relations with the government.
 
Mergers and acquisitions are a big part of the main business of many lawyer offices in China. During the process of applying for government approval, lawyers help the enterprises to sort out the materials and the final hand-in. If there are problems during the process, the lawyers are responsible for solving them for the enterprises.
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