Wayward Dragon: White-Collar and Corporate Crime in China
Situated in the context of the global economy and globalization, as well as the prevailing depiction of China as a major competitor with the West and its growing influence on the world stage, Wayward Dragon examines and reflects on white-collar and corporate crime in China. The authors, professors Adam K. Ghazi-Tehrani and Henry N. Pontell, are prolific scholars who have emmeshed themselves in white-collar research and comparative studies, with a particular focus on China. The result is this enlightening, informative, and up-to-date case study of Chinese white-collar crime with implicit and explicit comparisons with the U.S. and other countries. Drawing on a variety of data sources, including published articles, books, reports, and interviews with dozens of academics and criminal justice practitioners across a decade (2009–18), this book is a must-read for students and scholars who are interested in white-collar crime.
(A note on terminology: as stated by the authors, ‘economic crime’ is equivalent to ‘white-collar crime’ in Chinese criminal law.)
By the authors’ account, economic crime has increased exponentially since China’s open-door policy and economic reforms began in the late 1970s. Between 2002–2019, white-collar crimes increased at least 170%, and, in some cases, a staggering 3456%; violent crime decreased by 70% during the same period. While these statistics must be viewed with a grain of salt due to the lack of transparency and reliability of China’s official crime data, a review of three main editions (the 1979, 1997, and 2021 editions) of The Criminal Law of the People’s Republic of China (PRC) suggests that economic crimes have indeed been exploding both in number and type throughout the forty-year economic reforms. This is reflected in the legal provisions. In the 1979 edition of the Criminal Law of the PRC, there were only 15 articles addressing economic crimes. The number then markedly increased to 92 in 1997. In the 2021 edition, despite the unchanged number of articles, the descriptions of these economic crimes increased in length over four-fold (from 4,515 words in 1997 to 20,476 words in 2021), detailing varying degrees of different economic crimes, such as producing unsafe products and securities laws violations, and their respective sanctions.
In six chapters, Wayward Dragon explores the nature of white-collar crime in China and explains China’s economic crime problems and corresponding official responses. Ghazi-Tehrani and Pontell have several overarching goals. The authors seek to describe the various types of white-collar and corporate crime in China over the past few decades; document high-profile cases, analyzing them by classifying and conceptualizing them; reveal the enormous, yet largely ignored, costs and consequences of white-collar crime, not only within China but across the broader region and globally; position China’s white-collar crime in a relative frame, with multiple cases and examples of its U.S. counterparts to drive home the point that China is not the only bad guy and that its circumstances may not be entirely unique; and draw a broader theoretical understanding of white-collar crime by addressing policy and enforcement challenges associated with economic crimes.
Chapter one provides an overview of white-collar and corporate crime within the context of China’s relatively recent economic reforms, remarkable economic growth, and strategic importance in Asia and globally given its large population and share of the world economy.
Chapter two reviews comparative criminology and white-collar crime, noting that while American criminology has dominated the theoretical landscape for decades, there will be a rise in Asian comparative criminological research with economic development across Asian countries. Moreover, the authors assert, the case study approach is uniquely positioned to summarize national characteristics of white-collar crime due to its ability to accommodate new concepts and theories while facilitating the modification or negation of existing ones. Economic problems and crimes in China, such as air pollution and unsafe products, may easily transcend national boundaries, making their causes and policy responses valuable information for other nations as well. Additionally, the authors raise another aspect of white-collar crime that many nations share: their “non-issue making” treatment (pp. 43–45). For instance, they state that in both the U.S. and China, white-collar crime is not regarded as a serious issue because offenders are mostly in positions of power. As a result, there is a potential for law enforcement officers to either lack awareness of intricate white-collar crime schemes—like, for example, financial fraud—or not prioritize addressing such crime.
Chapter three contextualizes corruption in China with the “in-your-face” corruption of falsely claiming systemic election fraud by one major political party following the 2020 U.S. election and the normalized American practice of “access money” in the context of lobbying and political donations (pp. 54–55). Moreover, it links corruption with a unique Chinese socio-cultural practice: guanxi. Unlike a single case of bribery for a favor in Western contexts, guanxi in China builds on long-standing trust, mutual benefits, and resource exchanges that cut across individuals, groups, and business transactions. Corruption presents a considerable challenge in China due to the widespread acceptance and influence of guanxi, the lack of political will, and weak institutional and governmental oversight. More importantly, corruption can be used as a coping strategy to bypass the inherent contradictions between market demand and authoritarian rule in China (p. 63).
Chapter four presents major white-collar and corporate crimes. It begins by describing state-owned enterprises (SOEs), their distinctive roles in China’s economy, and their abuse of market power and corruption due to unequal competition. Crimes engaged in by SOEs vary from corporate fraud and political corruption to medical and environmental crimes, such as illegal toxic waste dumping. Major SOE criminal cases involving PetroChina and Anhui Haide Chemical Technology are discussed. The chapter then reviews contributing factors behind non-issue making practices with regard to white-collar crime with examples, including counterfeit products, bootleg entertainment and software, and art fraud.
Chapter five discusses domestic, regional, and global consequences of corporate crime and corruption in China. The authors describe horrific human and environmental costs domestically, noting examples such as the ‘bloodheads’ scandal resulting in widespread HIV/AIDS infections, oil production and local water and soil contamination, and the 2008 melamine milk scandal that caused numerous children to be hospitalized and nearly a dozen infant deaths. Moreover, the authors argue that adjacent countries will experience spillover effects from economic offenses due to China’s status as a major producer of inexpensive commodities, food, technology, and pharmaceuticals. These products can have far-reaching impacts on lives worldwide when they are defective or toxic.
Ghazi-Tehrani and Pontell believe that the short-term gains of mammoth economic growth, achieved through exploitative labor practices and environmental degradation, come at a long-term cost, not just for China, but also the region and potentially the global community. In the final chapter, they propose several solutions to tamp down white-collar and corporate crime. First, adequate laws must be enacted. While legal lag problems may persist—i.e., laws inevitably do not keep up with social change and are enacted to address new issues only after they arise—it is imperative that regulatory agencies and officials ensure that adequate laws and regulations align with ground reality in a timely fashion. Second, robust compliance and enforcement mechanisms, supported by adequate training and resources, are crucial to establishing system authority and credibility. For example, the authors highlight that without robust compliance systems, consistently applying harsh enforcement and anti-corruption campaigns would strain existing resources and hamper economic growth. Third, economic incentives should be geared towards pro-social outcomes to counteract the treatment of corruption and economic crime as costs of doing business. One particular concern involves how to incentivize economically distressed workers who choose to engage in lawbreaking—e.g., cigarette counterfeiting and food adulteration—to improve their livelihoods, not simply punish them. Additionally, the authors provide a comparative analysis and highlight that, at a systemic level, in a democracy such as the U.S., regulatory responses can undergo shifts with newly elected officials; in contrast, one-party rule under the Communist Party of China offers no real avenue for sweeping regulatory changes unless the party leadership initiates reform from within.
In closing, we would like to commend the authors for their meticulous illustration of white-collar and corporate crime in China. Context is everything! Throughout various instances, Ghazi-Tehrani and Pontell emphasize contextual backdrops: the American Dream versus Chinese President Xi Jinping’s Chinese Dream; the Trump administration’s in-your-face corrupt behavior versus Transparency International’s Corruption Perception Index on China; and guanxi versus corruption.
However, we would also like to raise a minor issue regarding the authors labeling some white-collar crimes such as “bootleg entertainment and software” as “Crimes Against Consumers” (p. 96). While the authors make reasonable arguments regarding the adverse effects of counterfeit products on consumers—such as low quality, malware, and censorship—the more direct harms are perhaps the financial losses suffered by companies who charge high fees for the products or by the state that fails to generate certain tax revenue. Therefore, these crimes are less about crimes against consumers so much as crimes against corporations or crimes against the state’s economic interests. This distinction is particularly evident when considering counterfeit or smuggled pharmaceuticals. Indeed, some counterfeit pharmaceuticals are completely fake and pose severe risks to consumer health; thus, labeling these counterfeiting activities as crimes against consumers is justified. However, other instances of counterfeit or smuggled pharmaceuticals might only evince procedural deficiency—e.g., no legal permit to manufacture or import the drugs. One such example involves the 2018 hit Chinese movie Dying to Survive which is based on the true story of Lu Yong. Lu Yong was convicted and duly sentenced to five years in prison for smuggling highly controlled cancer drugs from India to China, both for himself and other patients. It is worth noting that his offense primarily harmed to corporations and the economic interests of the state, rather than customers. This true-story film has sparked a heated debate over the definition and implementation of interventions against white-collar and corporate crime in China. Moreover, it has directly contributed to several practical changes, including the reduction of cancer drug prices. As CNN reports, “In the weeks after the film’s release, US pharmaceutical giant Pfizer Inc. decided to reduce drug prices in China, some by as much as 10.2%,” and China also subsequently “lifted tariffs on imported cancer drugs” (Yeung, 2018).
Jesse Yeung, Box Office Hit Sparks Debate on Drug Prices in China, CNN (July 18, 2018, 2:28 AM), https://www.cnn.com/2018/07/18/asia/china-cancer-drug-movie-intl/index.html.
Hong Lu, Professor of the Criminal Justice Department, University of Nevada, Las Vegas;
Shujing Shi, PhD Student at the Institute of Criminology, University of Cambridge.