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By Elizabeth M. Lynch, October 24, 2011

On Monday, the Standing Committee of the National People’s Congress began its review of China’s new, draft Mental Health Law.  The draft – originally issued on June 10, 2011 and opened for public comment – has received much criticism both at home and abroad, in particular, Article 27 of the draft which permits involuntary commitment where an individual exhibits behavior that “disturbs public order” (扰乱公共秩序).

Prof. Michael Perlin

The Chinese government appears intent on ratifying the new Mental Health Law by year’s end, but the question remains, how will the new law change the current landscape?

Below, Prof. Michael Perlin, professor at New York Law School, Director of the Mental Disability Law Project, and author of the recently published “International Human Rights and Mental Disability Law: When the Silenced are Heard,” analyzes China’s new draft Mental Health Law, paying particular attention to its interplay with the Convention on the Rights of Persons with Disabilities (CRPD), a treaty China has ratified.

Click here to listen to the interview with Prof. Michael Perlin or read below for the entire transcript.
Length: 31 minutes (audio will open in another browser)

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[01:31] EL: Thank you Prof. Perlin for joining us.

[01:33] MP: Happy to be here.

[01:34] EL:  Let’s begin by talking about your new book, specifically Chapter Four which discusses the use of mental disability law to suppress political dissent.  How long has China been using involuntary commitment to suppress dissent?

[01:47] MP:  We knew that it has been going on back at least 40 years, it may be before that, we don’t know.  This was written about first and most extensively by Robin Munro who brought most of this to the public attention and he gave some very, very serious examples of the misuse of state-sanctioned psychiatry in support of commitment of people who by any sort of standard, normative reason would not have needed commitment.

The use of involuntary commitment to squash dissent is not new in China and can be traced back to Cultural Revolution days.

[02:17] Sometimes it was done for political reasons, sometimes it was done for financial reasons.  There is this whole other set of cases where people wanted to get rid of a relative because they wanted to take over a business or something.  That was not unfamiliar to those who knew about this in the United States about the same time.  But clearly it was being used to suppress political dissent.

[02:40] When I wrote Chapter  Four of this new book, a lot of it flows from an article I’d done about four or five years before in the Israeli Law Review.  When I did that research, it was kind of interesting to me.  Most people know, or people who are interested in this whole general area, know that the former the Soviet Union, this was very common.  And there were exposes, the World Psychiatric Association sends a delegation in the late 80s, early 90s, there were quite a few books written about it and articles.  But China at that point nobody seemed to pay that much attention to, and it was pretty clear that the same kind of things were going on in China as were going on in the Soviet Union.  Fast forward, the Iron Curtain fell, some of the abuses – not all – in the former Soviet Union had been remediated to some extent. But again what was happening in China was pretty much under the radar.

[03:40] It became known, interestingly, with regard to what is seen as the persecution of the Falun Gong.  Is it a political group? Is it a kind of exercise? Is it meta-physical? I can’t answer that but it seemed very, very clear to me and to most neutral observers that practitioners and adherents were being singled out, and they were being marginalized as mentally ill.  One of the things, we’ll talk about it latter, is why do governments do this and I will discuss that in a few minutes but it seemed to me that China in many ways was paralleling[the experiences in the Soviet Union]

[04:25] What is interesting to me is that in this new draft act [China’s draft Mental Health Law], of which I am enormously ambivalent I should tell you, I think…and I have sent some comments to other people about it….I think there are some other things that are better than China has had before but an awful lot of it strikes me as very problematical.  [Much of it] would not only not meet constitutional standards in a Western country but also I think pretty clearly does not comport with the UN Convention on the Rights of Persons with Disabilities which China has ratified.

[04:58] It seems to me that  [in] this new law, Article 27  – about the disturbance of public order  – should be a red flag.  What does that mean?  We are sitting here on the corner of West Broadway and Leonard Street and how far are we from Wall Street where there is an occupation going on that seems to be spreading.  Is this disturbing the public order?   One could read the pages on Facebook and an awful lot of American citizens think it is.  Is something like this was being done in Beijing or Shanghai would, could everybody be dragged away to a psychiatric hospital?  Under the strict language of the Act, yeah, it probably could.

[05:36] EL:  Well, in terms of  that, and you sort of mentioned it in your answer.  The Chinese government itself has the power under even the criminal law, arguably; I mean maybe it is not directly stated in the criminal law but they use the power to detain people indefinitely.  Why do they choose to, for example Falun Gong and other dissidents, why do they choose to use a mental health analysis instead of using the criminal law when they are basically an authoritarian state.  Why did the Soviet Union do that, why does China continue to do that?

[06:13] MP:  It seems to me that there are at least three main reasons for that Elizabeth, and that truly is a great question.  First of all, there are always some, albeit minimal, procedural safeguards in the criminal process.  They

The criminal process in China has its limits

are not always adhered to.  … I spent some time working in China with criminal defense lawyers and I was teaching them how to, pedagogically, how to do certain things but I also spent much more time learning and I realized that it is not a lot those of us who have practiced criminal defense work in New York or New Jersey would go “oh my God”  [to much of what goes on in the criminal trial process in China] but at least there is a something there.  There is nothing there on the psychiatric commitment side.  So that’s number one.

[06:56] Number two, when there is a hearing, when there is an adjudication, there is usually a limit to the sentence.  It may be a draconian sentence, it may be for many more years than we would think make sense.  But at least there is a number there.  Psychiatric commitment is, in these jurisdictions indefinite.  And I should say, after the CRPD [the Convention on Rights of Persons with Disabilities], the Convention is ratified, I don’t think indefinite commitment without clear judicial review passes muster under the international human rights law.

[07:31] But the third I think is the most important.  Because I think  [psychiatric commitment] stigmatizes.  We know that if we call somebody a mental patient, he will be discredited.  And if he has political motives, that will mean, well, we can ignore them.  I use this example, I think, in that book, about someone in Romania (when Romania was a completely authoritarian state) who was picked up, and his psychiatric charge was [that] he was carrying a sign saying that the prime minister of the country must go; the [rationale was], “Well if he thought he was serious that someone would listen to him, he must be crazy.”  It’s a self-fulfilling prophecy.  It’s a loop.  But I think those three reasons together are really it.

[08:14] EL:  Right now, before…..I know they [China] have the draft [mental health] law published right now and it was opened for comments back in the summer, but before that.  Right now how does involuntary commitment work [in China]?  Are there laws in place?  Who makes the decision if an individual should be involuntarily committed?  How does it work?

[08:33] MP:  The decisions is made basically by the State.  Someone gets picked up; very, very often family will call and ask: take my relative and send him to the hospital.  And there is no independent assessment.  In 1985….I should say to your listeners, I have been a professor since the mid-1980s but I was a real lawyer before that.  I practiced 13 years both as a criminal defense lawyer and as an advocate for persons with mental disabilities.  I filed an amicus brief in the U.S. Supreme Court in 1985 in a case called  Ake v. Oklahoma in which the Supreme Court ruled that a person who is indigent had a right to a psychiatric evaluation at state expense if he was putting forth the insanity defense.  The idea being that this is something that can’t simply be done, can’t be decided on the say-so of the state doctor.

[09:32] In China it is always done on the say-so of the State doctor.  There is virtually no sense of independence.  There is also no lawyer appointed.  One of the issues that I think is really important; we know this, we know that both among the United States and in other nations, serious mental health reform only happens when there are lawyers assigned to represent patients.  I know that sounds very lawyer-centric.  Pardon me, I plead guilty to that.  But if you were to go to the United States and go state-by-state and see where has there been reform, where has there not, it’s an easy question.  Where have there been lawyers like in New York, the Mental Hygiene Legal Service, like in New Jersey, the Division of Mental Health Advocacy law office, like in DC, the Public Defenders Service/ Mental Health Division, that’s where it happens.  In other nations, where you have it: Israel is a nation that has a robust public defenders office doing these things and they are enormously successful.  Where there are no lawyers, reform doesn’t happen.

[10:29] There are no lawyers doing these cases on the ground in China.  I believe that after ratification of the CRPD, this needs to happen.  Commitment must be subject to the judicial process at every step.  That is demanded by the CRPD and it’s not in the draft [Mental Health Law] much less in the older law.

[10:49] EL:  So to clarify, the draft mental health law that has been proposed has no provisions for a lawyer to be appointed.

[10:57] MP: Correct.

[10:58] EL: And there is no independent review of a state’s decision.

[11:00] MP:  One can ask for a review but it is absolutely, utterly optional.  There is no sense that it is obligatory, it is not mandatory.

[11:09] EL:  Now, in terms of involuntary commitment, you say that the decision is made by the state.  Would that be – what division of the state?  Is that the Ministry of Public Security or is it not clear?

[11:21] MP:  It’s not clear.  You have sort of two different ways it could happen.  The Ministry of Public Security and

An Ankang Hospital in China

this whole Ankang hospitals that are really shrouded….I mean, I heard about them….oh my goodness…I’d been doing mental disability work my whole career.  I’ve been doing international human rights mental disability work for 11 years.  I’ve been going to Asia for nine years.  But it wasn’t until about four or five years ago that I even heard about these hospitals.  And they operate…there is virtually no way to find out what’s going on in them and that ministry is Public Security.  The others go through the Ministry of Health, I believe.

[12:00] EL:  So the Ankang hospitals are within the Ministry of….?

[12:05] MP: Of Public Security.  And those involve people who are seen as being criminally dangerous.  It’s a very, very murky line between criminality and other kind of dangerous behavior.  Very often, it’s what you choose to call it.  But there is very little, there is no review, and there is very little outsider involvement.  It’s like a world in and of itself.

[12:33] EL:  And in terms of that line between criminality and involuntary commitment….One of the things that is being heavily criticized both by foreign scholars and even Chinese legal scholars is this continued use of “disturbing public order.” And that’s included in the new draft mental health law.  My question is….just to get to the people who write this law.  Is there any sincerity in the use of this term?  Does the Chinese government believe that….I mean is there sincerity in the belief that perhaps the expression of a different opinion is evidence of mental illness?  And how do they get doctors on board with that?

[13:13] MP:  It’s very hard for me to tell what was in their minds.  There is no record of this.  And you can come

Occupy Wall Street - Political Protest or Endangering Public Saftey?

with multiple explanations Elizabeth. On one hand you can look at it just plain meaning.  Endanger public safety means somebody is standing in the middle of a main street screaming at cars, right?  That could cause an accident.  And that you and I would agree might endanger public safety.  And that’s one possibility.

[13:42]  [This is another:] … In this study that was done by the Equity and Justice Initiative of Psychiatry and Society Watch that was published recently which analyzes this commitment system in China, it is replete with example of people who were picked up and psychiatrically hospitalized because basically they were seen as dissident.  It’s an over-used word.  I am very concerned in any jurisdiction but especially, especially, in a jurisdiction that has this kind of track record of locking people up for disagreeing politically.  I am very concerned that this kind of language, like in Article 27, is far too overbroad and I see that as a really troubling issue.

[14:29] Why do state psychiatrists go along with it? This is something I have been trying to deal with for 20 years in terms of thinking about it and you don’t know.  I remember reading one study in which the researchers said – well you know if we went along for the ride we would get more vacation days or get a nice home at the beach – something like that.  Which sounds so depressingly banal, right, but it also in fact may be so.

[14:57] Some may also feel as if they[examining psychiatrists] are an arm of the state.  I have heard, I have been in meetings, just so your listeners know, I have been mainland China five or six times and have done quite a bit of work there and I have been at meetings with psychiatrists and I’ve tried to listen to what people say.  Very often….most recently I was in Beijing in June this summer, and I heard a psychiatrist say – “oh well, you know, I can kind of look at this guy in the eyes and I will know if he needs to be institutionalized.”  That kind of behavior was repudiated when I started practicing law, I heard doctors say that.  That’s been repudiated in the States for the last twenty or thirty years.

[15:42] Very, very much of what I heard on this last trip to Beijing – Yogi Bera said it is déjà vu all over again – very much of what I heard was very close to what I heard in the early 1970s when I started practicing law in New Jersey.

[15:55] EL:  Well in that regards, and this is a little maybe off topic because it’s not as much related to law, but has there been efforts….I know that there are a lot of rule of law projects from the US in China to help strengthen the legal profession.  Have there been efforts to maybe create….strengthen the professional mindedness of the psychiatry profession in China?  Has there been any attempts to do that and hopefully through that way, develop a grassroots feeling of independence?  Or is that something that might just be too difficult?

[16:26] MP: If this was a TV show rather than podcast, your listeners would be seeing my face at this moment.  Yeah, kind of, maybe, a little bit, not much.  I know the World Medical Association has taken seriously some of these issues.  There’s a psychiatrist in Mamaroneck, New York, Dr. Abraham Halpern, one of my heroes.  Abe has been working on some of these issues for the last 30, 40 years.  Mostly he is focusing on things like organ transplants now.  But he has been a gadfly to the World Medical Association encouraging it, as has  Dr. David Matos of Canada.  But generally not so much.  I don’t see this…..

[17:05] There is an interesting subtext issue here.  One of the things I write about, and I discuss it extensively in this book, is what I call “sanism.”  Sanism is the kind of irrational prejudice like racism, like sexism, like homophobia, in which we stereotype people with mental disabilities, we trivialize them, we typify them, we don’t take them very seriously.  We treat them as less than people.  Because of that, we generally – we meaning society – pay much less attention towards what psychiatrists do with purportedly “crazy people” than we do when there are other violations.  When people mistreat women, when people mistreat children, when people mistreat gays, there is a predictable and appropriate outrage on page one on all the blogs.  It doesn’t happen here.

[17:55] Internationally there is only one organization, a group called the Mental Disability Advocacy Center located mostly in Budapest, a couple of other sites in Europe, that is doing this work on a global level.  I am working with my friend and colleague Yoshi Ikehara who is head of the Tokyo Advocacy Law Office (as I said before we went on the air) to create a Disability Rights Tribunal for Asia and the Pacific.  But there is very little else that is being done.

[18:19] This is a population that people, even people who see themselves as traditional liberals –  traditionally progressive, traditionally focusing on social justice – which just as well go away.  They think it is yucky.

[18:34] EL:  In terms of….focusing on the international efforts, you had mentioned the CRPD, what international law is out there that would push China forward in this regards?  Since China has ratified some of the treaties, what can be done on an international level besides just issuing reports that they are in violation of the treaty?

[19:01] MP:  That’s the hardest question Elizabeth; it’s the most important question.  This treaty which has been on the books for three years….

[19:10] EL: And this is the CRPD?

[19:12] MP: Yes.

[19:12] EL: Which stands for?

China has signed & ratified the CRPD but does it follow it?

[19:13] MP: Which stands for the Convention on the Rights of Persons with Disabilities, is without any question the broadest document ever written on behalf of this population.  Importantly it repudiates the medical model and substitutes a social model of disability.  In other words, this is not simply “we have sick people”; this is, “society deals with this population a certain way, [and we need to] figure out what to do.”

[19:35] Irony, off to the side, what is so interesting to me is how the role of psychologists is so limited in this draft act [China’s draft Mental Health Law].  The CRPD moves away from the medical model, [and,] as such, psychologists – non-physicians – the use of them, the reliance on them should increase, not decrease.  One of the things that I am seeing between the lines with my magic decoder ring on is that there are struggles between the psychiatric trade associations and the psychological trade associations in China; the psychiatrists have much more political clout, much more legislative clout, so this is basically guild stuff.  That’s there.

[20:14] So, going back to what you said before.  It’s clear to me and I write about that extensively in the book, there are many articles that talk about due process basically, that talk about freedom from torture, freedom from cruel and unusual punishment, ant-discrimination, access to justice, on and on – and again I would be happy to send you some more recent things that I have written about it since I’ve written the book – and it seems to me that China is failing at all those.

[20:45] But then comes the question, and so what?  What are you going to do?  What can you do?  One of the reasons why Yoshi and I are devoting so much time to the creation of what we call DRTAP, the Disability Rights Tribunal for Asia and the Pacific, is because in Africa there is a commission on human rights; in Europe there is a court on human rights; in Latin America there is a court on human rights, in each case, a court or a commission.  There is nothing in Asia.  There have been seminars, there have been meetings, there is this group called the ASEAN , to which seven nations belong; some [groupings of nations] belong to other [pan-Asian groups that deal with other issues], but there is no Asian-wide tribunal.  Why? Good question.  People talk about “Asian values,’ [but] I reject that [as the reason why there is no human rights body in Asia] and I could talk about that later if you want me to.

[21:31] But without that, a person can, ostensibly, theoretically, appeal any kind of a decision directly to the Human Rights Council of the United Nations.  That’s pretty difficult for anybody to do.  It’s difficult for a person in a nation with a developed economy, what we call the first world, it is certainly, virtually impossible for someone in China to do without a lawyer, especially somebody is not in Beijing or Shanghai or one of the major cities.

[22:03] I went to Xi’an a couple of times to do some work and I talked to a lawyer who said: “Prof. Perlin, I’m not sure if you understand. In our province, we get to court by horseback”. This was in about 2007, 2008; this is not 20 years ago.  There basically, they have at this point in time, almost no legal recourse.  What you can do is [appeal to] the court of public opinion.  We’re trying to do that.  But again I am very saddened and disappointed that this issue has not sort of spread beyond the small circle of people who take this seriously, who care about it, who write about it, who foment about it.  I think some of the reason for that Elizabeth is sanism, that these people are just simply seen as not human, not as important.

[22:45] EL:  So are you saying that this issue hasn’t spread beyond the small group that focuses on it, so a lot of maybe the US’ projects in China, do they….are there US rule of law project that are pushing this?  Is it also I guess in some way our fault?

[23:01] MP:  Yeah it is.  Oh clearly it is our fault.   … I am on the Chinalaw LISTSERV, as you are, and if you spend a month there you will see there are certain topics that get written about a lot.  Some very serious topics.  Certainly there are serious human rights issue dissidents, things of that sort, but most of it goes to business law.  And that that does not go to business law, a lot go to things that are extremely important like environmental law.  Anyone like you or I who have spent time in China know how serious these problems are.  But there is virtually no attention paid [to the issues we are discussing here].  You and I could sit down after this is over and count on one hand the people who have done substantive posts in the last three years about this issue on that LISTSERV, and we would  have a couple of digits left over.  So yeah, I think that I can fault those generally interested in the “rule of law”  or “just society” for not taking this seriously enough.  Well you know everyone has their priorities, we can’t do everything and that’s true.  But this is an area that virtually no one is taking seriously.

[24:05] EL:  Back to China, in terms of the new draft mental health law, you said that you are extremely ambivalent about it.  Could you talk more about your feelings about what is good, what’s not good.

[24:18] MP:  The fact that there is a law; the fact that it sort of talks about the fact that there has to be some kind of structure to this; and the fact that at least there will be something to assess, something to test.

[24:30] But let me laundry list some things that I think are problematic.  First of all, I don’t think whomever drafted it ever looked at the CRPD.  It does not appear to me that that was ever done, and that should have been.  Elizabeth, when I talk to people — I am very fortunate, I have gone and done human rights law on every continent (except for Antarctica,  the penguins still haven’t asked for me)  — I’ll say to people now, when you re-write your law – I was in Argentina two or three weeks ago and I spoke to the World Psychiatric Association and I spoke to people from several nations and I said exactly the same thing – if you are rewriting your law, on the left side of your desk, you need the CRPD and for every section you write, go and look at the cognate section [of your local law] and ask, “Are we in line with this or not?”.

[25:16] EL: Well let me just interrupt for a second about that, I know there has been a lot of talk about the criminal procedure law, who has assisted in drafting that, do you have any idea which agencies of the government have assisted in drafting the Mental Health Law, if there has been any famous academics…is there any transparency about that?

[25:36] MP: I don’t know.  It may have happened, but I simply don’t know or it is something that I am just not a part of those conversations.

[25:45] As I said before, again call me lawyer-centric, I think there needs to be appointment of counsel…period.  Article 29 through 32 talk about maybe commissioning a forensic mental disability evaluation agency for second opinions in some cases.  But without a counsel, I don’t think it’s really going to make very much difference.  I think any part, every aspect of commitment has to be subject to the judicial process every step of the way.

[26:16] There are lots of other things that I sort of saw going through it.  On Monday, in my class on survey of mental disability law, we talked about the topic of sexual autonomy, the rights of persons to have some kind of sexual freedom, and I have written about this in an article I wrote in the Washington Law Review a few years ago about sexuality issues in Asia and in China, you might find that of some interest.  Nothing about it there.

[26:43] Their criteria for commitment are not really clear.  There has to be a causal relationship between mental illness and risk and dangerousness.  That is never spelled out.

[26:52] There is nothing about the institutionalized patient’s right to refuse medication, a huge, huge issue.

[27:03] There is a whole thing in Article 24 about when relatives can send a “suspected mentally disabled person” to the hospital.  Without criteria that is really, really problematic and I think that is an issue that needs to be dealt with.  Very, very often, somebody will come to a psychiatrist and say “doctor, my brother, sister, whatever is crazy” and that becomes sort of the fact in evidence, even though there’s no  [actual] evidence before [the psychiatrist.”].  That’s where we start out and I think that’s really a serious, serious issue.

[27:34] As I said before the “endanger public safety language” in Articles 26 and 27 is  especially problematic, especially, Elizabeth, given China’s history.  Article 28 talks about “diagnosis” but “diagnosis” is not “risk assessment”.  A person can have what we would call in the States an Axis 1 diagnosis – schizophrenia, bi-polar depression, major depression – and that does not mean they are committable because [to be committable], you have to have with that, as a result of that, the likelihood of serious danger to self or others.  That is not spelled out at all.

[28:14] The possibility, everybody has ballyhooed in Article 29 about this sort of duplicative examination…I am not convinced at all that it is going to be really independent.

[28:27] Starting in Article 30 it talks about forensics but I am really puzzled because there is nothing else in here about the criminal process.  It is just not clear to me what that is.

[28:38] I think rights need to be enumerated.  If you go to Article 34 we also have to articulate the fact, and again this is constant both with the CRPD and all developments of the last forty-plus years that the right to treatment has to be in the least restrictive alternative.  We have to talk about community treatment.  We have to talk about de-institutionalization.  We have to talk about congregate care, halfway house, on and on.   That’s not here anywhere.

[29:03] Psycho-surgery is discussed in Article 39.  Absolutely not.  That should never be an acceptable treatment.

[29:09] I was puzzled again as I said to you by the lack of….how psychologists appear to me to be squeezed out.  Again, I see this as kind of guild-mentality; it troubles me a lot.

[29:25] What can be done about this, I’m not that smart.  I have sent my comments in to other people who hopefully have the ear of those who do listen.  Hopefully something will happen.  But I looked in file before you got here but I have not heard back, gotten anything substantive on this in the last two months.

[29:41] EL: Well that’s what I want to ask you in a close out question basically.  There has been actually some verbal criticism by Chinese scholars about the draft mental health law and highlighting a lot of the things you have mentioned including the endangering public safety, disturbing public order issue.  Do you think the Chinese government will listen to any of this criticism?  Do you anticipate that the draft will change before it is adopted?  Or are these things that the Chinese government hasn’t been able to get past yet?

[30:15] MP: I wish I knew, Elizabeth.  I say jokingly I’m smart, I’m not that smart.  There will be some changes.  I think if they made no changes at all that would be a public relations disaster because that would mean we are ignoring everybody, we are doing just what we want, and take a hike.  There will be some changes.  I’ll say some of it will be better.  How much of it?  Ten percent?  A quarter?  I don’t know.  I wish I could be more optimistic and say – oh they are going to listen to everything we say – no, get real, they’re not.  But I am hopefully that it will be incrementally better and the way that it is written will give us more and people who are on the ground more to work with.

[30:59] I’m very sensitive to the fact, I go to China once a year, at the very most twice a year, I live in New Jersey, I work in New York, I am a foreigner, I am an outsider and all I can do is listen and learn and share some ideas.  It has to be done by the people on the ground.  I certainly spend a good deal of time talking to them and I hope that as a result of that something happens.  I remain….I’ve been doing this work for a long, long time…I remain an unflaggingly optimistic guy so I hope it is going to happen.

[31:30] EL: Okay, well, I guess we will find out.  It is suppose to be passed by year end.  Thank you very much Prof. Perlin for your time and your knowledge.

[31:40] MP: Thank you, Elizabeth, it was a pleasure.

Comments (3)

By Elizabeth M. Lynch, October 12, 2011

For a split second last week, I was transported from the doldrums of the current economic malaise back when the good times rolled and people didn’t worry that next week their paychecks might bounce – in other words, I attend a panel discussion on China’s current luxury goods market.  If you thought everyone was suffering the same in this economy, think again – according to the panelists, China’s luxury goods market is red hot and is continuing to grow.

I don’t have a specific panache for luxury goods (hell, I don’t even own a designer handbag), but decided to attend the Fashion Institute of Technology’s panel discussion entitled “Fashion, Beauty and Status: One Year on the Front Lines in China’s Luxury & Apparel Markets” at the recommendation of the China Law Blog’s post about one of the speakers.  What did I wear?  Business casual which was way out of touch with most of what the much more fashionable audience was wearing, an audience that topped over 150 people, reflecting the very real importance of the Chinese market to high-end fashion.

The talk itself, moderated by FIT  professor Lawrence Delson, featured three experts in the field: Byron Lee of the Hong Kong Trade Development Council, Michael A. Zakkour of Technomic Asia, Prof. Mark Greiz of FIT and MG Consulting.  (copy of Zakkour’s presentation can be found here)

All three speakers harked on the expansiveness of the Chinese luxury good market, a market increasingly driven by the young and by the female.  According to Zukkor who conducted a study on China’s luxury goods market, China’s growing middle and upper middle class, with 300 million consumers, is driving the growth in the luxury goods market and the need for more “affordable luxury.”  With a “spending mentality,” speaker Bryon Lee stated that by 2015, China will be the world’s largest luxury good market.  According to Zukkor, women in China spend $2,000 a year on handbags and their average yearly salary is $18,500; in the US, where the average woman’s salary is $150,000, women spend only a bit more: $3,000 a year on handbags.  (note: the average salary for women in the US seems to be a bit high and might just represent the average income of upper middle class women).

With those numbers, it is obvious that any successful luxury goods business must include China.  But those venturing to sell their goods in China must note the difference in sales and marketing vis-à-vis the West; to think that China is just an oriental version of the United States, London or even Prague would be a mistake.  According to Zukkor, the channels by which to get your goods into China are very different; there is no wholesale-retail model.  Instead, there are three ways for a foreign designer to reach the Chinese market: (1) through a distributor who will place the product in department stores and shopping malls; (2) by setting up your own brick and mortar store; and (3) through e-commerce.

Zukkor noted that Chinese customers’ e-commerce activity is very different from consumers in the West.  Unlike in the West, Chinese consumers don’t just “browse” the internet; rather they research and shop through the internet and their access to the internet is increasingly on mobile devices.  Many women will research their handbag purchase for two to three months before purchasing the product.

But no matter which method you use to access the China market, Mark Greiz stressed the importance of marketing to the Chinese market.  Unfortunately for the audience, Greiz’s presentation, which proved to be the most practical, was cut short because of time limitations (FIT would be well advised to so a second presentation just on marketing).

By providing various examples of successful marketing in China (L’oreal) and some unsuccessful examples (Quicksilver, American Apparel), Greiz highlighted the need to “localize” the brand: hiring local staff (L’Oreal’s China staff is 90% Chinese), using the Chinese language in marketing (this was a huge failure for Quicksilver who didn’t translate their US ads), and creating story for your brand that speaks to the hearts and mind of the Chinese consumer (American Apparel failed to explain to Chinese consumers why he should pay $40 for a t-shirt).  Greiz also stressed the need to have a very strong online presence to your brand.

Lee, Zakkour and Greiz painted a very rosy picture of doing business in China, contrary to many of the warning stories that you read in the Western press.  But many of those stories focus on China’s lack of rule of law in enforcing contracts.  So I asked the panelists – given the negative stories you hear about doing business in China, specifically with China’s legal enforcement issues, what should people be worried about.  And this is where I realized the difference between lawyers and business people – all of the panelists focused on the practicalities of the China business environment.  In terms of IP issues, Zakkour did acknowledge that China did have issues with the law on the books versus the law in reality but stated that it was more of a problem for “sensitive” industries, not luxury goods.  Zakkour did note that China is a “first to file” country for trademarks making filing a very important step in any Western company’s foray into China.  The moderator of the talk, Prof. Delson, was perhaps the most practical of all, noting the importance of maintaining good relations with government officials, especially if you are doing business in a second-tier or third-tier city (i.e. not Beijing or Shanghai).

But what the panel didn’t deal with is whether the future they project for China’s luxury goods market is in fact sustainable, or perhaps more aptly, obtainable.  In one slide, Byron Lee showed the increasing disparity between wages for urban/middle class consumers and rural/lower class consumers, which was projected to grow further.

Furthermore, David Barboza, in this Monday’s New York Times, reported a bleak outlook for China’s middle class.  Instead of showing any growth contrary to the FIT panel, Barboza noted that China’s consumer spending, as percentage of its GDP, has dropped in the past 10 years, from 45% of GDP to one of the world’s lowest: 35% of GDP.  The fact that Chinese citizens have to bear their health care costs themselves, that real estate prices have increased to the point beyond most average person’s reach and that inflation is rapidly rising, Chinese people have remarkably high savings rates.  Furthermore, to sustain cheap loans to Chinese businesses, Chinese banks provide such low rates of interest on savings accounts, rates that do not even keep up with inflation, that average Chinese citizens are losing money.  But they are left with almost no other investment options and most still keep their money in savings accounts.

In his presentation, Zakkour acknowledge the high savings rate of older Chinese people, saving up to 50% of their incomes.  But on a “happier” note, Zakkour stated that younger people – in the 28 age range – only save 4% of their income, providing for excessive income for luxury good purchases.  But 4% seems ridiculously and irresponsibly low.  Perhaps with the one child policy, the youth are relying on their parents’ savings.  But the one child policy would also require these kids to save for their parents; no longer are the expenses of elderly parents shared among multiple siblings; instead there is only one child who must make enough to provide for their parents in their retirement in addition to saving for herself.

“Fashion, Beauty and Status” provided important lessons to selling luxury goods in China and offered a road map for those ready to enter the market.  But as with all things China, it’s unclear what the future will be, even as the luxury goods market seems to be doing well today.  Those who want to do business in the luxury goods market should be sure to know that there is still some risk.

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By Elizabeth M. Lynch, October 10, 2011

Over at the US-Asia Law Institute’s blog, research fellow, Jeremy Daum has just published a thought provoking article on the Zhang Guoxi case, the first case to publicly – and perhaps most effectively – use China’s exclusionary rule to exclude evidence that was obtained through torture.

In June 2010, China surprised the world by issuing detailed rules on the use of evidence obtained through torture, essentially excluding it as the basis of conviction when the prosecutor could not show that the evidence was obtained legally and without torture.  China Law & Policy blogged about these new rules here and here.

On paper, the new rules provided hope that the police would reign in their ardent use of torture as a means to obtain a conviction.  But in practice, it appeared that the courts, the enforcers of the new exclusionary rules, had little institutional power to control the more powerful police and prosecutor’s offices.  This fear appeared to be realized when the Supreme People’s Court, a few weeks after the Rules’ adoption, chose not to apply them to overturn a death sentence that appeared to be based on a confession obtained through torture.

But as Daum describes below, a trial court in Ningbo has done what scholars thought was impossible – use the exclusionary rules to deny the use of a suspect’s confession where the prosecutor was unable to, or more aptly was too arrogant to provide evidence that the confession was obtained legally.

The Ningbo trial court did not just stop there.  Instead, the trial court issued a clear and transparent opinion on its decision, reflecting its reliance on the letter of the law concerning the new exclusionary rules. As Daum notes below, in China such an opinion from a trial court is rare making Daum wonder, what impact will the appellate court’s decision (the decision has now been appealed to the intermediary court), and the public’s response, have on the Chinese government’s impending adoption of an amended Criminal Procedure Law (“CPL”).

Below is an excerpt of Daum’s interesting article with a link to the full version.

 

Zhang Guoxi Case: a simple case of bribery?

Excluded : The Zhang Guoxi Case

By Jeremy Daum
Research Fellow, US-Asia Law Institute, NYU Law School

Normally, ‘dog bites man’ is not news, but in the generally bleak climate for reform that pervades China’s criminal justice system, a story of “judge upholds law” has gained some traction in the Chinese media. As Chinese and foreign experts scrambled to absorb new draft revisions to China’s Criminal Procedure Law (CPL) in time to offer their opinions during the single month allotted for public comment, another less publicized story was also making waves in the legal community. A trial court in Ningbo has been hailed as the first to give full force to rules on the exclusion of illegally gathered evidence jointly introduced slightly over a year ago by China’s Supreme People’s Court, Supreme People’s Procuratorate, Ministry of Justice and top law enforcement agencies (“the Rules”), by excluding a confession and allowing a defendant to go unpunished…

…The case itself is remarkable only in its mundanity.  It is an ordinary bribery case in which Zhang Guoxi (章国锡), an official from a local construction administration project, was accused of abusing his office to accept seventy-six thousand yuan (about $12,000 U.S.) in graft over four years. The mistreatment that Zhang allegedly received at the hands of interrogators is also not the sort of blood-curdling horror story that “shocks the conscience” or that one might expect would provoke a judge to take a stance against his investigative and prosecutorial colleagues, risking his career and reputation….

….What is exceptional about the case is instead the trial court’s insistence that prosecutors and investigators follow both the spirit and the letter of the law.

Read the full article here.

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By Elizabeth M. Lynch, October 2, 2011

London's Chilli Cool

Is it possible to go to a foreign country, live there for a number of years and remain completely unchanged?  In the case of British cuisine, the answer is a resounding yes.  Although England ruled countries with the world’s most flavorful food, the Brits never thought to incorporate any of the newly found spices into their own cuisine.  But while British food has remained unchanged, major cities in the U.K. are filled with foreign restaurants, which have a good number of British customers.  By choosing not to create a fusion cuisine, the Brits have guaranteed that cities like London have some of the most authentic ethnic restaurants;  arguably the best Indian food outside of India can be found in London (major props to Masala Zone – yes it’s a chain, but it was phenomenal).

But what about Chinese food in London?  For over 100 years, England ruled the island of Hong Kong and made significant inroads into the Mainland prior to the Communist takeover, with major concession areas in Shanghai and Canton.  But unfortunately, the number of good Chinese restaurants in London is scant.  In speaking with a London friend  who spent many years in China, she noted that there were only around three good Chinese restaurants in London, a disappointment indeed.

And that is how I found myself at Chilli Cool (the misspelling of “chili” is intentional), one of the recommended three, in the Kings Cross area of London.  From the moment you open the door to the restaurant, Chilli Cool is unmistakably Sichuan, with the smells of the region engulfing you- a very promising sign.  Additionally, Chilli Cool compromises two restaurants, one that serves Sichuan hotpot and one that serves appetizers dishes.  My friend and I opted for the main restaurant to try the dishes.

Savory Hot Spicy Chicken

The first dish we ordered, Sichuan Savory Hot Spicy Chicken (No. 6), a traditional Sichuan appetizer where the Chinese literally translates to “mouth-watering chicken”, was not just dead-on authentic but delish.  The chicken, served in a bowl drenched by a Sichuan hot sauce and sesame seeds, was tender and although the dish is filled with a canopy of spices, the flavor of the chicken (which is served cold) is not lost.  Instead, the spices only enhance the flavor. The chili is the main flavor of the dish, but the subtle smokiness of the black pepper serves as a wonderful compliment.  Any trip to Chilli Cool is incomplete without ordering the Sichuan Savory Hot Spicy Chicken – Chilli Cool offers the best version of the dish that I have had outside of China.

To shake things up, we then ordered the Hot & Spicy Spare Ribs (No. 29) and the Dry Fried Chicken with Cumin & Chili (No. 37).  Unfortunately that is where our culinary adventure began to go off course.  Aside from the meat selection – one with chicken, one with pork – the dishes were exactly the same.  Neither the English description nor the Chinese

Two of the Same - Dry Fried Chicken (near) with Hot & Spicy Spare Ribs

name of the dish signaled that two dishes would be virtually identical and our waiter did not let us know that perhaps choosing two of the same dishes was not a good idea.

Fortunately, the chicken version came out first and was amazingly good and flavorful;  if one had to choose between the two dishes (which one should otherwise it is repetitive), the chicken version is by far superior.  The chicken was lightly fried and breaded, giving the dish a lightness that is often not found in fried Chinese food.  For those with a more delicate palate, the dish was not overwhelmingly spicy and was bursting with flavor.  The scallions, onions and peppers were fresh and perfectly complemented the mild chili flavor.  However, the dish likely could have used a touch more cumin as that flavor went largely unnoticed.

As for the pork version, the spare ribs were a bit dry.  Additionally, the flavoring of the dish tastes better with chicken.  Arguably other pork dishes on the menu would be a better choice.

As our fourth and final dish, we ordered one of my favorites, Shredded Potato with Spicy Dried Chili (No. 18).  When I lived in China, this dish was a staple for me and when made right, is a good carbohydrate alternative to

Shredded Potato with Spicy Dried Chili

rice.  Unfortunately, Chili Cool could not have made it more wrong.  The dish, which is usually very lightly fried, came out drenched in grease.  If made right, the potato slices should be firm; in the Chilli Cool version they were soft and soggy.  For some reason, Chili Cool added cloves to the dish which was weird and messed too much with the flavor.  Our Shredded Potato dish remained untouched during our meal.

Although one of the dishes was largely inedible and we were not properly warned that two of our dishes were twins of each other, I would still recommend a visit to Chili Cool when in London.  Two of the dishes were pretty amazing and could easily compete with the Sichuan chefs of Chengdu or Chongqing.  However, it might be best to stick with the traditional Sichuan “appetizers” (like dan dan noodles and Sichuan dumplings).

However, do note that Chilli Cool is no where near “Chinatown cheap.”  With four dishes and one beer, Chili Cool set us back 40 pounds (approximately $63), a lot of money considering two of the dishes were not that great.  Chilli Cool holds promise to be an amazing experience but a more careful selection from the menu is necessary.

Rating:

Chilli Cool
15 Leigh Street
London, UK WC1H 9EW
020 7383 3135
Nearest Tube Station: Kings Cross
http://www.chillicool.com/home-eng.html

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By Elizabeth M. Lynch, September 27, 2011

Last week, Seton Hall University School of Law featured an interesting and timely panel discussion on the role of China in UN peace operations.  As China rises, what role does it envision in such operations?  With its new global capacity has China moved away from a policy of non-intervention?  China’s reaction to the humanitarian intervention in Libya is indeed instructive.  Below, Zachary Kelman and Desiree Sedehi, two third-year law students at Seton Hall, report on last week’s fascinating discussion.

Steven Hill on a New Beijing Consensus in UN Peace Operations

By Zachary Kelman and Desiree Sedehi*

Steven Hill on China's role in UN peace operations

Steven Hill, Visiting Professor from 2010-2011 at the Hopkins-Nanjing Center in Nanjing, China, visited Seton Hall Law School on September 22, 2011, and spoke in a personal capacity about the research he conducted there on the subject of Chinese participation in UN peace operations. At an event hosted by Professor Margaret K. Lewis, a Public Intellectuals Program Fellow with the National Committee on US-China Relations, and Professor Kristen E. Boon, Director of Seton Hall Law’s International Programs, he posed the following questions: How has China’s approach to international relations changed since assuming its role on the UN Security Council in the 1970s? And is China’s approach to the humanitarian intervention in Libya the harbinger of a new “Beijing Consensus”?

In his presentation, Mr. Hill discussed the evolution of China’s approach to foreign relations, from the “Molotov cocktail-throwing revolutionaries” of the early 70s to the top contributor to peacekeeping missions among the five permanent members of the Security Council. According to Mr. Hill, this movement signals a shift from “non-intervention” to “tolerance, maybe even some enthusiasm and engagement.”

Mr. Hill recounted for his audience how, from when the People’s Republic of China regained China’s seat in the UN in 1971 until the 1990s, China had been largely detached from UN peacemaking activities.

Mr. Hill noted that China’s “traditional approach” to UN peacekeeping privileges stressed the importance of non-intervention. While China’s position has evolved considerably as it applies to UN peace operations, shades of it can be seen, for example, in Ambassador Li Baodong’s 2011 statement that the international community should “respect the sovereignty, independence, unity and territorial integrity” of Libya.

Hill further noted, importantly, that in spite of this rhetorical deference to sovereignty, China abstained from voting on UNSCR 1973—an abstention which was instrumental in authorizing the largely European-led intervention in Libya. China’s rhetoric led many commentators to believe that it would vote against the resolution. However, China’s ultimate abstention has been seen by many to symbolize its larger shift from a non-aligned power to a global power that has a substantial stake in the international community.

According to Mr. Hill, that China felt it necessary to evacuate 36,000 workers from Libya due to this humanitarian crisis featured prominently in its decision on how to vote on the Libya resolutions. Moreover, China’s growing stake in the international community means increased interest in avoiding catastrophic scenarios, and hence likely a more active China on the global scene.

That being said, Mr. Hill cautioned against unbridled optimism with respect to China’s “new role.”  He noted that China made every effort to defer to traditional notions of national—and then regional—self-determination. This position was evidenced by China’s acknowledgment of Arab League and African Union positions.  In addition, China reserved abstention as a “special circumstance” and was careful not to set precedent. This cautiousness, said Mr. Hill, exemplifies China’s broader attitude toward UN peacekeeping—the possible emerging “Beijing Consensus”—to promote a limited “blue helmet” approach within the general understanding of military procedure, but to avoid “nation building” and other more interventionist forms of intervention. Whether this approach will change to a more progressive humanitarian attitude, as held by some of China’s Western counterparts on the Security Council, remains to be seen.

After Mr. Hill’s presentation, both Professors Lewis and Boon offered commentary to the audience. Professor Lewis,

Steven Hill & Margaret Lewis discuss the Beijing Consensus at Seton Hall Law School

who recently appeared before the Congressional-Executive Commission on China in a roundtable discussion on the “Current Conditions for Human Rights Defenders and Lawyers in China, and Implications for U.S. Policy,” raised China’s need for global stability for the safety of its investments as an impetus for its increased role in UN peace operations. Professor Lewis further emphasized that China’s increased participation in UN peacekeeping efforts may be improving its reputation in the eyes of the international community. Such positive reputational benefits could encourage China’s future involvement.

Professor Boon, who has written extensively on the UN and the Security Council, suggested it might be wise for the US to rethink its skepticism towards international institutions, given the growing influence of China.  The United Kingdom took the approach in the 20^th century of placing greater emphasis on international institutions. As its national power waned relative to the rising US, it has maintained a far more powerful seat in global affairs than it would have if it had not actively engaged in international institutions. The US has an opportunity to solidify its interests in the current international legal and political order, which could serve it well in the future. Professor Boon also highlighted the importance of the new Draft Articles on the Responsibility of International Organizations, and suggested that these could affect the willingness of permanent Security Council members to engage in new endeavors as much as a new “Beijing Consensus.”

Following their commentary, both Professors Lewis and Boon invited the audience to ask questions and provide comments. Professor Michael Ambrosio of Seton Hall Law School asked Mr. Hill to comment on the success and efficiency of China’s participation in UN peacekeeping, and to rate China’s involvement. Mr. Hill responded that he would rate China’s increased participation quite high, and noted that China has provided crucial assistance in terms of medical and engineering troops, police units, and military observers to UN missions around the world. Mr. Hill emphasized the dire need for police units and explained that China’s assistance in this capacity was especially successful because it was so necessary.

* The authors are both third-year Juris Doctor students at Seton Hall University School of Law. Mr. Kelman is also a Deborah T. Poritz Fellow and Ms. Sedehi is the former president of Seton Hall’s International Law Society.

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By Elizabeth M. Lynch, September 15, 2011

China's UN Peacekeepers - Expect to See More

As China emerges as a global power, the question arises: what role will it play in the UN, especially in peacekeeping operations?  Since first re-emerging on the world stage in 1978, China has maintained a philosophy of noninterference in other countries’ domestic affairs, making China’s involvement in peacekeeping operations limited.

But more recently, China has begun to step up to the plate in UN peacekeeping operations, sending non-combat PLA soldiers to assist with such effort.  In March 2011, Beijing issued a white paper on the matter, commending its troops for serving in UN peacekeeping operations and stating that such a role is important for a “responsible party.”

So why the change?  And how will China move forward?  Noted China law professor Margaret K. Lewis will examine these developments and discuss China’s future role with Steven Hill, Counselor for Legal Affairs at the United States Mission to the United Nations, at an event next Thursday at Seton Hall Law School.   All are welcomed to attend; RSVPs (to get a sense of numbers) are very much appreciated; for lawyers in the house, the event will provide 2.0 hr NJ/NY CLE.

***RSVP HERE: http://law.shu.edu/About/News_Events/new-beijing-rsvp.cfm ***

A New Beijing Consensus in UN Peacekeeping Operations
Featuring Steven Hill, Counselor for Legal Affairs at the United States Mission to the United Nations
with Comments by Prof. Margaret K. Lewis, Seton Hall Law School

Thursday, September 22, 2011
4 pm – 6pm
Seton Hall Law School, 5^th Floor Faculty Library
1 Newark Center
Newark, NJ 07102
(2 minute walk from Newark Penn Station which has the Path & NJ Transit)

INVITATION TO BLOG – China Law & Policy’s staff will be out of town next week; anyone interested in blogging about the event please contact me at elynch@chinalawandpolicy.com This is an interesting event and should provide for a stimulating blog post.  Thank you in advance.

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By Elizabeth M. Lynch, September 11, 2011

Last Monday, ChinaGeek’s had an interesting post on the draft revisions to the Chinese Criminal Procedure Law (“CPL”).  But what really caught my eye in the post was this quick statement: “proposed revisions to China’s criminal law code are currently making the rounds for public comment, as is customary prior to the revisions being ultimately approved (or not).”  Is public comment on proposed revisions to any law in China, let alone a law as sensitive as the CPL, really the custom?

Public comments on draft laws and regulations are the norm in the U.S.  For state and federal laws, the public communicates their thoughts through the usual democratic channels – calling and writing letters to their senator/congressperson; for those with better, more organized means, they can of course lobby.  Even for regulations issued by government agencies, a public comment period is required by the Administrative Procedure Act (APA); usually comments are open for at least 30 days.

But China is not a democracy like the United States and the Chinese people have little means of direct communication with their government.  So a public comment period for the current draft revisions to the CPL is no ordinary affair.  In fact, when the CPL was last revised in 1996, the public was pretty much kept out of the loop; even criminal defense lawyers had little ability to comment (lawyers’ comments were filtered through the Ministry of Justice).  Instead, the 1996 CPL was initially drafted by Chinese criminal law professors, with significant comments from some National People’s Congress (NPC) representatives, the Ministry of Public Security (MPS), the Supreme People’s Procuratorate (SPP) and the Supreme People’s Court (SPC).  (See Sida Liu & Terence C. Halliday, Recursivity in Legal Change: Lawyers and Reforms of China’s Criminal Procedure Law, 34 Law & Soc. Inquiry 911, 927-28 (2009)).

A Meeting of the National People's Congress

But this time around, the Chinese government has been very open about the 2011 draft revisions to the CPL.  On August 30, 2011, the NPC officially released the draft CPL and invited the public to comment.  Comments can either be sent via snail mail or can be posted through the internet.  While it is true that one has to “register” in order to post a comment via the internet, thus risking anonymity, presumably a comment can be mailed in without a return address.  Similar to comment periods in the U.S., the NPC will be accepting comments for 30 days.  According to a Chinese law professor colleague of mine, every major newspaper in the country published an article about the draft revision to the CPL with information on how to submit comments.

Similarly, in June 2011, the NPC also welcomed public comments on a draft (and new) Mental Health Law.  My Chinese law professor colleague believed these were the first major laws where public comment was officially allowed.

So what does this all mean?  Is China becoming a bastion of democracy, giving greater voice to its people?  On some level, yes.  The people have a means by which to communicate their feelings on legislation that will ultimately govern their lives.

But the bigger question is, will it make a difference?  First, for such an exciting experiment, namely commenting on the draft legislation through the internet, the number of comments posted 11 days into the comment period is fairly low.  As of Monday, September 12, 2011, only a little over 50,500 comments have been submitted online.  In a country of 1.3 billion people, that is a drop in the bucket.

But secondly, and this is more a problem with comment periods in general, can any one individual comment, no matter how erudite, make a difference?  Even in the U.S., where lawmakers are more responsive to their individual constituents, a lawmaker usually only listens to comments when many of its constituents call at the same time, voicing the same opinion.  I have received many emails from my more politically active friends to call my senator and express a certain complaint.  Presumably, China would be no different.  Unless a concerned Chinese citizen organizes his or her friends, classmates or colleagues to comment on the same issue, the NPC is not going to pay as much attention to a lone, individual comment.  And that is where the effectiveness of the comment period in China and the U.S. diverge: in the U.S., there is no risk in attempting to organize a group to comment to lawmakers; in China, that is a different prospect (although again, the influence of professional lobbies makes one wonder if even people power in the U.S. really makes a difference).

Ultimately, this public comment period is an interesting development that should not be ignored or taken for granted.  While the ability for individuals to influence lawmakers through a comment period is questionable, it still provides the Chinese people with an institutional voice.  It also provides the Chinese people with a means that perhaps in the future may grow more effective and may be used to better establish the people’s control over its government.  At this stage, it is the potential of the comment period in the future, and the people’s taste of more of a role in their own governing, that is most exciting.

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By Elizabeth M. Lynch, July 24, 2011

Birthday Wishes from Chuck Norris!

Last week marked the second anniversary of China Law & Policy’s founding – happy birthday China Law & Policy!

So how has year two been going?  One of the greatest challenges of this past year has been balancing working a full-time, non-China job with blogging.  It has not been easy and our goal of publishing at least one article a week sometimes was not met; in year two, we published 36 original blog posts.  But we continue to keep the scholarship level high, allowing for our readers to rely on the accuracy of the information in our posts.

In terms of readership, year two saw a marked growth.  China Law & Policy can now boast over 350 subscribers, over 200 Twitter followers and over 3,000 hits per month.

In year two we also experimented with Twitter, creating an automatic weekly blog post of our tweets.  We used this to recommend other articles our readership might find interesting.  In general, this Weekly Digest has not proved popular (although if your opinion differs, please let me know).  Instead, we have now have our tweets appearing in real-time on the left sidebar under “Recommended Articles.”

Our three most popular articles are more recent pieces.  By far, the overwhelming favorite article was “In Defense of Dylan in China: Come Writers and Critics Who Prophesize with Your Pen,” a critique of Maureen Dowd’s Bob Dylan in China op-ed piece.  Of more substance perhaps was our second most popular piece, “Don Clarke & Li Tiantian: Two Takes on the Jasmine Revolution in China,” comparing two pieces on the Jasmine Revolution in China.  Rounding out the top three was “Reality or Myth: China’s Rule of Law & Its Recent Assault on Lawyers,” an article alerting the world of China’s random abduction, abductions that still continue, of rights-defending lawyers.

One of my personal favorite posts was the book review of Nien Cheng’s Cultural Revolution memoir “Life & Death in Shanghai.”  Just discovering Cheng’s book was a pleasure, reading her story of survival was inspiring, but soon after the post, one of Cheng’s good friends in the U.S. emailed me to tell me that he was moved by my review.  He believed that if Cheng was still alive, she would have been happy to know that her book was still moving people.

When I created China Law & Policy, the goal was to provide a different voice to the China debate and to explain in easy to understand terms, why non-China people should care about some of the underlying issues about China’s rule of law development.  For the past few months, with the arrest, detention and abduction of rights-defending lawyers, human rights and rule of law has largely been a focus of this blog.  I will likely continue to focus on these issues as on some level, rule of law cannot be said to exist if rights-defending lawyers, those lawyers who keep the government in check, are continuously harassed.  However, in year three we will seek to cover other areas of legal development in China.

Also, to provide our readership with a more diversity of voices, in year three China Law & Policy will resume its podcast series and interview others on their thoughts of China’s legal development.

Most of all on our second anniversary, China Law & Policy would like to thank all those friends and colleagues who have continued to support our efforts.  To those who provide article ideas, edits, and challenges to some of our arguments, your advice, criticism and encouragement are always appreciated and we hope that you continue to engage us.

As always, China Law & Policy encourages readers to participate in the creation of this blog, either through writing blog posts or giving us ideas on what areas or issues to cover.  Have an idea?  An article?  Feel free to email: elynch@chinalawandpolicy.com

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By Elizabeth M. Lynch, June 30, 2011

Getting caught for tax evasion

Originally posted on the Huffington Post

Taxes are a tricky business in any country, let alone China.  Tax codes are usually overly complicated and let’s face it, if you are making money, you can afford to hire accountants who think “creatively.”  American country singer Willie Nelson owed close to $32 million dollars in back taxes when the IRS declared one of the tax shelters his accountant was using to be in violation of the U.S. tax code (he later settled for $16 million, raising the majority of that money through the sale of his album entitled “The IRS Tapes: Who Will Buy My Memories?”); Leona Helmsey, the billionaire New York City hotel operator, served four years in prison for tax fraud (Helmsey allegedly enlightened her staff on a regular basis that “We don’t pay taxes.  Only the little people pay taxes.”); and Al Capone, mafia hitman, bootlegger and perhaps the most famous tax evader of all time, served his longest sentence, seven years, for tax evasion.

When Chinese artist and dissident Ai Weiwei was freed from police custody last Wednesday, the question was raised, most notably by Brian Lehrer in his interesting interview with Human Rights Watch’s Phelim Kine: “are you sure his detention was for being a critic of the government and not for evading taxes?”

Since his release, the Chinese government has vaguely issued more information about the investigation that landed Ai in criminal detention for the past two and a half months.  Although neither formally charged, arrested nor indicted, Chinese officials stated that Ai was held for “failure to pay a ‘huge amount’ of taxes and for willfully destroying financial documents.”  In particular, officials alleged that Ai’s company, Beijing Fake Cultural Development Ltd. failed to pay 5 million RMB (USD 770,000) and owed an additional 7.3 million RMB (USD 1.1 million) in penalties.

But the question remains, what is Ai’s individual liability for a corporation’s tax evasion?  Is he financially liable?  Can

In 2008, Ai was a Chinese government darling, designing the acclaimed Birdsnest Stadium

he be criminally prosecuted?

The answer is….you betcha,  if it is determined that Ai had some form of “direct responsibility” over Beijing Fake Cultural Development Ltd.

Article 201 of China’s Criminal Law criminalizes tax evasion (Amendment VII to the Criminal Law Amends Article 201).  Like many laws in China, the actual law is not the end all and be all.  Because China is a civil law country, often the generalities of the national law are fleshed out in various agencies’ “interpretations.”  Here, Article 201, is further defined through the “Interpretation of the Supreme People’s Court on Some Issues concerning the Specific Application of Laws in the Trial of Criminal Cases for Tax Evasion and Refusal to Pay Tax” (“SPC Interpretation”).

The SPC Interpretation further defines tax evasion as: (a) forging, altering, concealing or destroying without authorization accounting books or supporting vouchers for the accounts; (b) overstating expenses or not stating or understating income in accounting books; (c) being notified by the tax authority to file tax returns but refusing to do so; (d) filing false tax returns; and(e) after paying the tax, fraudulently regaining the tax paid through the adoption of deceptive means such as fraudulently declaring the commodities it produces or operates as export goods.

But while Article 201 and the corresponding SPC Interpretation only uses the term “taxpayer,” Article 211 of the Criminal Law clarifies liability when the taxpayer is a corporation or business unit: “Units committing offenses under Articles 201, 203, 204, 207, 208, and 209 of this section shall be punished with fines, with personnel directly in charge and other directly responsible personnel being punished according to these articles, respectively.”

Thus if Ai Weiwei is determined to be a “personnel directly in charge” (直接负责的主管人员) of the Beijing Fake Cultural Development Ltd. he could potentially be criminally and economically liable.  Ai’s family has maintained that Ai cannot be on the hook because he is not the company’s “chief executive or legal representative.”  However, the Chinese for “personnel directly in charge” is not limited to just the chief executive or legal representative; rather it is anyone in the company with management responsibility (主管人员 is better translated as executive officer).

Ai Weiwei - a directly responsible person?

Furthermore, the second category “other directly responsible personnel”(其他直接责任人员) contemplates a much broader group of people that could potentially be anyone affiliated with the company that has some type of vaguely-defined “direct responsibility” over the company.

Potentially, there could be some validity to the alleged charges against Ai for Beijing Fake Cultural Development Ltd. if the company did in fact evade taxes.  The Chinese government has yet to offer any evidence of the company’s tax evasion.  The company’s attorneys have appealed the charges of tax evasion and have requested a hearing before the Beijing Tax Bureau.

But if there is tax evasion, Ai’s liability will ultimately be determined by defining what his precise role is within the company.  According to friends and family members, Beijing Fake Cultural Development Ltd. merely dabbled in small design projects; the company was not involved in selling Ai’s work.  In fact, according to Ai’s family, it is his wife who is registered as the company’s legal representative not Ai; Ai was a mere consultant.

And while the Chinese government could potentially have a legitimate claim against Ai for the company’s tax evasion, it’s illegal detention of Ai, the fact that there is still no official indictment, the fact that the government continues to hold incommunicado the company’s accountant, the one person who could explain the company’s actual tax filings, and that the government went after Ai instead of his wife, the legal representative of the Beijing Fake Cultural Development Ltd., makes one suspect that the potential charges against Ai are a legal long-shot.  Instead, political considerations – the need to silence one of Beijing’s most vocal and well-known critics – are the real reasons behind the prosecution of Ai.  Again, the rule of law in China takes a back seat to politics and Party supremacy.

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By Elizabeth M. Lynch, June 22, 2011

Ai Weiwei

For the past three months, the world has awaited news on internationally-known artist Ai Weiwei’s unlawful detention by Chinese authorities.  Originally taken into custody on April 3, 2011, Ai’s detention has remained shrouded in rumors as the rest of the world vocally called for his release.

Although not formally arrested, on May 21, 2011, the state-run New China News Agency reported that Ai was being investigated for evading “huge amounts” of taxes through his corporation, Beijing Fake Cultural Development, Ltd.  However, no official government statement confirmed this report and no arrest warrant was issued.

Finally, this morning, Xinhua News Agency, another state-run news outlet, announced that Ai was released on bail “because of his good attitude in confessing his crimes as well as a chronic disease he suffers from.”

Unlike in the United States, bail –or in Chinese qubao huoshen (取保候审) is not freely given in China.  As Prof. Jerome Cohen points out, the term bail is perhaps a misnomer in translating the Chinese since in China “bail” can be provided at any stage in the “investigation,” even before a formal arrest or an indictment as was the situation in Ai’s case (Siweiluozi also has a good piece on the inadequacies of translating qubao huoshen as bail).

If bail is limited in China, what are the circumstances in which it is given?  Prof. Cohen rightly points out that the consideration is largely political and has little to do with rule of law – it’s a good way for the Chinese government to get out of a difficult situation when international criticism mounts (Evan Osnos also has an interesting take on the impact of international pressure on Ai’s release).  But was Xinhua’s reason for bail – good attitude and a chronic disease – a legal basis for the rare reward of bail?

As a matter of fact, there is a basis in law.  Article 60 of China’s Criminal Procedure Law (CPL) makes clear bail may be granted in those cases where the “criminal suspect or accused…should be arrested but are suffering from a serious illness….”  Ai suffers from diabetes and during his ordeal, Ai’s family repeatedly expressed his concerns about his health to the international press.  So while the Chinese government likely made a political choice to release Ai, there is in fact a veneer of legality.  But the claim of “good attitude” for bail is found nowhere in the CPL.

But what is perhaps a more interesting question, is the validity of the alleged charges of tax evasion.  Ai’s company, Beijing Fake Cultural Development, Ltd., is a limited company – how is Ai personally on the hook for the company’s tax evasion?  Presumably there would be limited liability, so how are the authorities able to attribute the company’s evasion to Ai?   On that issue, tune in later, same bat-time, same bat-channel.