Protecting People’s Assets

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Legislators have been busy in China in recent months (with postal, monopoly and other laws) but, for the first time, they are on a sixth draft of a law (which was first tabled in 2002, and which had its fifth reading in August lat year) to protect state assets…and private property rights. Xinhua reports that:

    “China’s lawmakers are again debating a controversial law on the protection of private property as they struggle with the concept that experts say “could undermine the legal foundation of China’s socialist system…The latest draft has included “the protection of state, collective, and private property” as the main principle of legislation.”

The sensitivities partly arise from the fact that clauses may be added that “will prevent fraudulent acquisitions and mergers of state assets” – a sensitive issue given public anger at official corruption, and the recent round of corruption-related detentions in Shanghai.

It is also controversial on account of the fact that the law would add to protection of individual assets, with confirmation of rights to have “bank accounts, earned profits and residential property”. Some fear this move could undermine the “socialist” bit of China’s already unique “socialist market economy”

The report notes:

    “‘The biggest problem is that corrupt government officials conspire with businessmen to prey on state assets in the process of restructuring and merging’, said Huang Shuhe, deputy director of State-owned Assets Supervision and Administration Commission. “

There is little doubt that this sort of collusion is a problem. Reports abound, and one example I have worked on involved the sale of a major state enterprise to a private Chinese company for a token amount. Our investigations clearly showed that local officials were directly involved in the planning and approval of the deal.

At the same time, the law on banking regulation and supervision is also being discussed (according to People’s Daily). New proposals could “allow banking supervisory bodies to investigate non-financial institutions and individuals”:

    “CBRC Chairman Liu Mingkang believes the current law fails to enable the banking watchdogs to effectively crack down on illegal practices in the banking sector…He said many cases are masterminded by bank insiders in collusion with outside institutions and individuals that banking supervisory bodies have no legal power to investigate.”

The introduction of measures to protect state assets (for all the people, rather than just a few cronies), and the legitimate private assets that are increasingly driving the Chinese economy, must be a good thing. Let’s hope political doctrine doesn’t get in the way.

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