Data on medical malpractice, pollution, & product liability cases from Supreme People’s Court

Screen Shot 2016-03-28 at 7.19.28 PMThis blogpost continues the analysis of data from the SPC on civil cases–traffic accidents, medical malpractice, product liability, and environmental claims.

Traffic accidents

Traffic accident cases totalled about 889,000, up 11%.  China has a very high number of fatalities and injuries in road accidents, with road accidents a leading cause of death. Reasons that local court posit for the large number and increase in cases:


Medical malpractice

Medical malpractice cases continue to rise year on year, with this year’s increase over 16%.Law on medical malpractice is generally recognized to be inadequate.  Chinese patients (and families) are increasingly aware that litigation may result in a more favorable outcome than other methods. This may (or may not change) when regulations on the prevention and handling of medical disputes are finalized.  A draft was issued for public consultation late in 2015. The SPC participated in the drafting.  As has been reported and analyzed in a variety of publications, patients and their families often feel that the system favors medical institutions, and sometimes resort to violence, but increasingly to courts.  As mentioned last year:

  • the SP is working on new ways of trying medical malpractice cases;
  • high on its priority  is more detailed rules on the burden of proof and the standard of proof in medical malpractice cases (the new interpretation of the civil procedure law does not add significant details on this, leaving earlier rules in place);
  • the concept is to strike a balance between protecting the interests of the patients and enabling normal operation of medical institutions.

The Chinese government is seeking more foreign involvement in the medical sector.  Foreign investors contemplating establishing hospitals or clinics should be aware that their tort liability is likely to expand in the near term future.

Product Liability Claims

Product liability cases totalled 21, 828, up over 100%, accounting for a tiny fraction of disgruntled customers.  These can be expected to rise even further when the SPC issues public interest consumer litigation regulations, which it is now drafting.  A Shanghai lawyer recently noted that so few consumers resort to litigation because it is not worth the expense.  This is another area for counsel for foreign investors in China and those selling into China to monitor. It is unclear whether the SPC will solicit the public on its draft, as it did for environmental public interest litigation.  It is an area in which the legal committees of  foreign chambers of commerce should make their views known to the SPC.

Environmental litigation

Environmental tort claims totalled totalled 2370, down 15%, despite widespread pollution problems and efforts by the SPC: a judicial interpretation on environmental tort liability and the establishment of environmental divisions within local courts.  Reasons cited in the official media include the complexities of the cases, including proof of causation, and the lack of organizations that can provide evaluations needed by the court.  Another issue to complicate implementing China’s polluter pays principle in the increasing number of polluters that close up.


Data from the Supreme People’s Court on 2015 Labor/Employment Disputes

Screen Shot 2016-03-27 at 10.26.57 AMAnother indication of the soft economy is the growing number of labor disputes. The Supreme People’s Court (SPC) has released selected national statistics (chart from linked source), indicating a significant increase in labor disputes.  Unfortunately, the SPC did not release a provincial breakdown and the searches necessary to set out such data are relatively time-consuming.

The statistics are divided into labor disputes (劳动) and labor service (劳务) disputes.  Labor disputes are disputes which arise because the employee is or should have been employed under the Labor Contract Law.

Labor service disputes

Labor service disputes, which totalled 162,920, an increase of 38.69%.  relate to an “independent contractor,” but more often a quasi-employment relationship, governed by the Contract Law and General Principles of Civil Law, under which the laborer has minimal protections.  Although an attempt had been made to set forth better legal infrastructure (and protections) for this category of workers, “for a variety of reasons,” more comprehensive legislation has not yet been promulgated. Local courts have identified the following categories of litigants to labor service disputes:

  • Migrant construction workers,  often hired (without a written contract) by construction contractors or sub-contractors who lack the proper qualifications to be in business, often occurring when the worker has been injured or has not been paid.
  • Older workers, who are beyond retirement age.  According to a Guangdong court, many small companies hire these workers to reduce their labor costs.

These cases often involve large groups of workers, but little documentation. Courts note that  “mass incidents” arise if the cases are not handled properly.

Labor contract disputes

New labor contract disputes accepted by the Chinese courts totalled 483,311 labor dispute cases, up 25.02 percent.For certain categories of labor disputes, the dispute must be first heard by labor arbitration. In an indication of the view of the SPC, its official newspaper, the People’s Court News, has published an article by a judge in a Nanjing court, suggesting that if the employer is in bankruptcy, the employee can sue in court, without resorting to labor arbitration.

Some provincial courts have reported an increase in large scale labor disputes. The  Xinjiang High Court, for example, reported retrials of at least 10 labor disputes involving 600 or more persons.

Some lawyers and judges in China have done a further “big data” analysis of labor cases.  One of the more relevant and detailed was done by the Guangdong Moreking Law Firm), which in 2015 published a series of charts along with their analysis (but relating to 2014, based on a search of the SPC’s case database).  A selection of those charts are set out below (©remains with them).

Location of labor disputes in Guangdong, 2014

In 2014, the Guangdong courts accepted 13,168 cases, 80% of which arose in the Pearl River Delta cities of Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan and Zhuhai (10178).


Comparing Zhongshan (red) and Zhuhai (blue), most cases were in the manufacturing sector, followed by service, transportation, construction, and other inddustries.




In Zhuhai (on left) and Zhongshan (on right), the majority of disputes arose in privately owned companies, followed by foreign invested companies.  The authors noted that foreign invested companies tended to have more compliant labor management, with those company represented by lawyers in most cases.image-6

Comparing Zhuhai (blue) and Zhongshan (red), in each location three quarters of litigants were men.  Similarly, the Panyu district court (part of Guangzhou), noted the same phenomenon.


Most cases related to termination, followed by payment, with failure to sign a labor contract, social insurance and other reasons far behind.


On disputes over payment, the greatest reason is wage arrears (35%), followed by overtime pay (22%).  The Guangdong High Court issued guidance in 2015 enabling lower courts to impose a criminal sentence for wage arrears if certain minimum thresholds are met.


A more comprehensive survey is needed by province, as well as an analysis of the underlying reasons.  From the statistics above, and from earlier comments by senior leaders of the SPC, it is clear that labor abuses of migrant construction workers by unscrupulous contractors are widespread, and it is difficult for the legal system to deal with them.  The private sector has a far greater incidence of labor disputes, and women are more willing to tolerate ill-treatment at work.  Finance Minister Lou Jiwei criticized the Labor Contract Law during this year’s National People’s Congress session, but the numbers reveal significant issues with labor relations in China.


Data from the Supreme People’s Court on real estate disputes

Screen Shot 2016-03-26 at 3.46.14 PM
Pie chart of real estate investment disputes

Yu Yongding, Academician of the Chinese Academy of Sciences, writing in early March, indirectly predicts a continued growth in real estate disputes.

Clearly, China has gone too far in real estate development… By the end of 2015, the unsold house floor space for the country as a whole was 700 million square meters… Facing a double-digit growth in inventory, naturally, real estate developers cut their investment deeply. At the moment, the growth rate of real estate investment has dropped to almost zero. Without stretching the imagination, one can be sure that in 2016 growth of real estate investment will enter into negative territory.

Because the economics on which the participants in real estate development deals has changed greatly, that has meant a major increase in real estate disputes in 2015.

In 2016, as an earlier blogpost flagged, the Supreme People’s Court (SPC) is monitoring real estate disputes closely, because of their link with the government’s economic policy, social stability, and links with other parts of the economy. As Yu wrote, “real estate investment accounts for a fourth of the total investment. For a long period of time, real estate has been the most profitable area of investment in China.”

As set out in the earlier blogpost, in 2015, the SPC leadership identified the following problems in real estate development cases:

  • developers suing to invalidate grant contracts (under which they purchase land for development) and seek the return of the land grant fees (upon which local governments depend);
  • Developers who are short of funds and unable to hand over properties on time;
  • Declines in property prices causing “mass incidents.”
  • Cases involving real estate development and private lending, including illegal fundraising;
  • Many cases involving unpaid migrant construction workers.

According to the “big data” that the SPC recently released, in 2015, the number of cases in all categories related to real estate development rose sharply:

  • newly accepted grant contract disputes, 1368, up almost 21%.  A quick search of the SPC’s case database reveals that some of these cases have been heard in the first instance in provincial higher people’s courts and on appeal in the SPC, because of the large amounts in disputes.
  • disputes involving the sale (by developers) of real estate, 172,372 cases, up 42.29%.  Cases are up substantially in provincial cities, such as Liuzhou, Guangxi province and Zhaoqing, Guangdong, where the number of cases in the first half of 2015 were almost as much as the total for the year before.  Analysis by Zhaoqing judges of the cases revealed a laundry list of problems, such as poor government oversight of developers (because local government is desperate for investment); developers pre-selling real estate development projects although their rights to the land are in dispute; poor quality building,  misleading sales advertising, and cases involving large numbers of litigants.
  • joint venture real estate development cases, 1946, up 20%.  These refer to domestic joint venture cases, when one company provides the funding and the other the land.  Some cases involve deals between state-owned companies from different provinces, with the out of town party often trying to move the case to a more favorable venue ;
  • disputes involving compensation for demolished housing, 24,871 cases, by 33% (despite legal obstacles to bringing these cases) .(For those who understand Chinese, the Xuzhou (Jiangsu) courts have posted this video of proceedings in one such case).
  • Other types of real estate development cases, 33,605, up by 49%.

These cases (and related “mass incidents”) may be expected to rise in 2016.  Litigators with real estate expertise can be expected to be very busy.

Related to this, the SPC also expects an increase in real estate development companies going into bankruptcy.  It is for that reason that this month, one of the SPC journals has published an article by two Jiangsu High Court judges on priority in bankruptcy of real estate development companies.


Big data from the Supreme People’s Court on bad debt

The focus these days is on the amount of debt in the Chinese financial system.  Few economists are looking at the data on bad debt from the court system.  The data includes numbers on private lending, bank and other financial institution lending, and credit card debt.


Screen Shot 2016-03-24 at 9.11.32 PMThe data on lending disputes is partially useful, because it sets out numbers and percentage increases, but does not set out total amounts in disputes.  The pie chart above sets out data on different types of lending and finance sector disputes.

Private lending

This category encompasses a range of non-financial lending, from simple notes between individuals to P2P lending. Zhou Qiang’s report stated that  1,420,000 private lending disputes were resolved in 2015, with total amounts in dispute of 8,207,500,000,000 RMB (1,259,620,865.48 US Dollars.  This latest report states 1,536,681 new private lending cases were accepted, up 41.48%, but does not set out the amounts involved.

The total amounts in dispute are likely greater–greater work is required to tease out the details, as to how much of it is attributable to P2P lending, and other forms of business-related lending. Recent studies by local courts reiterate that these cases often involve fuzzy lines between companies and their owners, multiple guarantees or quasi-guarantees.

Bad debt cases involving financial institutions

Financial institution call loans: 9873, up 10.8%, inter-company loans: 12278 cases, up 3.87%, other types of financial loans (loans by financial institutions): 802,738, up 24%. Finance leasing disputes: 18,503 cases, up 61%, credit card disputes: 169,045, up 74%, insurance, guarantee, pawn shop lending disputes, up 15% and more.

It is likely that the SPC has more data about specific types of disputes in the finance sector, such as wealth management products, but this report did not set out that level of detail.

Using the SPC’s and other databases, further information can be obtained on the different type of loans categorized above, including security for these loans, amounts, geographies, and reasons for default.



Big data from the Supreme People’s Court

Now that President Zhou Qiang’s report has been well received by National People’s Court delegates, one of the issues to which the Supreme People’s Court (SPC) has turned its attention is big data.  Recently, the SPC released a report with “big data.” The charts below are from two versions of that report.  The press release accompanying this report indicated that the SPC will release more data more periodically.The SPC has traditionally been very stingy with the release of data, and certain data that interest persons outside the court system are classified as state secrets. SPC personnel have also discussed their rationale for reviewing and releasing more data, but that will be addressed later.

Because of the large amount of data in the report, it will be reviewed in several blogposts.

Chinese courts hear a huge number of civil cases

The pie chart sets out first instance cases in the courts, both the civilian and military courts.  There were 20% more first instance cases in the courts in 2015 than 2014, almost 11.5 million.  Almost 90% (88.6%) of them were civil/commercial cases, with slightly under 10% criminal cases (9.84%).  Less than 2% of cases were administrative cases.

Ten year trends

Screen Shot 2016-03-20 at 3.46.15 PM


Trends over the last 10 years of cases resolved, by all courts, in units of 10,000.

Criminal cases

The courts accepted 1,126,748 first instance criminal cases, up 8.29%, and concluded 1,099,205 of them,up 7.45%, involving 1,232,695 defendants, up 4.06%。The preponderance of those cases were relatively minor crimes.  
As the pie chart below illustrates, sentences imposing five years and more in prison, death sentences or suspended death sentences were imposed on 115,464, accounting for 9.37% of those convicted. Close to half (43.96%) , or 541,913 were sentenced to prison terms of less than five years, while 45.12% (556,259)were either given suspended sentences or control, or other minor punishments.  A tiny percentage were exempted from criminal punishment (18,020 persons), accounting for 1.46%, while a miniscule number (1039) (0.08%)were declared not guilty.  

The two pie charts below set out out the criminal cases by type, omitting the more sensitive types and showing a drop in most types of crimes, with the exception of fraud and theft/robbery.

Violent crimes

The criminal courts accepted 10,187 cases involving violent crimes, down 5.81%

  1. Intentional assaults: 122,209 cases, down 3.04%;
  2. Rapes: 21, 252 cases, down 9.39%;
  3. Kidnapping: 787%, down 24.54%;
  4. Explosions: 131 cases, down 18.13%

Food, sex, drugs, and gambling crimes

Food and drug safety crimes are always a concern of the government, but enforcement activity or publicity about harsh criminal punishment may have had a positive effect on compliance.  New food and drug safety cases totaled 10,410件 down almost 10%, of which about 3000 involved the production and sale of poisonous or harmful food products, down almost 35%, while there were about 2300 cases of the production and sale of foods that failed safety standards, down about 2%.  The courts accepted less than 250 cases involving the illegal sale of personal information, down about 15%. Food safety issues in China affect people all over the world, as many articles of posted out.

It was clear from last year’s SPC’s guidance on drugs cases, discussed in this earlier blogpost, as well as articles in the press and reports by think tanks, that (illegal) drugs are an increasing problem.  The statistics are an indication of that: drugs cases accepted by the courts have risen 30.79% to 141,999件,Of those, almost 93,000 (92982) cases involved trafficking, sale, transport, and manufacturing of drugs, up 15.61%,illegal possession of drugs, 11104 cases, up 26.9%, providing premises for taking drugs, 36,530 cases, up 101.32%. These, at least the ones involving manufacturing, transport, and sale of drugs are relevant to the world outside of China, as the cheap production of illegal drugs has also moved to China, as articles in the Financial Times (China-made $5 insanity drug goes global) and the European press indicate.

The criminal courts accepted 26423  gambling cases, an increase of almost 32%, including about 19,000 cases of operating gambling premises, up 35%,

The criminal courts accepted 13,700 cases involving the sex trade, an increase of almost 11%, of which 11, 682 cases involved organizing prostitution businesses, providing premises, compelling women to become prostitutes, and acting as a pimp or madam, an increase of 7.4%.  Prostitution offenses themselves are generally punished outside of the courts.

Financial crimes

The pie chart above sets out newly accepted financial crimes:

4825 cases of illegal fundraising,  up 127% over last  year.  This crime is very much on the government agenda.  There were a much smaller number of credit card crimes–844 cases, up by almost 50%, illegal fraudulent fund raising, 1018 cases, up almost 49%, with fraud relating to loans, financial paper, financial instruments, 1284 cases, up 44%, insurance fraud, 422 cases, up 33%, credit card fraud, almost 11,800, up 12%, pyramid scheme cases, almost 1500, up by almost 31%.

The criminal courts accepted about 26,600 robbery cases, down about 16%, theft, 224,907 cases, up 4%, while fraud cases were up 8%.  (offenses subject to confirmation)

SPC’s big data

The other major issue for anyone outside the Chinese court system, Chinese or foreign, reviewing SPC data is that frequently changes in classification and criteria make it difficult to understand and analyze. Or is the thinking that “a foolish consistency is the hobgoblin of little minds”?

Takeaways from the Supreme People’s Court 2015 work report

20160313104344_51387The Supreme People’s Court (SPC)’s 2015 work report has many takeaways for different audiences.  The apparently formulaic report took five months to draft, involving comments and input by many within and outside of the SPC (this article  describes the process, as did my earlier blogpost), most likely involving clearance by the Central Leading Group on Judicial Reform.  It was drafted to show certain accomplishments, send certain signals–show that judicial reform is on the right path and is successful, particularly that the court leadership and the courts are doing their part to fulfil the tasks set for them by the Party/state leadership.  This year’s report has three sections, rather than the usual two, with one section summarizing judicial reform accomplishments. This post will focus on highlights of the overview of 2015, and leave judicial reforms and tasks for this year for another day.

In a sign that the diminished attention spans have come to China, the SPC has come up with graphic and even musical versions of the report.

Statistics to convey current message


This short book, explaining how statistics are used to convey certain messages, was originally published in the 1950’s and translated into Chinese about 10 years ago (and given to me when I was 11 by my parents). It is a useful reference when puzzling out what SPC court statistics are saying and mean, because as this  Wall Street Journal article noted, the categories used in the annual reports often shift from year to year, making comparisons difficult, and breakdowns of specific categories are generally missing. The reason for that is the report (including the statistics) are meant to harmonize with the latest government/Party policies and be on message. The SPC is reforming judicial statistics and seeking to make better use of big data, but the fine details are not in this report.

Takeaway #1–Caseload Up Significantly



The caseload of all levels of courts were up significantly, primarily because of the docketing reforms implemented last year (mentioned here).  Civil (family, inheritance, private lending) and commercial cases account for most of the growth.

Cases heard at the Supreme People’s Court were up 42.6% compared with 2014 (accepted 15985, concluded 14,135). with most of those heard at headquarters in Beijing rather than the two circuit courts.    The local people’s courts heard 19,511,000, and concluded 16.714 million cases, with large increases  in the amounts in dispute, an increase of 24.7%, 21.1% and 54.5%, respectively. This seems to exclude cases heard in the military courts.

Performance target reforms mean that judges are no longer under enormous pressure to conclude cases by year end (although some local court officials may not been on message).

The bar chart below compares 2014 and 2015 numbers for criminal, civil, commercial, administrative, and enforcement cases respectively.Screen Shot 2016-03-15 at 7.16.13 pm

Criminal and Commercial cases up–Takeaway #2

Just briefly on the criminal cases, as the overview graphic of commercial cases is linked to criminal cases-criminal cases are up by 7.5%. Significantly, criminal cases involving refusal to pay wages were up 58%, with last year’s report revealing that 753 persons were convicted, which means that 2015 convictions were close to 1200. a\Analysis of  the statistic of 1419 persons convicted of state security and terrorist crimes can be found here.

e8fade90gw1f1v665sc3uj209i0ugq6mCommercial cases were up 20% (3,347,000, with 120,000 intellectual property cases (up from 110,000 in 2014).  This is likely linked to the new intellectual property courts, but I will cede further analysis on this to my fellow blogger Mark Cohen of  Again, tiny numbers of foreign-related (6079), but up from last year (5804) and Hong Kong, Macau, and Taiwan-related cases.  Cases involving subsidiaries of foreign companies are not in this category–this is a commercial case with a foreign party. The maritime courts heard 16,000 cases, the large increase apparently also attributable to the case registration system.  The language in the speech (making headlines) about making China an international maritime judicial center reflects language in previous speeches Zhou Qiang gave in China (analyzed here), but unnoticed until the NPC report.

Private lending disputes up significantly

The courts heard 1,420,000 private lending disputes, up from 1,045,600 in 2014.  Further background on private lending disputes can be found in my previous articles for the Diplomat. Last year the private lending disputes were categorized with the civil cases, rather than commercial cases.

SPC doing its part for greater government policy

The SPC issued policy documents on One Belt One Road (see this analysis of its implications), the Beijing/Tianjin/Hebei area, and Yangtze River Economic Belt to implement government policies. Those strategic projects are priorities for government.

Takeaway #3 Commercial disputes

Screen Shot 2016-03-15 at 8.33.59 pm

In 2015, 1,053,000 financial disputes were heard and 100,000 insurance disputes, as well as 4238 securities fraud and insider trading cases, compared with 824,000 financial disputes in 2014, a number which included insurance cases.  This speaks to the weakness in the Chinese economy.

The bar chart to the left illustrates percentage increases in product liability (in 2014 there was also a large increase), reputation, real estate development (see this blogpost), loans, sales contracts, labor (up 21%!), and rural residential land disputes. The report flags 1400 bankruptcy cases and highlights pilot projects.

In another indication of problems with the real estate sector, Zhou Qiang mentioned “mass real estate disputes” and the expert handling by the Jinan court (in coordination with the government) of a large villa project in Jinan that encountered financial difficulties in 2008 (see this description) and led 2000 purchasers to petition in Beijing and even surround the Jinan Party Committee, Shandong Party Committee, and the Central Inspection Group that was on site. In 2014, the Shandong government decided to use “legal thinking” to involve the Jinan intermediate court.

An area for commercial lawyers to monitor is unfair competition and anti-monopoly, where the regulators are working on a stream of regulations. Last year the Chinese courts heard 1802 cases.

Takeaway #4– Big jump in civil disputes

Screen Shot 2016-03-15 at 5.38.32 pm


The pie chart on left shows the distribution of first instance civil cases–26% family (1,733,000), 1.5% inheritance, 5% ownership disputes, 17% personal rights (privacy, portrait, reputation), 22.8% private lending, 7.32% labor disputes, including 300,000 migrant worker wage arrears (and other cases related to rural residents rights (拖欠农民工工资等涉农案件 30 万件).  Consumer, education, housing and employment accounted for 720,000 cases.

For environmental cases, 78,000 civil cases were concluded, along with 19,000 criminal cases.


Takeaway #5 Big jump in administrative cases

The amendment of the Administrative Litigation Law last year, the docketing reforms, and the decision to push disputes off the streets and into the courtroom has been a large increase in administrative disputes, although the baseline was very low.  In 2015, 241,000 first instance administrative cases were accepted, up 59% from the year before, with 199,000 concluded.  Reforms have been undertaken to move administrative cases outside of the area in which they arise, which is another reason that some persons or entities have been willing to file.  The bar chart has the percentage increase in different types of administrative cases, with an 176% increase in education cases. The remaining categories (from the left are: public security, trademark, pharmaceutical, construction, transportation, energy, and the environment.

(Black & white charts from SPC work report, thanks to Josh Chin of the Wall Street Journal).

Screen Shot 2016-03-15 at 10.51.25 pme8fade90gw1f1v66664yyj209i0tstbr-1

Supreme People’s Court issues statistics on crimes against women and children

In honor of International Women’s Day and as evidence that the Supreme People’s Court (SPC) is doing its part, the SPC released statistics related to crimes against women and children.  This brief blogpost gives some of the highlights.

Trafficking of women and children

Trafficking of women and children is an ongoing problem in China, and it is likely that a significant number of cases do not find their way to the courts.  The statistics show a reduction in cases involving the trafficking of women and children–last year, 853 cases were resolved, in comparison to 1919 in 2010, involving 3631 persons in 2010 and 1362 in 2015.



Rape cases

As in many other places in the world, women are often reluctant to bring charges of rape in China, particularly when it involves men more powerful than themselves. (Rape of men is still not a crime, according to this analysis by Jeremy Daum).  It is unknown how many of the rape cases were heard in the military courts. This analysis of cases from the SPC’s case database evidences that that the military courts have heard some.  Trends in the last three years in the number of rape cases heard in courts (cases concluded and persons sentenced):


Indecent assault cases

The number of convictions in indecent assault cases (the crime of using violence, coercion or other methods to act indecently against others or insult women) is on the rise. This report by a local court  suggest that those charges are sometimes used when rape cannot be proved.


Child molestation cases

Convictions in child molestation cases are on the rise, or at least more make it into the court system.


The SPC commented that the situation involving crimes against women’s and children’s rights remains grim:

  • No reduction in the number of crimes involving the sale of biological children by parents;
  • High number of cases of sexual abuse of minors, which has not gone down;
  • Many serious incidents of school violence;
  • Children left behind in rural areas are often abandoned and subject to domestic violence;
  • Specific rules are needed to implement the Domestic Violence Law and relevant sections of the Criminal Law Amendment (9);
  • Better mechanisms are needed to protect the rights of children.


Paul Schmidt, a follower of this blog, who is Counsel with Jun He Law Offices in Beijing and a former Colorado State Prosecutor, had the following comment:

This is a heart rendering issue, but the statistics provided continue to tell, what I believe, is a very interesting story about criminal prosecutions in the PRC. The basic story is this: criminal prosecutions in the PRC are rare.

Some very rough math shows what I mean. In 2014, the New York Police Department investigated 1,352 instances of rape. (See, In 2014, the population of NYC was 8,500,000. In short, this works out to very roughly 1 rape investigation per every 5,000 people.

In China in 2014, the courts there handled 23,158 rape cases. China’s population was 1,367,000,000. In short, this works out to very roughly 1 rape case per every 50,000 people.

What’s going on? Is NYC 10 times more violent than the PRC? Are people in China 10 times more reluctant to report rape than in NYC? Even if we assume that New Yorkers are twice as violent and the Chinese are twice as reluctant (neither of which I actually believe to be true), this still leaves a huge gap.

The above pattern repeats itself regardless of the crime examined. Chinese crime statistics appear to be not just lower when compared to other countries – but profoundly lower. Additionally, I have seen little to indicate that such statistics are being actively manipulated (unlike, say, economic statistics). I don’t believe PRC courts are actively under reporting their cases – civil or criminal.

What mainly accounts for the gap, I believe, is that only a certain percentage of crime in the PRC is handled by the formal criminal system. A lot of crime is dealt with through administrative means or informal “mediations” adjudicated by the police between victims and perpetrators.

A retired Chinese lawyer pointed to the availability of commercial sex [however this is  also available in New York] as a reason for the small number of rape cases.  He also mentioned settlements between victims and perpetrators, mediated by the family or lawyer for the perpetrator and the victim and her family.  He suggested that the lawyer for the perpetrator will seek to convince the victim and her family that she is best off with a monetary settlement, conditioned on the victim withdrawing charges.

There is also likely a link to the performance indicators of the police and prosecutors.  Like judges, they have been evaluated based on a number of quantitative indicators, including the number of arrests and number of prosecutions.  Settlement of cases removes the risk of a case going wrong from the police and prosecutors.  It may be for a combination of these reasons that the number of rape cases reaching the courts, and rape convictions in China is relatively low.

If you have further information on this, please use the comment function.



Chinese bankruptcy courts to become “hospitals for sick companies”

hospital-clipart-hospital3As recent blogposts  (and academic studies) have shown, Chinese bankruptcy courts have been acting as underused morgues rather than hospitals for ailing Chinese companies.  The Supreme People’s Court (SPC) anticipates major changes, because (as highlighted on this blog) the government has decided that a stake needs to be driven through the heart of zombie companies.

This blogpost will focus on the role that courts are to play in clearing up zombie enterprises.  But because the role of the courts in bankruptcy is linked to other government policies, it will also flag some significant ones that have not yet come to the attention of observers outside of China. It appears that behind the scenes, officials have been working on putting together the policy machinery to do so and that the process is ongoing.

In late February, the SPC convened a conference of bankruptcy judges and other officials on dealing with zombie enterprises in Hangzhou, Zhejiang Province, both to transmit the newest judicial policy on bankruptcy and to find out from local judges and other officials what the issues are.

Judge Du Wanhua, a senior SPC judge, has been designated to take the lead on bankruptcy law reforms. The location of the conference is intentional, because (as mentioned in an earlier blogpost), Zhejiang Province has been piloting new approaches to bankruptcy law. The Zhejiang Higher People’s Court has been working with government to promote bankruptcy related policies, but at the same time has emphasized that the courts need to hear cases independently. In 2015, the courts of that province accepted over 600 bankruptcy cases.

According to Judge Du, the “courts are to become hospitals for sick companies.” Listed below is the approach that the SPC is intending for the lower courts to take (with some of my comments).

  • The courts should promote more bankruptcy reorganization and conciliation, and diminish liquidation cases (a contrast to what has occurred in recent years).  (The SPC has promoted this approach through recent reports promoting reorganizations by the courts and is continuing to promote this in its pronouncements. Local governments are adopting policies to promote reorganization of companies.)
  • A market-oriented mechanism should be established which classifies zombie enterprises.  The mechanism should distinguish ones than can be saved through restructuring or conciliation procedures from the ones that should be liquidated.  The classification should fulfil the industrial development goals, targets, and other principles of the central government.  (But, Professor Liu Zhibiao, a leading economist suggested in a recent interview that it should the market to determine this, not government.)
  • The rights and interests of the state, workers, creditors, and investors should be protected (listed in this order).
  • A corporate restructuring bankruptcy information platform mechanism that uses modern information technology tools should be created to promote the greatest degree of success of corporate restructuring, and better use of economic resources.  (This is consistent with government (including SPC) policy promoting the use of information technology tools);
  • A unified coordination mechanism for bankrupt enterprises needs to be created under the local Party committee’s strong leadership and support of the relevant government departments to ensure cases are handled in an orderly manner. (However, in the fall of 2015, Ma Jian of the SPC’s research office pointed to local government interference in the acceptance, and trial of bankruptcy cases, as being an major issue.
    • A local court judge writing recently described a judge’s role: “bankruptcy involves the vital interests of many people, and directly affects social harmony and stability. Thus the social dimension of bankruptcy cases determines that the court can not ” go it alone” in bankruptcy cases. Some local governments do not want companies to go bankrupt for statistical , performance, maintenance of stability and other considerations.  [According to Professor Liu, it can have a negative effect on the performance evaluation of local officials.] The court should actively seek the support of the local government where the debtor is located, to provide good placement of workers of bankrupt enterprises, payment of wages, disposal of plant or other fixed assets disposal.  By communicating with relevant departments, policy support can be provided to help pay taxes , apply for transfer [of property], coordinate the interests of creditors, debtors , investors, employees and others) ;
  • Orderly mechanisms should be established to deal with wages, state tax, and the priority and realization of secured claims, unsecured claims.
  • Local courts should establish bankruptcy divisions and provide bankruptcy judges with better bankruptcy law training;
  • Procedures should be established to consolidate related bankruptcy proceedings in different courts;
  • Procedures for bankruptcy administrators should be drafted and their status should be improved;
  • Special funds should be established to pay for bankruptcies and bankruptcy administrators.

Related to this are the following government initiatives:

  • Local governments, such as Guangdong, are starting to issue policy programs on “supply-side reforms.” The Guangdong program, issued on 28 February, contains a section on bankruptcy. The policies reiterate and further detail the principles Judge Du enounced (and merit further analysis).
    • The Guangdong policies mention separate databases for bankrupt state-owned and non state owned enterprises, mentioning that special policies would be forthcoming for state owned enterprises and that courts would be given the “green light” to deal with the bankruptcy of zombie companies. Reflecting policies seen elsewhere, the Guangdong government is seeking to encourage private enterprises to assist in reorganizing state-owned zombie enterprises and is considering establishing special funds to assist companies to upgrade.
  • The central government is also looking to simplify procedures by which companies with no debts can be closed.  During 2015, the State Administration of Industry and Commerce announced that it was piloting reforms in a number of locations, first designating Shenzhen, the Pudong district of Shanghai, and several other locations, and subsequently expanded the locations.
  • Training sessions on bankruptcy law, either within the courts or with related government agencies and institutions. In late February, the Changsha (Hunan) Intermediate People’s Court held a training session with experts from the SPC (First Circuit Court) and professors of bankruptcy law from Beijing, while the local government in Quanzhou organized cross-institutional training.
  • Local courts (such as this one in Quzhou, Zhejiang Province) are providing reports to local government/Party Committees on what the courts can do.

But what are bankruptcy judges really doing?  If a recent message on Wechat is any indication, they are reaching out to their fellow judges for guidance and creating a chat group on how to deal with the many legal and social complexities that bankruptcy cases pose.

Can bankruptcy court “doctors” save zombie enterprises and their millions of employees?  It is very early days. What can safely be said is that bankruptcy and zombie enterprise related policies merit close monitoring by lawyers, the business community and others.