Detentions, arrests and jail sentences are nothing new in China. But when those involved are local employees of foreign companies or foreign passport holders, the alarm bells start to ring for overseas investors.
While some incidents involve clear-cut crimes, a number of recent cases in 1996 point to a more worrying trend:
* Ms Ye Shu, a 24-year old native of Chongqing employed by Swiss securities firm SBC Warburg. She was detained in Beijing without charge from September until late October. The Ministry of State Security accused her of acquiring and divulging classified financial information after she obtained an 'internal' copy of a People's Bank of China report on possible currency devaluations in 1997 and used . it for a research document for company clients.
* Mr Hong Yang, a 44-year-old mainland Chinese employee of the International Monetary Fund. Hong was sentenced to 11 years in jail last June, after disappearing during an IMF mission to Beijing the previous December. It later emerged that he had been arrested and charged in connection with allegedly accepting US$12,000 in bribes while working at the PBOC in 1992. IMF pressure led to Hong's retrial in August and the reduction of his sentence to five years. However, many IMF staff accused senior management of failing to take proper action for fear of upsetting relations with Beijing. The IMF itself is particularly irked at being hoodwinked by the Chinese government which asked for Hong's inclusion on the 1995 mission ? presumably so they could grab him.
* Ms Xiu Yichun, mainland Chinese employee of Anglo-Dutch oil giant Royal Dutch/Shell. Xiu was detained last March on suspicion of receiving state secrets related to the government approval process for a large refinery being developed by Shell and the state-run China National Offshore Oil Corporation (CNOOC). Her CNOOC counterpart was also arrested. Shell maintains that Xiu committed no crime but it will not discuss the case.
It seems that mainland Chinese employees of foreign firms are in danger of wandering into murky legal territory in the course of their work. Some observers claim that local staff should know the limits of research and investigation. However, others believe that overseas companies are asking too much of their employees in gathering new information, data which might be regarded as restricted or confidential. They contend that local staff are frequently put in danger by their foreign employers.
Just when is a report really 'internal' or 'confidential'? The 'internal circulation' label which appeared on a report used by Ye, for example, is also printed on the cover of Reference News, a local publication widely distributed from newspaper stalls. Little can be done while such a grey area continues to exist.
The risk of detention is not confined to mainland Chinese. Two Russians were detained for seven months over a US$1.3m commercial dispute, eventually being permitted to return to Irkutsk in October. The following month, the Russian government complained that the authorities in the Liaoning provincial capital, Shenyang had breached diplomatic and international laws by detaining a Russian businessman in a related trading dispute. On one occasion, police stormed the Russian consulate in Shenyang and on another attempted to pull the Russian businessman out of the car of a consular official. In both cases, the personal intervention of National People's Congress chairman Qiao Shi was required to defuse the diplomatic crisis that followed.
These incidents stem from a number of factors, not least the lingering mutual animosity that persists in north-eastern China. Intense distrust combined with often illegal or borderline business practices can spark nationalist outrage, and very often the authorities are only too willing to take the side of their compatriots.
In the latest incident involving a foreign businessman, a Shanghai court on January 13 handed down a 10-year jail sentence, deportation and US$60,000 fine to Mr William Ping Chen (see page 12). Though undeniably harsh, Chen's imprisonment was clearly the result of breaking the law. Other ethnic Chinese who now hold foreign passports are languishing in jail for committing little or no crime whatsoever. Xi Yang, a mainland-born reporter for Hong Kong's Chinese-language Ming Pao newspaper, was convicted to 12 years in prison in March 1994 after getting hold of restricted information about China's interest rate plans and gold production statistics. The severity with which Xi and others have been treated, and the failure of foreign governments and companies to take a stand, will only encourage the Chinese authorities to resort to increasingly arbitrary and harsh rulings.
Options for foreign firms
In the absence of clear-cut legislation, there is little that foreign businesses can do. Ms Ye's detention prompted China-based securities operations to rein in their research efforts, but such caution will soon fade as local employees again start to dig deeper for new data ? presenting fresh risks to themselves and their employer's local reputation.
What foreign employers need is a set of guidelines for local researchers ? something which no-one appears yet to have come up with. This is because it is impossible to paint the lines on the pitch when the goalposts have not yet been fixed. But there are options open to Chinese-based employers. One would be to create research teams comprising local and expatriate staff, thereby providing some measure of protection for local employees ? though the quality of information obtained would probably suffer as a consequence. Alternatively, foreign operators might consider sounding out relevant ministries on what constitutes acceptable information for publication. But paranoid officials fearful of taking responsibility for possible mistakes could decide indiscriminately to censor all such data as a matter of course. With things as they stand, it looks like foreign employers will just have to remind their local staff to tread a little more carefully when looking for information.
Chris Torrens is head of research at Batey Burn in Hong Kong, tel: (852) 2810 0211, fax (852) 2810 1788.