China/death penalty: It goes without saying that China’s plan to scrap the death penalty for most financial crimes is a welcome step. But the move could also further ease the Middle Kingdom’s integration into the global economy.
The use of the ultimate punishment for financial offences is no paper tiger. Wu Ying, a resident of Zhejiang province, was sentenced to death for running an illegal bank in December. Du Yimin was executed last year for “fraudulent raising of public funds” – basically, running a Ponzi scheme. Last week, a Beijing police chief was sentenced to death with a two-year suspension for accepting $2 million in bribes.
China’s criminal code currently allows the death penalty for “extremely serious crimes”, but what this means in practice varies. Stealing a national treasure qualifies, as did killing a panda until the 1990s. Yet some non-financial crimes are treated surprisingly lightly. Take organ smuggling, which is only now set to become illegal.
The use of capital punishment for financial crimes partly reflected the importance of having trustworthy financial institutions as China's economic development has accelerated. After all, banks are the main tool of monetary policy, and only by controlling lending did Beijing avert recession last year. The central bank estimated informal lending hit seven per cent of GDP in 2007. Some academics think the real figure much higher.
But while faith in institutions may have been important domestically, China’s draconican legal system reinforced perceptions of political and economic immaturity in the minds of global investors and politicians. That could only become more damaging amid mounting concern about issues such as currency reform and investor protection.
Financial crime will still be punished heavily. Huang Guangyu, founder of electrical retailer Gome, was imprisoned for 14 years for economic offences last year. For high fliers, public shame adds to the burden.
There is still some way to go. Under new rules, bribery would remain a capital offence, for example, reflecting China’s preoccupation with corruption. That still leaves it in a small club, along with nations like Iraq and North Korea. But the latest proposed change takes China a real step closer to becoming a credible economic superpower.