Whistle-blowers spearhead fight against corruption in China
Common feature in graft prosecutions is use of social media to expose officials for misconduct
A new and increasingly important tool in China's fight against corruption is whistle-blowing, a cause for concern among multinationals, analysts say.
"One theme that current anti-corruption efforts in China have in common is the prominent role played by whistle-blowers," a report by US law firm Jones Day said.
"A substantial percentage of the corruption investigations against officials and foreign companies were initiated after Chinese whistle-blowers approached authorities with or publicly disclosed alleged misconduct."
An increasingly common feature of Chinese corruption prosecutions is internet users using social media to expose officials for misconduct, such as keeping mistresses, flaunting luxury watches and hoarding real estate, the report said.
John Donker, PwC's lead partner for forensic services in Hong Kong and China, said: "Many of our investigations, including those in Hong Kong and China, started because of a whistle-blowing activity, like an anonymous e-mail or a blog."
Whistle-blowing against multinationals in China began to gain significance last year, said a lawyer who declined to be named.
"It changes things, because companies have to worry about someone going to the public with allegations of corruption against them, and the Chinese and US authorities learning about it," he said.
Last year, the Central Commission for Discipline Inspection (CCDI) announced that Chinese disciplinary bodies had launched 155,144 investigations based on tips from the public, resulting in the punishment of 160,718 officials in government and state enterprises.
In September, the CCDI and the Ministry of Supervision jointly set up a website that allows members of the public to report misconduct by officials.
Whistle-blowers can do this anonymously or with their real names.
Not all official Chinese reactions to whistle-blowers have been positive, and the government has taken steps that critics fear will deter private citizens from blowing the whistle, Jones Day's report said.
In 2012, the government introduced regulations that require social network operators to compel users to register their real identities.
Last year, the National Internet Information Office closed more than 100 informal news websites in a government campaign against "extortionists", including a well-known corruption whistle-blower, according to the Jones Day report.
In September, the Supreme People's Court and Supreme People's Procuratorate jointly issued an interpretation that expanded criminal laws so as to subject social media users to criminal defamation charges and up to three years in prison if a libellous post is viewed more than 5,000 times or forwarded more than 500 times.
However, not all that passes for whistle-blowing in China is legitimate.
"Black media" has increasingly reared its ugly head in recent times, a report by FTI Consulting, an international business advisory, said. This occurs when social media firms are hired to conduct malicious marketing campaigns against brands or personalities by spreading false and negative information.
Nonetheless, there is enough wrongdoing in China to keep real whistle-blowers busy. Almost 80 per cent of mainland companies reported internal fraud in the past two years, according to PwC's latest survey of global economic crime. That is higher than the global average of 56 per cent and the Asia-Pacific average of 61 per cent.
The survey found 39 per cent of respondents on the mainland experienced bribery and corruption in 2012 and 2013, more than the global average rate of 27 per cent and the Asia-Pacific average of 30 per cent.
PwC polled 5,128 people from 95 countries and territories, including 85 respondents in mainland China and 116 respondents in Hong Kong and Macau.
Mainland respondents were five times more likely to have been asked to pay a bribe than their counterparts in Hong Kong, the survey found.