China Briefing | In China, breaking the law is about to get a whole lot costlier

China may claim to have made great strides in improving the rule of law and expanding rule-based governance, but for the law-abiding majority, their daily experiences often tell a less inspiring story. On many occasions, it pays more to break laws or breach regulations than comply with them. It can be small things such as irresponsible drivers taking advantage of the emergency lane on a jammed motorway, or big things such as unscrupulous businessmen ignoring environmental requirements and allowing their factories to spew toxic pollutants into the air or rivers. They bet on lax regulations and the fact that even if they get caught, they can usually get away with paying a meagre fine. Such a mentality has helped contribute to a spate of shocking public safety scandals and disasters in the country over the past decade – tainted foodstuffs, toxic spills, mining accidents and deadly explosions at chemical plants, just to name a few. Following each scandal, a subsequent inquiry invariably finds that the violators failed to comply with rules and regulations and more often than not, that they had been repeatedly warned or fined by the regulators before the disasters or accidents occurred. But the financial punishments were apparently inadequate to serve as a deterrent. Now the Chinese leadership seems to have finally had enough. In March, while chairing a cabinet meeting to approve a new set of food safety regulations, Premier Li Keqiang vowed qingjia dangchan – which literally means the family reduced to poverty and ruin – as the punishment for violators responsible for serious food safety scandals. China’s parents still mistrust local brands 10 years after milk scandal In Chinese folklore, qingjia dangchan is the worst thing that could happen to someone, jail time included. Li’s vow is the latest signal that the Chinese government is prepared to introduce and apply punitive damages against a wide array of malpractices which greatly affect people’s livelihoods. In Beijing last July, Li told visiting European Union leaders that China would mete out severe punishments to violators of intellectual property laws with enough financial fines to make them qingjia dangchan at a time when wide-ranging IP infringements from within China have become a major point of tension with both the EU and the United States. That came after Li included a pledge in his annual government work report – the Chinese equivalent of the US State of Union address – to introduce punitive damages to enhance IP protection for the first time in March last year. All this should be welcomed, even though change should have come much sooner. Unlike in the US, where punitive damages are often awarded to plaintiffs on top of compensatory damages to punish defendants for a wilful or reckless act, the Chinese courts have generally been stingy in awarding punitive damages even though they are well established in the legal system, especially against manufacturers or sellers of faulty or defective products. In fact, until recently, whenever man-made disasters occurred, especially those involving state-owned enterprises, the government’s first action has often been to compensate the victims quickly and force them, in the name of political stability, to sign pledges not to sue or protest – even though the culprits may later be disciplined or jailed. Chinese industrial park where deadly chemical blast happened ‘opened in a rush’ A lack of high fines and punitive damages has contributed to widespread malpractice, which leaves ordinary people helpless or angry. For instance, during the heyday of China’s property boom, it was common for developers to deliberately increase gross floor area of their developments by a much higher margin than officially approved by city planners, as they knew that the fines they would incur would be much smaller than the profits they could reap from the sales of the extra units. The same can be said of the polluting factories which have deliberately failed to install the necessary anti-pollution equipment because their managers would save more money by simply paying the fines and counting them as necessary costs. As for the Chinese and foreign companies going after the violators of their IP rights, the money they were awarded by the courts was often a fraction of what they had spent in terms of financial and human resources on the chase – if they were lucky enough to locate and bring the culprits to court at all. But once the Chinese leadership gets serious about punitive damages, the deterrent effect could be powerful. China’s earlier attempts to apply punitive damages to two high-profile cases in October won much popular support. First, the Chinese tax authorities ordered Fan Bingbing, the country’s most famous actress, to pay about 884 million yuan (US$132 million) in overdue taxes and fines, a decision which then forced other celebrities to pay 11.7 billion yuan in back taxes. In the same month, a Chinese manufacturer of a rabies vaccine in Jilin was fined 9.1 billion yuan for producing shoddy products. Finally, small things also matter. The Chinese authorities should greatly raise penalties for traffic violations such as reckless driving in the emergency lane, an offence that currently attracts a fine of merely 200 yuan (US$29) and two points on the offender's driving licence. ■ Wang Xiangwei is the former editor-in-chief of the South China Morning Post. He is now based in Beijing as editorial adviser to the paper

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}In the past, inadequate punishments often meant committing crimes made more financial sense than compliance But now the Chinese leadership looks to be getting serious about punitive damages

In the past, inadequate punishments often meant committing crimes made more financial sense than compliance

But now the Chinese leadership looks to be getting serious about punitive damages