Perhaps it was the recent U.S. visit by China’s Vice President Xi Jinping, who is expected to become China’s President later this year.  In any event, there has been much focus on Chinese state-owned or state-controlled enterprises (“SOEs”) of late.   If you have an interest in Chinese SOEs (and every FCPA practitioner should given current enforcement theories), this post is for you.

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In, “China’s Money Trail, In the Heart of the Rust Belt, Chinese Funds Provide the Grease,” Wall Street Journal, (Feb. 11, 2012), it was noted that Nexteer Automotive, the largest remaining industrial employer in Saginaw, Michigan, is owned by Pacific Century Motors, which in turn is controlled by Aviation Industry Corp. of China and Beijing E-town International Investment Co., an investment arm of the city of Beijing.  The article details how Chinese SOEs (and private enterprises) “are pouring investment money into the U.S. into industries such as auto parts, real estate, and oil and gas.”  Many Midwestern states are courting Chinese investment.  The article contains a graphic detailing Chinese SOE (and private enterprise) investment in the U.S. 2003 – Q3 2011.  Of the 292 deals, the “ownership” of 24% was government, of the $15.9 billion value of the deals 62% was government.

“China Foothold In U.S. Energy,” Wall Street Journal (March 6, 2012), noted as follows.  Since 2010, Chinese companies have invested more than $17 bilion into oil and gas deals in the U.S. and Canada according to data provider Dealgoic.  Leading the push has been Fu Chengyu (first as chairman of China National Offshore Oil Corp., known as Cnooc) then as chairman of China Petrochemical Corp. (Sinopec).  The North American energy push is part of a wave of investment money from Chinese state-owned and private enterprises into the U.S. and other Western nations.

The recent report “China 2030″ (here by the World Bank) notes, under the heading.  ”Private sector development and state enterprise reforms” as follows.    Going forward, a vibrant corporate sector will be critical for sustaining relatively fast growth. China’s rapid growth, particularly since 2003, benefited from SOE restructuring and expansion of the private sector. Many small and medium-sized SOEs became privately owned.  In line with these developments, the new policy direction has been to diversify the ownership of state enterprises. Indeed, many large state enterprises have been “corporatized” and some of the biggest (including those directly monitored by the central government) are now not only listed on stock exchanges but have also improved their governance structure, managerial professionalism, and profitability.”

In February, the Senate U.S. – China Economic and Security Review Commission held a hearing titled “Chinese State-Owned and State-Controlled Enterprises”  (see here for the prepared statements and testimony).

Representative Peter Visclosky (D-IN ) stated as follows.  “I am concerned that China’s state-owned enterprises will only continue to gain influence in our country and around the world in the future, and it is my hope that through hearings and discussions such as the one that you are holding today, we can begin to develop the appropriate policies that ensure American workers and American companies can fairly compete in a world with Chinese state-owned enterprises.”

Hearing testimony and statements addressed among, other things, the following topics: how much of the Chinese economy is state owned or state controlled; how many SOEs and non-central SOEs there are; what is the difference between SOEs and other entities with state “involvement”; what kinds of government support do SOEs receive; SOE procurement and contracting practices; can SOEs be considered “commercial” and, if so, in what respects; does the CCP choose or influence the choice of directors and top management of SOEs; China’s “going abroad” policy and increasing Chinese SOE investment in the United States; are SOEs in the United States and other foreign markets primarily expected to turn a profit or to gain market share or to pursue other non-commercial goals.

As noted in submitted statements “SOEs are now gigantic on a global scale.”  Three of the top 10 companies in the Fortune 500 are Chinese SOEs.

In March, the House Committee on Foreign Affairs, Subcommittee on Africa, Global Health, and Human Rights held a hearing titled “Assessing China’s Role and Influence in Africa” (see here).

In testimony (here), Principal Deputy Assistant Secretary Don Yamamoto (The Bureau of African Affairs, State Department) noted that China has emerged as the clear leader in trade and investment in Africa.  Assistant Secretary Yamamoto noted however that”China’s practices have in some cases undermined efforts to promote progressive business practices, democracy, and good governance in Africa.”  Among others, he stated as follows. “Although China enacted legislation criminalizing bribery of foreign public officials in 2011, some Chinese companies continue to undermine accountability and good governance by engaging in corrupt practices to win contracts and bids in Africa.  Corrupt activity by Chinese companies also disadvantages U.S. companies who compete on the merits and do not engage in such illegal behavior (which is prohibited under domestic bribery laws in Africa as well as under the U.S. Foreign Corrupt Practices Act). The United States encourages China to rigorously enforce its anti-bribery laws, accede to the OECD Anti-Bribery Convention, and subscribe to international development practices.”

At the hearing, Carolyn Bartholomew (Commissioner, U.S.-China Economic and Security Review Commission) noted (here) as follows.  “The deal-making [by Chinese companies in Africa] is often done between corrupt government officials. The public has no access to information about those deals. The Chinese government’s support for its state-owned and state-connected enterprises, its deep pockets, and its willingness to bring to the table a wide range of incentives, has created barriers for U.S. business participation in countries across the continent. Corruption is a serious problem. We should be proud of the standard set by the Foreign Corrupt Practices Act (FCPA). Yet, when Chinese partners are willing and able to offer new palaces, military equipment, sports arenas, and a host of other “gifts,” American companies cannot compete.”