This year’s annual meeting of China’s legislature, the National People’s Congress (“NPC”), brought forth a series of consequential changes that continue to push forward President Xi Jinping’s anti-corruption campaign while consolidating the President’s power through new party appointments and the elimination of the two-term limit, and streamlining government bureaucracies through the restructuring of several government agencies. Among the key changes was the creation of a new anti-corruption “super” agency, vested with broad powers to investigate and recommend for prosecution prosecute public-sector corruption throughout the country.
Consequential Government Reorganization
This year’s NPC was the most consequential in recent memory. Through several new laws, China reduced the number of ministries in the State Council, China’s cabinet, by eight in an effort to streamline government. The new agencies include the National Markets Supervision Bureau, which combines the responsibilities of the State Administration for Industry and Commerce, the General Administration of Quality Supervision, Inspection and Quarantine, and China Food and Drug Administration, and also takes over the pricing supervision and antimonopoly law enforcement role from the National Development & Reform Commission, Ministry of Commerce, and State Council; the China Banking and Insurance Regulatory Commission which merges the China Banking Regulatory Commission and the China Insurance Regulatory Commission to streamline and tighten oversight of the country’s rapidly growing financial system; and the Ministry of Ecological Environment which will take on responsibility for environmental protection.
Among the most-watched changes was the constitutional amendment that removes the two-year presidential term limit, effectively permitting President Xi to remain in office indefinitely.
Introducing the National Supervision Commission
In a signal that China intends to continue the aggressive anti-corruption regime that has marked President Xi’s tenure, on March 20, 2018 the NPC passed legislation establishing a new anti-corruption “super” agency, the National Supervisory Commission (the “Supervisory Commission”). The Supervisory Commission will replace the Central Commission for Discipline Inspection (the “CCDI”), a predecessor agency with a remit limited to disciplining party members accused of corruption.
The Supervisory Commission will retain the powers of the CCDI but also consolidated the anti-corruption functions previously spread among a number of different national-level agencies. Its remit will also extend considerably beyond policing party members, instead assuming jurisdiction to investigate government officials regardless of Party membership, including individuals employed by state-owned companies, educational institutions, and other state-run enterprises.
The Supervisory Commission is vested with broad investigative powers, including the power to detain a corruption suspect under a new mechanism called “liuzhi.” Liuzhi is designed to replace shuanggui, a secret and highly-criticized detention mechanism run by the party for party members whereby those accused of corruption were held without charges or access to counsel, often without notification to their family, for indefinite periods of time. Unlike shuanggui, those subjected to liuzhi have the right to notification of family within 24 hours, detentions will be limited to three months, and, upon approval, another three months, and interrogations will be videotaped. The Supervisory Commission also has the power to collect evidence, seize assets, and recommend cases for prosecution.
While the Supervisory Commission will have a much broader-reaching mandate, the primary focus continues to be on the covered government officials rather than the private sector. Nonetheless, Chinese companies and foreign firms that do business in country should take note of the expansive nature of the agency’s powers, in particular because even private sector firms risk becoming embroiled in investigations conducted by the Supervisory Commission (indeed, the law permits the detention of even private individuals deemed to have committed bribery or misconduct jointly with a public official). This is particularly true for companies and individuals doing business with Chinese state-owned enterprises.
Administratively, the Supervisory Commission ranks alongside the State Council, Supreme People’s Court and Supreme People’s Procuratorate, and above most institutions of the Chinese government (including the Judiciary). While there is nothing new about prohibitions on public-sector corruption in China, the creation of the Supervisory Commission reflects a decision to invest greater resources and further prioritize President Xi’s anti-corruption agenda.
The new Supervisory Commission has a familiar leader, Yang Xiaodu. Mr. Yang comes to the role from his position as the Deputy Secretary of the predecessor CCDI. He is widely considered to be closely connected to the former head of CCDI, Wang Qishan, who has been elevated as China’s Vice President to President Xi. Before joining the CCDI in 2013, Mr. Yang was the secretary of the Shanghai Municipal Discipline Inspection Commission (President Xi was then the senior party official in Shanghai).
A Preview Of Administrative Changes In The Area Of Commercial Anti-Corruption
Creation of the Supervisory Commission follows two other recent developments designed to enhance the Chinese government’s anti-corruption arsenal, including in the areas of commercial anti-corruption.
First, in November 2017, the NPC’s Standing Committee amended the Anti-Unfair Competition Law to revise the definition of commercial bribery to include conduct “seeking transaction opportunities or competitive advantage,” establishing a presumption of vicarious liability for employers in connection with illegal actions taken by employees, and increased the potential range of fines. The amendments also confirmed liability for interfering with ongoing anti-corruption investigations and established civil liability for businesses that commit acts of unfair competition (including commercial bribery).
Second, the Institutional Reform Plan of the State Council approved on March 17, 2018 calls for the consolidation of the agency that traditionally enforced China’s laws on commercial bribery – the State Administration for Industry and Commerce (“SAIC”) – with several other agencies to form a State Market Regulatory Administration (“SMRA”). The newly-merged agency will have a more senior rank within the Chinese administration than its predecessor, and is widely expected to be led by Mao Zhang, the current head of the SAIC.
While it remains to be seen what these changes will mean for the future of Chinese anti-corruption enforcement in the commercial context, given the focus on anti-corruption enforcement in China more generally, it is reasonable to expect that the new SMRA will be eager to demonstrate that it is a serious and credible enforcement authority.
A Continuing Of Aggressive Anti-Corruption Efforts
Fighting corruption within the Communist Party has been a central tenet of President Xi’s first term in office. In the past five years, up to 1.5 million Chinese officials have been investigated and prosecuted for corruption. This includes anti-corruption prosecutions of powerful officials and party members including Zhou Yongkang, once the third most senior leader in China, Bo Xilai, a former party chief of Chongqing, Sun Zhencai, a member of the Politburo, and Wu Ai’ying a member of the Central Committee and justice minister. Within the past month, Zhang Zhongsheng, the deputy mayor of Luliang, a city in Shanxi province, was sentenced to death without the two year reprieve given to most officials convicted of corruption, for accepting over one billion yuan (US $160 million) in bribes. According to the CCDI, since the last meeting of the National Congress in 2012, more than 70,000 officials at or above the county-head level have been investigated for suspected corruption and over 7,900 have been punished, including at least 17 members of the CCDI itself. 
While the broad anti-corruption effort has widely been viewed as reducing rampant corruption in the Chinese administration, human rights groups have also raised concerns that the effort has been characterized by a lack of transparency and due process, and has served as a tool for President Xi to consolidate his authority.
 Zhonghua Renmin Gongheguo Jiancha Fa (中华人民共和国监察法) [Supervision Law of the People’s Republic of China] (promulgated by the Nat’l People’s Cong., Mar. 20, 2018, effective Mar. 20, 2018), available at http://www.npc.gov.cn/npc/xinwen/2018-03/21/content_2052362.htm.
 Zhonghua Renmin Gongheguo Fan Bu Zhengdang Jingzheng Fa (中华人民共和国反不正当竞争法) [P.R.C. Law Against Unfair Competition (2017)] (promulgated by the Standing Comm. Nat’l People’s Cong., Nov. 4, 2017, effective January 1, 2018), available at http://www.npc.gov.cn/npc/xinwen/2017-11/04/content_2031432.htm.
 Guowuyuan Jigou Gaige Fangan (国务院机构改革方案) [State Council Institutional Reform Program] (promulgated by the Nat’l People’s Cong., Mar. 17, 2018), available at http://www.npc.gov.cn/npc/xinwen/2018-03/18/content_2050371.htm.
 China’s Anti-Graft Drive Wins People’s Trust, China Daily (Oct. 8, 2017), available at http://www.chinadaily.com.cn/china/2017-10/08/content_32973939.htm.