Change of Penalties under new PRC Criminal Law

China

On December 26, 2020, the Standing Committee of the National People's Congress, China's top legislature, voted to adopt the “Amendments to the Criminal Law of the People’s Republic of China (11)” (“Amendments”), which will come into effect on March 1, 2021.

Comparing to the PRC Criminal Law amended in 2017 (“2017 Criminal Law”), there is a certain degree of imbalance between the levels and standards of sentencing for corrupt conduct (acceptance of bribes, embezzlement and misappropriation) committed by state functionaries and non-state functionaries. To reduce such imbalance, the Amendments has largely raised the sentencing levels for non-state functionaries.

Increased criminal liability for white-collar corrupt activities

The Amendments introduced an additional sentencing level for the crime of accepting bribes and the crime of embezzlement committed by non-state functionaries. Under this level, suspects could be facing a longer prison sentence when the amount involved in the case is “extremely huge”. The penalties for two preceding sentencing levels were also changed. When the case’s involved amount is “relatively large”, the top penalty of imprisonment is changed from five to three years. For cases involved with “huge” amount, the term is changed from “more than five years” to “up to five years”.

New standards for sentencing

The Amendments also provided new standards for sentencing depending on the seriousness of the circumstances of the violation. Where "serious" circumstances attract prison sentences of no more than five years and a fine. "Extremely serious" circumstances see the penalties increased to more than ten years imprisonment or even a life imprisonment, plus a fine. After the amends, these new standards are now consistent with the sentencing standards for corrupt crimes committed by state functionaries.

Comparison between 2017 Criminal Law and the Amendments

Crimes committed by a non-state functionary 2017 Criminal Law The Amendments
Acceptance of bribes relatively large” amount - fixed term imprisonment for up to five years or criminal detention relatively large” amount - fixed term imprisonment for up to three years or criminal detention
huge” amount - fixed term imprisonment for more than five years, may be accompanied by confiscation of property huge” amount/serious” circumstance - fixed term imprisonment for up to five years, plus a fine

extremely huge” amount or “extremely serious” circumstance - fixed-term imprisonment for more than ten years / life imprisonment, plus a fine
Embezzlement relatively large” amount - fixed term imprisonment for up to five years or criminal detention relatively large” amount - fixed term imprisonment for up to three years or criminal detention, plus a fine
huge” amount - fixed term imprisonment for more than five years, may be accompanied by confiscation of property huge” amount - fixed term imprisonment for up to five years, plus a fine

extremely huge” amount - fixed-term imprisonment for more than ten years / life imprisonment, plus a fine
Misappropriation relatively large” amount without returning within three months/ use such funds for profit-making or illegal activities and returned within three months - fixed term imprisonment for up to three years or criminal detention relatively large” amount without returning within 3 months/ use such funds for profit-making or illegal activities and returned within 3 months - fixed term imprisonment for up to three years or criminal detention
huge” amount/ “relatively large” amount without returning - fixed-term imprisonment from three years to ten years huge” amount - fixed-term imprisonment from three years to seven years

extremely huge” amount - fixed-term imprisonment for more than seven years

It is worth noting that the standards and monetary threshold for determining the amount or seriousness of corrupt conduct for non-state functionaries has not been issued. It is expected the Supreme People’s Court and the Supreme People’s Procuratorate will issue interpretations on the Amendments after the law came into effect on March 1, 2021.

Increased criminal liability for infringement of trade secrets

Another focus of the Amendments is trade secrets protection. In this regard, standard for sentencing the crime of trade secret infringement was changed from “price amount” (i.e. "causing heavy losses”) to the to “circumstances” (i.e. causing "serious circumstances" or “extremely serious circumstances”). The maximum prison sentencing has been raised from “seven years” to “ten years”. It also adds “fraud” and “electronic intrusion” (such as hacking) as a punishable method for stealing trade secrets. These changes are consistent with China’s commitment on strengthens protection and enforcement of IP on the U.S.-China Phase 1 trade deal in January 2020, and the revised PRC Anti-Unfair Competition Law in 2019.

The amends for crimes committed by non-state functionaries and trade secrets protection will have a direct impact for local and foreign companies operating in China. Informing employees about relevant changes and providing compliance training appropriate to the risks involved is strongly suggested.