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China capital market reforms may impact who’s a ‘foreign official’

China Ambassador Zhang Yesui attends reception hosted by the US-China Business Council The U.S.-China Business Council (the “USCBC”) — the leading organization representing U.S. companies of all sizes doing business with China — monitors policy developments in China of potential interest to its members and publishes various comments. 

A summary of State Council Measures on Capital Market Reforms prepared by the USCBC should be of interest to FCPA practitioners. It can be downloaded here.

The Measures deal in part with SOE Ownership Model Reforms and note that SOEs will be encouraged to participate in “mixed” ownership structures with the private sector, including foreign investors. 

Given that China has already been innovative in devising “mixed” ownership structures and allowing the listing of SOEs, more creative and flexible structures should be expected. 

Although the Esquenazi decision has brought some predictability to deciding which SOEs carry out governmental functions, and, thus, are staffed by “foreign officials” for FCPA purposes, future developments in China are likely to produce “mixed” structures that make application of the Esquenazi factors difficult.

It is also reassuring to see the State Council calling for more transparency with SOEs and in IPOs involving Chinese companies. While in China, high level interest in anti-corruption and transparency can sometimes be politically motivated, it is always good to see the highest authorities of the Chinese government concerned with improving China’s performance in these areas.

The USCBC website is here.


Benjamin P. Fishburne, III practices law independently and has been a partner in several major international law firms. He is a former Assistant General Counsel and, later, General Counsel of the US-China Business Council. He can be reached here.


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