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China: Mooncakes and Mooncake Coupons Revisited

I wrote a post two years ago (here) describing some of the compliance complexities in giving mooncakes and mooncake coupons as part of China’s Mid-Autumn Festival, which falls on September 8 this year. Those compliance complexities still exist.

This post notes four emerging trends:

The anti-corruption campaign has reduced demand for mooncakes, particularly for certain types.

Chinese media have reported that the government/Party’s ongoing anti-corruption campaign reduced sales revenue attributable to mooncakes by an estimated 25% last year, and revenue is expected to fall further this year. Specifically, the demand for mooncakes with extravagant packaging has declined significantly, as has the demand for “mooncakes with extras” (cash, wine, mobile phones, gold bars, etc.), although such goods still can be found online.

Technology has expanded the ways that mooncakes and coupons can be given.

Mooncake coupons are often given electronically as e-coupons.  Like their paper cousins, these e-coupons can be redeemed for mooncakes — or other goods on the merchant’s website. Some online merchants are willing to issue a tax-valid receipt (fapiao) for “office supplies” to conceal the purchase.

WeChat, a mobile text and voice messaging platform, also offers “e-mooncakes.” A recipient enters the coupon number and password, and a QR code is sent to the recipient’s phone and swiped at the store to redeem for the mooncake (or another item). This is a variation of the digital gift cards and electronic red envelopes that first appeared earlier this year.

Traditional coupons can still be exchanged for other goods or services.

As noted in my previous post, coupons (and e-coupons) can still be redeemed at stores for non-mooncakes goods or scalped for money, although the second-hand market is reportedly less robust than in previous years.

Some hotels are using specially designed packages that have no trademarks or logos in order to avoid scrutiny. Other hotels are issuing mooncake coupons that are redeemable for mooncakes — or as credit toward lodging or meals at the hotel.

Government officials continue to be scrutinized for mooncake-related corruption.

The Party’s internal disciplinary authority, the Central Commission for Discipline Inspection (CCDI), has set up an online whistleblower website (here) for the general public to report use of public funds to buy mooncakes.  State-owned media have reported that officials have been disciplined for violating the Party’s rules on mooncake-related corruption. As the Party continues its anti-corruption crackdown, CCDI investigators increasingly are seeking evidence of corrupt activities from private companies.
Eric Carlson, a contributing editor of the FCPA Blog, is a partner at Covington & Burling LLP.  He specializes in anti-corruption compliance and internal investigations, with a particular focus on China and other regions of Asia.  He speaks Mandarin and Cantonese and can be contacted here.

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