Death Penalty for a Bad Loan: Crime, Punishment, and Politics in China

Two recent cases show that China can be far tougher on misbehaving officials and bankers than is the U.S. So how is it that the American system, for all its faults, is still so much better at promoting rule of law?

Chinese businesswoman Wu Ying, left, was condemned to death for taking out bad loans. U.S. torture architect John Yoo, right, on his way to his Berkeley classroom. AP

If you're an American who is outraged by insider trading in Congress, if you're appalled that Bush-era officials green-lit torture and Obama era officials have a "kill list" of American citizens, if you're infuriated that so many of the Wall Street tycoons whose bad choices sparked the 2008 financial crisis would not only go unpunished by give themselves bonuses, or if you believe that top Bush administration (or Obama administration) officials should be prosecuted as criminals for deadly abuses of power, then the Chinese system has something for you. China is remarkably, thoroughly tough on abuses and corruption within its top political and financial ranks. Or so it might seem on the surface, anyway.

American torture architects such as John Yoo, financial derivative deregulation architects such as Larry Summers, maybe even someone as popularly disliked as Dick Cheney -- none of them has to worry about much more than public disgrace in the U.S., but how long would they last within China's system? Three good Chinese answers to this question are Bo Xilai, a provincial leader currently embroiled in scandal over his abuses of power; Zhao Ziyang, the Communist Party General Secretary until he showed too much sympathy to Tienanmen Square protesters in 1989; and Wu Ying, a 28-year-old woman who will soon be put to death for taking out large loans she was unable to pay back.

Bo Xilai, one of China's most influential and fastest-rising political leaders, a man who runs the country-sized district of Chongqing and seemed destined for Beijing, has been sacked over what appear to be remarkable abuses of power. As part of his tough, popular, and not-always-legal crackdown on organized crime (something that bears some similarities to, say, the U.S. war on terror and its excesses), Bo overstepped, imprisoning and torturing suspects who might not have deserved it, sometimes maybe even for personal ends. (This last abuse breaks from any "war on terror" similarities.)

The details of Bo's case are more complicated, and it appears to be about more than just the abuses of his rule -- his preference for state-run enterprises contradicted Beijing's efforts at economic liberalization, his police chief rushed into the local U.S. consulate to (maybe) fess up to his boss's abuses, and his wife is now under investigation for murdering a British businessman. But the cases of American officials and businessmen who are responsible for controversial and potentially abusive policies are complicated, too.

Where the American system seems to err on the side of forgiving high-level individuals, China's seems to be much more ready to topple its own giants. But China's internal purges, though maybe cause for occasional American envy for the state's willingness to take down almost anyone if their abuses are grave enough, are very different from American self-policing in one important way. In China, enforcing the rule of law usually isn't primarily about the rule of law itself, even if it often happens to achieve that end -- it's about preserving the Chinese system, whatever it takes.

Over the course of about a week in May 1989, Zhao Ziyang went from one of the most powerful people in the world -- the General Secretary of the Chinese Communist Party -- to officially nonexistent. As protests mounted across China, Zhao, a reformer sympathetic to the demonstrators, urged "a track based upon democracy and the rule of law." He opposed declaring martial law in Beijing, but former Chinese leader Deng Xiaoping (still pulling the strings from official retirement) and other party hard-liners overruled him, after which he was ousted from rule. The next morning, he waded into the crowd at Tiananmen Square, bullhorn in hand, to give a tearful speech that began, "Students, we came too late. We are sorry. You talk about us, criticize us, it is all necessary." He was placed under house arrest, where he died 16 years later. According to Out of Mao's Shadow, a book by journalist Philip Pan, most state media were barred from even announcing Zhao's death; The Beijing Evening News ran a one-sentence item on page 16.

Zhao Ziyang, like Bo Xilai 23 years later, was ousted from power for many complicated reasons, which on the surface appear contradictory. Zhao's firing was lamented in the West as a sign of Beijing's authoritarian retrenchment; today, Bo's removal looks like good news for China's liberal reformers, who opposed Bo's more neo-Maoist governance. Both of these are true, but Bo and Zhao share that they threatened the established norms of Communist Party rule at that moment. Fears about political stability and the sustainability of Communist Party rule are never far off in Beijing, which came to perceive these two leaders as dangerous to the system. It was that perception danger, much more than any real or imagined crimes, that may have done them in. Call it rule of law with Chinese characteristics.

The U.S. and China are, in this way, actually not so different. Whether rightly or wrongly, the Obama administration might believe that prosecuting Bush-era officials who approved torture, for example, would pose too much of a threat to the larger political-economic structure of the United States. Locking up John Yoo or Jay Byee, the argument goes, could set a precedent of one administration prosecuting the previous that would be too easy to repeat and too easy to exploit. Even if you disagree with the logic, the intent here seems to be to deviate from the rule of law in service of the rule of the law. In China, corruption is the norm; it's ingrained in the system. The rule of law is a check on that corruption, but it exists more to serve the system. In the U.S., the system exists to serve rule of law.

That brings us to greedy bankers. Nobody likes a greedy banker, in China or in the U.S. But the two systems deal with them very differently. Wall Street authors of shoddy mortgage-backed securities might have done something very wrong, but, with some exceptions, this isn't necessarily illegal, even if it is bad for society, and even if a lot of people would like to see those bankers punished. That's not always how it works in China. When 28-year-old Wu Ying took out $55.7 in loans from investors, had her investments fizzle, and then failed to back the creditors back, she got the death penalty. Taking loans outside of the tightly regulated, state-run banks is illegal in China, although an estimated 42 million Chinese businesspeople do it regularly.

Party officials often make examples of villains-du-jour, in this case the young Wu, whose decisions robbed the economy of lots of money. Sending her to her death will win some popular support for the party, which will make a show of fighting corruption, and it will curb the banking abuses that these officials see as dangerous to the economy. But it won't be about rule of law. The U.S. system isn't always perfect, but at least it puts that one principle first.