China has established a strategy of resistance against the
U.S. legal and financial supremacy which took place in four major steps.
The first step was that of kindness, what might be called
the Stage of Open Collaboration with the West where Chinese doors wide opened
to foreign corporations, openness of course coupled with the lure of mutual
gain. It has been free entry of Americans and Europeans in China for 20 years.
U.S. and European multinationals have been invited to come
to China to produce at very low costs. As multinationals became accustomed to
low cost of production, they decided to settle permanently in China, to produce
and also to sale.
The second step is what we could call the Stage of the Law.
In the years 2005 to 2009 a series of court cases in China caused problems for
the European multinationals, including German ones producing and selling
chemical products in China. The best known case is that of a Chinese worker who
came to work in pajamas. He was turned back at the entrance, but two hours
later the Chinese police came to incarcerate the two German directors. The
legality of their arrest was their ticket to an old, but still in force, local
Chinese law that allowed workers to come to work in pajamas. It took several
days to German employers in Europe to realize the seriousness of the situation
and the determination of the Chinese. Their two executives could only get out
of jail two weeks later, after paying a fine of several million dollars.
Chinese authorities have strengthened their stances on the European front to
attack the Americans.
The third step was the Stage of Sanctions and can locate its
peak in 2010-2011 with a series of cases involving the number one global
distribution, the renowned giant Wal Mart, both accused of not respecting the
legislation work in China and of selling in its stores merchandise which did
not comply with Chinese health regulations. Wal Mart’s first response was to
simply despise these attacks. But the immediate and abrupt closure of several
of its hypermarkets and the arrest and imprisonment of several senior managers
in China put the store chain on its knees and at the end of 2011 it was
sufficient enough for Wall Mart to consider the full and final closure of all
its operations in China.
However having weighed the pros and cons and under its best
interests, Wall Mart decided to present its apologies to dismiss senior
officials, or at least officially held responsible, pay steep fines and above
all agree to abide by Chinese laws forever ...
The fourth step is the last step and it could be called the
Chinese March for Legal and Financial Power.
American financial power has many faces, but it is best
known through some particular faces. Among these faces is the face of the SEC
and those of the Big Five.
The SEC or Securities and Exchange Commission is the supreme
authority of the U.S. financial markets and by repercussion of all the
companies that are listed on the New York Stock Exchanges, or who invest in the
NYSE, specifically all banks and insurance of the planet as well as all
multinational companies worldwide. In other words, the SEC controls everything,
everywhere, all the time.
The Big Five are the giants of the accounting, auditing and
certification of the balances sheets of all the large companies in the world.
The Big Five validate and certify the financial statements of the corporations
listed on the New York Stock Exchange, the NYSE companies.
The Big Five are the guarantors of the regular financial health
reports of the listed companies.
These health bulletins determine the price of the shares of
these corporations end therefore the course of actions of these companies.
To close the loop, since the SEC controls the BIG Five, this
means that the great leading controllers of the SEC control the controllers.
One of the findings of the U.S. financial markets has been to
double-list companies on Wall Street and in the stock exchanges in Hong Kong
and Shanghai. Originally this meant more money, more investments, more
shareholders, and more money again.
But this double-listing also proved to be the Achilles’ heel
of the U.S. financial supremacy.
Between 2011 and 2013, one of the Big Five, a subsidiary of Accenture
in China, and then others among the Big Five, have been the target of the SEC
regarding the audit of listed Chinese companies in both the financial markets
China and in Wall Street.
The SEC required Accenture delivers secret information on
its Chinese corporate clients. If Accenture did not comply, then Accenture leaders
could be imprisoned in the United States and Accenture would then be hit with
huge fines.
However for the first time in the SEC history there was a
complication, a complication of size.
This time, the China Securities Regulatory Commission (CSRC)
and the Chinese Government showed teeth.
The CSRC is the equivalent of the Chinese SEC.
The argument of the CISC and Chinese Government is that the
information required by the SEC from Accenture about corporate clients was
Chinese about Chinese trade secrets protected by Chinese law on secrecy of
business transactions. Their violation would have resulted in the imprisonment
of the Accenture leaders in China this time.
In other words Accenture leaders had a choice between
obeying the SEC and go to jail in China or disobey the SEC and go to jail in
the United States.
After two years of struggle, the Accenture cases, and other
similar cases, have resulted in a negotiated agreement. Chinese financial
authorities have authorized that certain information be disclosed to the SEC
and the SEC had to be content with only receiving a small portion of the information
the SEC first requested.
And so, there was a clear and total victory of China who got
what it wanted from the beginning: that the world recognizes the supremacy now
shared by the United States and China's domination of international finance and
international financial law.
Since 2013 there are two super-gendarmes of finance in the
world: 1) The Securities and Exchange Commission and 2) the China Securities
Regulatory Commission.
What could be called a new balance of terror, a financial
one this time.
Prof. Olivier Chazoule
