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Sunday, February 20, 2011

On the Police Power of Chinese Banks: An Exception or the Rule Worldwide?

In July, 2010, a few days after the Agricultural Bank went public in an IPO bringing in $22 billion, dozens of former bank employees stealthily gathered outside the headquarters of the country’s central bank. Like many other state-owned companies, the bank slashed its payroll and restructured in order to raise profitability and make the bank more financially attractive to outside investors. By Western standards, the bank was overstaffed, a legacy of its role as one of the pillars of China’s socialist financial system. The fired bankers have no legal redress in China. In 2000, the Supreme People’s Court put an end to any hope that the legal system might adjudicate such disputes, saying that plaintiffs from state companies had no standing in Chinese courts. So the ex-bankers protest—at least they attempt to do so before being picked up by a coordinated police response. This dynamic should come as no surprise to anyone.  What might not be so apparent is the ability of the banks to use the police to go after recalcitrant ex-employees. The banks are so powerful that they can enlist the local police to keep an eye on the most troublesome employees, often following them to Beijing, where their protests and petitioning can prove embarrassing for executives back home. One ex-employee said, “The head of my branch said he would never give me my money and spend any amount to fight me to the end.”  I contend that it is troubling that the director of a bank branch whose mentality it is to spend any amount of money to fight an ex-employee has police-power at his beck and call.  Beyond the lack of an independent judiciary in China, the possibility that a banker in any country could have a police force at his or her ruddy fat hands is something that ought to be investigated.  While it might be tempting to relegate such a scenerio exclusively to China, European and American states are most likely not immune either.

Source: http://www.nytimes.com/2010/08/16/world/asia/16china.html?pagewanted=1&_r=1&dbk