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China doubles reward for consumer fraud whistleblowers to up to $155,000

Beijing looks to increase scrutiny on businesses as product complaints surge

Chinese consumers who report food safety problems to the government can receive a share of any penalties paid by the company.   © Reuters

BEIJING -- The Chinese government will offer rewards of up to 1 million yuan ($155,000) for reports of safety problems or misconduct involving consumer products, double the current ceiling, to encourage employees and the public to blow the whistle on corporate wrongdoing.

Set to begin in December, the bigger incentives respond to a steady rise in consumer complaints driven by the online shopping boom of recent years.

The China Consumers Association reports that related organizations received more than 980,000 claims last year -- up by half from five years earlier -- with appliances, daily necessities and food among the leading categories.

Rewards of 1%, 3% or 5% of any penalties levied against a company will be paid to the person who reported the problem, based on factors including the evidence provided. Internal whistleblowers can receive a larger share of the fines, up to the 1 million yuan limit.

The new provisions apply to food and pharmaceuticals as well as products and equipment related to consumer safety. The last category is expected to be broad, covering such items as elevators, air conditioners and air purifiers.

The changes recently announced by the Finance Ministry and the State Administration for Market Regulation combine two existing systems offering rewards for reports of counterfeit or poor-quality goods or illegal conduct related to food or drugs, capped at 300,000 yuan and 500,000 yuan, respectively.

The new program includes provisions to protect those making the reports, with the threat of criminal charges if personal information about a whistleblower is leaked or content from a report is sent to the company in question. People who fake claims of misconduct in hopes of claiming a reward will face fines.

The change aims to supplement an oversight system that is becoming overstretched, as well as lower administrative costs. The number of registered corporations and sole proprietors in China has swelled roughly 160% from 2012 to 145 million -- too many for authorities to catch every instance of misconduct on its own.

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