The fact that without being caught you have worked illegally does not mean others should follow.

Yes, that's absolutely true. But according to the official line, the fine for those caught in the act is 500 or 1000, in Shanghai, not 5,000. Though the new laws that will apply from the middle of 2013 will up that to a maximum of 10,000 for a foreign teacher who flaunts the law, if he is caught, Owen will only be fined 10,000 plus his thus- illegally-gotten profits, whatever they might be, if his guanxi deserts him, very unlikely in my opinion. His firm won't be put out of business, and he won't be deported!
Nige is probably not qualified on paper to merit the issue of an FEC. That's why he's teaching on an F. Can't blame him, but for his sake I hope he avoids detection by the PSB. In all probability, he'll be overlooked, but that's not absolutely certain. So, he should ensure he has sufficient cash available to pay his way out of trouble if things go pear-shaped!