The international community is fully cognizant of the seriousness of government corruption in China. China remains one of the few countries that continue to employ strict control of media and the Internet, and the organization Transparency International has still not been able to obtain permission to open an office in the country. As a consequence, it should not surprise us that the international community lacks a clear picture of the actual extent and nature of corruption and its negative influence on the country’s future development.
This paper will attempt to clarify and address the following problems:
1.The relationship between political corruption and the social system;
2.The areas where there is a high occurrence of corruption and its forms;
3.The unfavorable influence of corruption on social development;
4.The methods employed by the Chinese government to strengthen social control.
The paper concludes that, under the current social system, the government is incapable of finding a solution to a problem that it has itself created. As a Chinese saying puts it, even the sharpest blade cannot be used on itself! The government's measures against corruption in China are comparable to a surgeon performing an operation on himself. Serious corruption has devastated the very foundations of Chinese society and enveloped the country in a state of crisis—a volcanic landscape dotted with underground fires—and on the brink of erupting.
In response, a number of academics have put their faith in the government’s capacity to maintain stability through its “fire brigade” approach to the problem. This includes increasingly widespread and violent political oppression, a reliance on informers and espionage, and tight control of the country’s media and the Internet. Important too has been the Party’s recent willingness to open a narrow door to power and authority to China's economic and intellectual elites, allowing them to share in society’s wealth.
The author’s opinion is that while this unstinting willingness to throw money around in order to survive will lengthen the ruling life of the Chinese Communist Party (CCP), it will fall short of overcoming the corruption crisis.
1. The Special Characteristics of Phases of Corruption in China
Early in 1999, the author wrote an essay expounding the argument that from the mid-90s onwards, China had entered a stage of systemic corruption. Beginning with the [economic] reforms, governmental corruption has gone through the following stages of evolution: From 1980 until the early 1990s, corruption was chiefly limited to the venal behavior of individuals. Yan Jianhong, General Manager of the Guizhou China International Trust and Investment Corporation (CITIC), Gao Senxiang, President of the Shenzhen Branch of CITIC Industrial Bank and Wang Jianye, head of the Planning Department of the Shenzhen Planning Bureau are typical examples.
From 1995 onwards, corruption developed from individual acts into an organized pattern of behavior. Organized corruption includes: 1. Corrupt behavior by leading figures and subordinates in social organizations—including government departments—becoming the norm within the organization; 2. Exchange of power for money or other liquid assets by members of an institution; 3 Use, by relatively low-level government organizations and enterprises, of public resources at their disposal in order to bribe higher officials. These bribes are aimed at obtaining increased levels of public finance, favorable policies or more opportunities in general.
The case of Deng Bin in Wuxi of Jiangsu province displayed the typical characteristics of "organized corruption". Another prime illustration of such activity was the notorious Zhanjiang smuggling case, which led to the "collapse" of the Party Secretariat, Mayor and leading officials from, among others, the departments of Finance and Customs, as well as the exposure of smuggling operations organized by military authorities.
Beginning in 1998, the organized corruption described above began the transition to systemic corruption. Evidence of this transition can be seen from the following: Firstly, corruption has permeated into the political system itself and was now dominant throughout the government apparatus. The departments of Industry and Commerce, Customs and Excise, Finance, Land, Education and Public Health have been particularly prone to systemic corruption over the years. Secondly, corruption has become a system of resource allocation in itself. Society's political, economic and cultural resources are thus a principal target. Each case of the sale of official posts and titles represents an example of systemic corruption.[1] Thirdly, the campaign against corruption has itself—on one level—become a tool for obtaining gain or prosecuting a political struggle. For example, part of the political and economic life of the city of Rui’an in the Wenzhou area of Zhejiang fell under the control of a local village gangster after he used the corrupt behavior of the officials as a lever to gain influence over official appointments.[2]
In recent years, the Organization Department of the CCP’s Central Committee has even used information on the private affairs of its cadres—matters that they would rather keep quiet—to control their behavior. The so-called “struggle against corruption” has been stained by its use as a weapon to attack political rivals. For example, the purging of Zhu Xiaohua and Wang Xuebing from Zhu Rongji’s team of officials was allegedly on the grounds of corruption, but this was, in fact, simply a case of using the campaign against corruption to purge them from office.[3]
Because corruption has seeped into the daily life of the majority of government departments, officials who try to maintain an honest approach to their work are often squeezed out by others, who are fearful that such honesty will block their own route to riches. In what is surely testament to how low public values and social consciousness in China have sunk, it is now the case that all officials are taking kickbacks. This is how 'things gets done' and the size of the kickback is the measure of “success.” At times, government departments have actually been known to strike deals with criminals in order to protect higher-level officials and avoid exposure of their corruption. The case concerning the business activities of the Huachen Group’s Managing Director, Yang Rong, in August 2002 is a good example.[4]
The reliance on what amounts to blackmail to restrain the behavior of officials and the use of the campaign against corruption to liquidate political rivals, has now become the glue that unites political elites together. In these circumstances, regulations against corruption will not act as deterrents. Instead, they will encourage political elites to guard against any divisions in their ranks and adopt various new measures to prevent the emergence of a strong and influential opposition faction. In recent years, universal recognition of corruption and widespread exchange of power for money has reduced previously audible appeals from China’s political elite for political reform to a muffled whisper. Friction within the political system has diminished. On the issue of corruption, all the established political power holders are in agreement: the upholding of the current political system and status quo is in the interests of those who have already acquired riches.
In fact, “corruption with Chinese characteristics” is almost identical to the forms of corruption in Latin America and South Asia. Although there are differences between China’s political system and those of the nations of these two continents, the supremacy of power over law is common to all these systems. In China, those who have become rich through corruption and have power and wealth at their disposal are situated at the very top of the social hierarchy. Because the source of their wealth is unclear, the vast majority of ordinary people are highly suspicious of the legitimacy of their prosperity, and, from a moral perspective, hold such people in low esteem. In 1997 and the first half of 1998, a number of social and political commentators welcomed Jiang Zemin’s “Theory of the Three Represents”, and the “July 1 Speech" recommending “the entry of private entrepreneurs into Party.” The so-called theory is employed as an attempt to justify the current social order in China and to open up an institutionalized route for the integration of China’s political and economic elites.
2. Causes of Systemic Corruption in China
The point is that corruption in present-day China is not a transitional phenomenon, nor is it the product of capitalism as Chinese official media proclaims. The structure of political power in Chinese society determines the inseparable relationship between corruption and the country’s social system itself. Relying on anti-corruption measures and posturing from the CCP government will yield no real results on institutionalized corruption. To begin with, the CCP formulates the Constitution and all laws, as well as industrial and commercial regulations. The latter are especially important as they ensure that the powerful interest groups within each sector are also those that take part in the government and Party's legislative process. In the process of formulating laws, a clear systemic bias emerges. It becomes even more pronounced as the CCP government simultaneously performs the three roles of formulating, implementing and monitoring all laws. Apart from the CCP, there is no other existing power that can perform any monitoring of the government. And unsupervised power is the breeding ground of corruption. Secondly, the CCP is not simply the allocator of resources in China, it is also the chief beneficiary of this allocation. Such a system gives pole position to government officials, who are able to use their posts to get the first bite of society’s cake. Thirdly, in the “market economy with Chinese characteristics”, the CCP government not only fixes the rules, it takes part in the competition and acts as referee as well.
A great deal of attention has been focused on the two most important changes to the Chinese economic system since 1978, namely the dissolution of the command economy and the expansion of the non-state sector. Faced with this transformation, many researchers have employed the "planned economy or free market economy” either/or formula to arrive—with alarming alacrity—at the reductionist conclusion that the market already occupies the dominant position in the Chinese economic system. Such a simplistic conclusion misses a key point. That is, following the dissolution of the command economy in China, the system that filled the vacuum wasn’t necessarily a market economy. To be sure, there is no doubting the disintegration of the command economy, but this has not led to a reduction of interference in economic life by the government or monopolistic state institutions. It has simply rendered it a random, as opposed to, systemized intervention. It is not the market that dominates the economic process in China. Rather, there exists a “twin-track system”, which relies on the interplay of more or less equal measures of market forces and random government intervention. This is not the same as the classical market systems we see in Western Europe, and is also different from the market systems that have evolved in the non-socialist countries of East Asia. It is instead a hybrid that blocks the efficient allocation of resources, and provides an increasingly fertile breeding ground for corruption.
Political expedience dictates that the government restricts its definition of reform to a “reform of the planned command economy and adjustment to the ideology that rejected private economic activity.” Over the course of time, academic custom and practice has led even respected scholars to accept the government's limited definition of reform, and allow its propaganda to permeate into their thinking. In other words, intellectuals "accept" that the formation of a market economy in China is thus reduced to the turning of various ideological and macro-economic levers. The ideological room required for a market economy to operate is duly provided; controls over prices, production, the money supply, and labor are removed, to a greater or lesser degree. More decision-making power is permitted to devolve from the center to local governments. But in fact a socialist system is not simply a matter of "a command economy plus ideology." A mature socialist system gives rise to and nurtures its own social structures and institutionalized norms and culture. It is simply not possible for China's lame duck reforms—which have excluded any political progress or reform—to "disappear" these socialist social structures and their cultural appendages. Far from it in fact. They have clung tenaciously to their own existence while ensuring their familiar "traces" have remained well-hidden throughout the economic transformation. The result is an economic system that acknowledges the original power structures, and accepts the market—as a method of exchange—being grafting on to existing political and social foundations.
The two foundations of the former planned economy that have remained in place despite the disappearance of its form are:
1.The huge Party-state machinery and monopolistic state organizations that constitute its organizational pillars, running from the center down to local village government, that have not yet been disbanded. Some of these have merged while others have just changed their names. The power of these organizations to involve themselves at any time in daily economic activity has in no way diminished, let alone been cancelled out.
2.The high political and social status still enjoyed by China’s ten million CCP cadres and the twenty million staff members employed by monopolistic state institutions. While the environment in which these powerful groups exist has undergone tremendous changes, their capacity to act in their own interest is even greater than it was in the pre-reform era. The changes include, firstly, the significant weakening of the top-down disciplinary restraints that were a feature of the former, highly centralized system. This weakening has allowed organizations and individuals within them much more room to manoeuvre. Secondly, the goals and objectives of individuals and organizations have changed. In the past, the goals were to work hard at ensuring that orders from above were fully implemented, in order to secure and expand an organization's power and gain personal promotion in the process. Since the reforms, these aims have modified into striving to establish "income opportunities" for an organization, which in turn transforms the goals of individuals, from seeking promotion and status, to the exclusive pursuit of money, legal or illegal.
The disintegration of the planned economy resulted in the government treasury no longer being able to hold on to total control of the country's resources. With the decline in the dimensions of public finance, the higher authorities have been left unable to fully finance the normal activities of the lower levels of their organizations and state institutions. They are thus incapable of meeting the continual demands for better wages and benefits issuing from the people who staff these institutions.
In this context, the behavior of institutions and the cadres who staff them has naturally undergone considerable modification. While they are no longer the docile tools of central government, simply carrying out orders of the latter, they are certainly not civil servants subject to the checks and balances of genuine civil society. Moreover, they are no more disposed to abandon their social-political status than they are to accept a drop in their economic standing. Hence, on the one hand they represent the government by carrying out public duties and, on the other, make use of the power this gives them to obtain personal economic gain. Familiarity with the "job" has rendered them highly adept at identifying and seizing opportunities for advancement. From a moral perspective, their motives could best be described as driven by a determination to make use of the power at their disposal before it reaches a "sell-by date". To put it crudely, "get it—and spend it—while you can."
The widespread administrative interference in economic activity by the government or its monopolistic institutions has also manifested itself in the trend of commercialization of state administration organs and public services that emerged during the nineties. Because the organs of state administration were originally dependent solely on public finance for their existence, they could not avoid falling into a state of "semi-starvation". In order to ensure their membership of Deng's vanguard class of nouveau riche, the overwhelming majority of public or government officers spend their time in office meticulously calculating how to make the best use of their power for the greatest possible personal gain. This process has produced a unique systematized culture: the capitalization of political power and corporatization of government behavior. The results manifest themselves in a myriad of ever present "wealth creation" activities. This was originally regarded as an inevitable makeshift and stop-gap phenomenon, but the term "wealth creation" has since become a specialist term that appears regularly in official documents.
The most common concrete expression of this scenario is the exchange of the power and opportunities possessed by state institutions for direct or indirect economic gain. Administrative institutions and departments brazenly use their power to apportion or allocate wealth by various means: "compensated reports" in the news media, short-term "training courses" in educational institutions and universities, the concoction of various pretexts to sell educational diplomas, the sale of places in primary and middle schools, the enrolment of "high-price students," the sale of publication permits by publishing houses and hospitals forcing the recipients of publicly-funded medical services to buy expensive and unnecessary medication when they are being treated for illness. The authority to check tax evasion and smuggling, broadcast and publish news, bestow academic qualifications, publish materials etc. which in the past had no connection with commercial activity, have become the essential tools of "wealth creation". "Market exchanges" have expanded into government organizations and public services, and the parameters of this so-called "market economics" are far wider than those in any of the developed countries, greatly enlarging the space available for "rent seeking" as state institutions, organizations and work units continuously seek and create opportunities to interfere in social and economic life in search of financial gain. This interference has become increasingly lawless and random—a direct result of the lame duck reform process.
With public finances under increasing pressure and no corresponding reduction in the size or budgets of state organizations and institutions, this kind of activity can, in the short term, reduce financial burdens on the government and simultaneously increase the income of the officers of these institutions and government departments, while bringing a measure of stability and continuity. It is for this reason that the central government has largely turned a blind eye to "rent seeking" and has at no point seriously attempted to curtail it. Yet the social consequences are real enough. The current situation not only brings chaos to society's economic activity. It also profoundly weakens moral standards and even corrodes the fabric of society itself. When work units indulge in this kind of activity it is, more often than not, explained away in terms of "revitalizing 'income-creation' economics". In contrast, if an individual officer is caught out and convicted of using a public office for private gain, his or her activities are invariably labelled as "corruption."[5]
For example, when institutions of higher education auction off diplomas and academic places, it is deemed to be "income-creation" and receives the endorsement of staff and teachers alike. If, on the other hand, an individual teacher is discovered to be selling marks to students, the teacher is condemned, and their reputation is left in tatters. When a top level lecturer at a medical school in the city of Urumqi in Xinjiang was found to be selling marks to students for a few hundred dollars in exchange for successful examination grades, he was condemned as corrupt. 5 But in reality, there is no difference between an institutional engaging in organized "income creation" and an individual doing the same thing by using the name of an institution. The term "income creation" and "corruption" are entirely interchangeable and provide a mutual shield.
Many of the individual victims in the resulting chaos are the same people who create the disorder in the first place and are capable of presenting one of two public faces according to particular situations. When evaluating their own behavior, they will unashamedly start by looking to their own interests, and conduct a bold, high-sounding defense of inappropriate activities. In evaluating the same kind of behavior by others, they will swiftly climb to the moral high ground, and sternly censure those who have been caught with their fingers in the proverbial till. The blackmail and extortion case involving Shang Meiying, a Deputy Director of the Trademark and Advertising Administration House, and an officer in the Xianyang City Bureau of Commerce and Industry in Shaanxi province, is a good example. In June 1997, Shang deemed that the Buzhang Company was adopting irregular trademark and advertising policies in the area under her jurisdiction, and proceeded to blackmail the person responsible at the company by threatening to send letters to all 151 of the company's clients, besmirching its reputation. Despite pleas from the Buzhang Company to lower the amount, Shang Meiying insisted that the price tag for not sending an individual letter was 10,000 yuan, a total of 1.5 million yuan. The company was left with no option but to report Shang to the police who detained her for a number of days before ordering her release on bail. On her emergence from prison, the Xianyang Commerce and Industry Bureau went so far as to formally organize a grand ceremony to welcome her back. The clearly corrupt Deputy Director of a government department was feted as a returning heroine.[6]
As mentioned above, what has emerged in China in the long period since the dissolution of the command economy is a "twin track economy" that has little in common with the former system. In other words, China's developing market system exists alongside administrative interference. By the latter, I do not refer to the normal macro-economic management of the economy by government, but chiefly to two sets of circumstances: firstly the implementation of policies aimed at satisfying influential sectors in society. This includes, for example, the continued willingness of the banks to follow orders and issue new loans to loss-making state owned enterprises already way behind on instalments from previous loans. Secondly, the improper interference in society's regular economic activity by powerful institutions and individuals bent on economic advantage for themselves. By its nature, this kind of interference is not subject to regulatory supervision, and consequently the central government cannot effectively control it. The government’s response is limited to occasional anti-sleaze and anti-graft campaigns to try and restrain improper interference. In fact, the plague currently afflicting China's “twin track” system of random administrative interference and market economics cannot be cured from within. Propaganda campaigns that rely on heavy punishments and the example of designated individual people as "models" of morality will not have any genuine effect.
The current "twin track" may well last into the foreseeable future as it does partially fulfil the functions of a market economy by bringing market regulation to exchanges between producers, and between producers and consumers, thereby ensuring continued economic activity. Another factor ensuring its continuing existence is that the "twin track" not only acknowledges and retains the original structure and organization of power, but, moreover, it has actually injected the original structure with a new lease of life that has consolidated its existence. Consequently, the overwhelming majority of civil servants, government officials and staff of various public institutions have emerged as the big winners in the "reform" process, and their support for the process is thus ensured. As a result, the Chinese government will definitely not launch any political reforms that will even slightly touch this present power structure in the short-term future.
Hot Spots of Corruption
A.Government Departments
Table 4~1: Statistics on Corruption Cases Investigated by Inpsection Bodies
Year No. of Cases No. of Officials involved
(county level and above)
1988 36,500
1989 58,926 742
1990 51,373 1,188
1991 46,219 924
1992 98,876 915
1993 56,491 1,037
1994 60,312 1,827
1995 63,953 2,262
1996 61,099 2,699
1999 38,382 2,200
2000 45,113 2,680
2001 54,367 2,670
Note: These statistics are from annual reports compiled by China's Supreme Procuratorate. However, there are two peculiarities to the figures that need to be noted. Firstly, there are inconsistencies in the annual specifications (or: annual statistical presentation); and secondly there are inconsistencies in the methodology. For example, the cases covered in the four-year period from 1988-1991 are presented as annual totals, but the figure for 1992—compiled in 1993—is presented as a sum of the five-year period from 1988 to 1992. In other words, the figure of 98,876 cases for 1992, was arrived at by subtracting the accumulated figure of 115,422 for the four-year period 1988-1991 from the total figure 214,318 for the five-year period 1988-1992. The 1998 Procuratorate report states the total number of cases for the five-year period 1993 to 1997, and shows different statistical specifications than in previous reports. The 1999 report has different specifications, and so the previous two years (1997-1998) are left blank.
Beginning in the 1990s, the following trends began to emerge in corruption:
The number of Party and government officials implicated in cases of economic corruption rose continuously. There was also a marked rise in the number of high-level officials involved in corruption. Among those sentenced for corruption and bribery were former Vice Chairman of the National People's Congress (NPC) Standing Committee, Cheng Kejie; former Deputy Governor of Jiangxi province, Hu Changqing; former deputy minister of the Ministry of Public Security, Li Jizhou; Vice Governor of Liaoning province and mayor of Shenyang city, Mu Suixin; former Governor of Yunnan province, Li Jiating, and former Anhui province Vice Governor, Wang Huizhong. The tentacles of corruption have also reached out to officials of the Procuratorate (Chinese prosecution service) and officers of the government's civil and legal administration bureaucracy. Criminal behavior by staff members includes extortion, blackmail, acceptance of bribes, perverting the course of justice and the use of public office to protect illegal business of their family and relatives. As the scale of corruption has grown, so has the incidence of people absconding with large amounts of ill-gotten cash. Criminals have forged links across provinces and countries in order to facillitate their activities. This phenomenon of widespread organized corruption is causing enormous harm to the reputation of the reforms and, to a degree, the political and economic stability of the country itself.
The corruption so far highlighted and exposed is limited to venal officials who have been publicly exposed. According to data gathered, only 42.7 of every 100 cadres who have been subjected to Party and government disciplinary punishment were formally investigated, and only 6.6 of them were actually sentenced by the courts. With a punishment rate of just 6.6 percent, the benefits clearly outweigh the risks, and it is hardly surprising that no sooner is one corrupt Chinese official caught another steps in to take their place. In the latter half of the 1990s, direct economic losses and losses to consumers—in the form of welfare and benefits—amounted to an annual average of between 987.5 billion and 1.257 trillion yuan - 13.2 and 16.8 percent of GDP! [7]
B.The Government Offices in Charge of Resource Allocation
The so-called "market economy" established during the course of the reforms is in fact little more than mimicry of the real thing. The power to allocate and distribute resources is still basically in the hands of the government and its officials, who, at all levels, remain the ultimate arbiters of who gets what. This reality gives appointed officials in ministries with control over resources, such as the State Bureau of Land Administration, the State Planning Bureau and financial organizations and institutions (state banks and securities companies, for example), considerable opportunities for rent-seeking activity. The methods these people resort to in order to gain advantage are hardly subtle and crystallized in the acceptance of bribes and the diversion of public funds. In 1995, there were a number of cases that serve as typical examples of this kind of corruption: Yan Jianhong, who served first as the Deputy Director of the Guizhou province Planning Committee and later as the Managing Director of the Guizhou CITIC, and Wang Jianye, head of the Shenzhen Planning Bureau’s Department for Finance and Trade. These government departments are in a position to approve or deny the use of materials and resources designated in government plans, as well as control the use of capital and various funds, which, in the particular environment of China’s “twin track” pricing system, amounts to nothing less than possessing the Midas touch. It is not rare for a single authorized “approval note” to immediately transform such people into millionaires.[8]
During the 1990s the China Procuratorate Publishing House published the “Records on the Elimination of Corruption in Modern China,” along with a publication entitled “Justice and Evil—Records of the Latest Important Cases in the Punishment of Corruption” compiled by the CCP’s Central Commission for Discipline and Inspection.” The cases featured in these two books clearly revealed that corruption existed at all levels of government, state and Party activity, from the Central Committee down to the county level, and even lower.
The State Bureau of Land Administration, which, as its name suggests, allocates land resources, is where corruption is especially severe, and it appears in the majority of cases that come to light. The investigation into the activities of Wang Ju, Deputy Mayor responsible for urban construction in the city of Shenzhen, ended with prosecution in 2001. The case found that 32 officials were involved in corrupt activities and the affair enveloped almost all officials working at the city’s Land and Urban Construction departments. The sheer amount of cash involved left the public—already accustomed to large-scale corruption—in a state of shock. The Wang clan, via Wang Ju’s daughter Wang Tao and her control of the project, harvested 120 million yuan in profits from the Windsor Square real estate development alone. According to government regulations, the plot was worth 150 million yuan, but Wang Ju ordered his subordinate, the Deputy Director at the Shenzhen Land Planning Bureau, Pang Chenghong, not to go through official land value procedures when dealing with the Windsor project. The price was subsequently valued at 27.6 million yuan, 122 million yuan less than its real value.[9]
The city of Beihai in Guangxi province has been hit particularly hard by the phenomenon of "land speculation", a problem exacerbated by the even more common occurrence of insider trading. Following a two-year investigation by the Central Investigation Group, 123 people were implicated in the Beihai "land enclosures" scandal, involving embezzlement and bribery. Five provincial-level cadres and 20 department-level cadres were caught up in the case, which involved a sum of 110 million yuan. Three standing committee members of the Beihai city Party Committee were punished for the large sums garnered via embezzlement and the acceptance of bribes. They were the Beihai Deputy Mayor in charge of day-to-day affairs, Wang Fangchun, the Secretary for the Committee of Politics and Law, Peng Fuqin, as well as the Director of the Department of Organization, He Youxue.[10]
The corruption case against Deputy Governor of Anhui province and Secretary of the Fuyang city Party Committee, Wang Huaizhong, involved 100 million yuan, the bulk of which appeared to come from profits from the resale of state land. According to the data that was made public, Wang Huaizhong oversaw the disappearance of state assets worth up to one billion yuan by approving various land sales beginning in 1996. In fact, at least ten tycoons have emerged in China whose wealth is rooted in the continuous flow of profits from the sale of state land.[11]
The province of Guangdong has been a hotspot for corruption arising from improper land transactions. Between 1992 and 1994, there were 13,894 cases involving ratification of various forms of land use that violated the relevant laws and regulations. The total land put to illegal use came to 152,000 mu of which 80 per cent was government-owned. In 1996, Guangdong province underwent a "find waste, eliminate waste" inspection and campaign, which revealed that out of the 238,000 mu of non-agricultural construction land lying idle, 70 per cent was rendered idle by the government.[12]
In 1998, there were 287,000 cases of illegal sale or use of land on the public record alone. Of the 1.2 million mu of land involved, 387,000 mu was arable land.[13] On June 10 2001, Meng Xianlai, the Director of the Executive and Supervision Bureau of the Ministry of Land Resources, announced that there were 170,000 cases of land use violation in 2000, leading to an annual loss of 10 billion yuan in state-owned land. Despite this extraordinarily large number of violations, the ratio of cases thoroughly investigated remained small, and those successfully concluded even less.[14]
Financial institutions in China have become known as “cash captains” and are enveloped in similar corrupt work practices as the departments responsible for land, public security industry and commerce and taxation. If ordinary citizens need to acquire loans or mortgages, they have no choice but to resort to bribery. This practice is so widespread that it has been dubbed the “All Chinese People’s Banking and Loan Service”, meaning that the people serve as an improper source of funds for the institutions. This kind of scandal is frequently reported in the press and other media channels. However, the underlying reason why this behavior is difficult to investigate and punish is because it is collective. A veritable sea of bribe-taking was exposed in the district of Linfen in Shanxi province in 1995. The manager of the Linfen Construction Bank, Liang Tianrong, and more than sixty colleagues working in the local financial system and enterprises were directly implicated in the case.[15]
For many years the Puqi city branch of the Bank of China in Hubei province enjoyed a golden reputation as a “model advanced enterprise,” and was frequently the focus of attention as news media vied to report on the bank’s successful management. Almost out of the blue, the branch was revealed as a nest of maggots who, headed by its Director, Xiong Xuebin, were worming their way at will through the bank's finances. The scale of graft and misuse of funds was so great that the bank’s operations resembled those of an independent kingdom. More than ten people, including the Deputy Bank Manager, Liu Shaoqin, Credit Department Manager Wei Jianxin, and Chief Accountant Li Junfeng, were involved in the operation. It was described locally as an organized mafia led by a 'triumvirate of chariot-drivers to carry out the daily routine of graft'. From 1988 onwards, the bank’s accounts were distorted to a point that in 1995, when the gang’s activities were brought to a halt, the figures bore absolutely no relation to the real financial situation of the bank.[16]
Cases of meticulously planned scams by bank directors are a common occurrence. In April 2002, a massive case involving the theft and misappropriation of assets came to light in Kaiping, Guangdong province. Beginning in 1993, three successive bank managers made use of a mutually beneficial relationship to obtain personal financial gain. The criminal activities of Xu Chaofan,Yu Zhendong and Xu Guojun spanned nine years, during which they stole a total of US$483 million. The theft was carried out via the financial system of the Bank of China itself, and apart from a few token investment loans in Kaiping, the vast majority of cash was diverted out of the country into private bank accounts - and subsequently spent. Following the success of this criminal activity, the three crooks left the country in October 2001, and disappeared. At the same time, the Guangdong branch of the Bank of China was enveloped in a mushroom cloud of graft, as fresh financial scandals emerged in all areas of its activities. The crisis was worsened by the Wang Xuebing case at its New York branch, and the Bank of China (Hong Kong) had no option but to abandon plans to list on the US (New York) and Hong Kong stock exchanges.[17]
At present, the percentage of bad debts at the Bank of China is 30 per cent,[18] a figure directly related to the corrosive activities of corrupt officials. Although there are serious limits on the reporting of their activities in the media, the cases already revealed demonstrate a scale of corruption in administrative and law enforcement departments. These include the Public Security Bureau, the Procuratorate, the Department of Industry and Commerce, as well as Customs and Taxation, a revelation that has caused genuine alarm—even a sense of dread and foreboding—among the ordinary citizens of China.
C: Public Utilities
Many of the sectors responsible for the provision of public services in China such as housing, electricity, communications, health and education, have their monopolies. Consequently, Chinese people come into frequent contact with the officials running these monopolies—they have no choice. The often-voracious behavior of the staff and administrative personnel has led to various utilities being dubbed "tigers." People refer to the "housing tiger" or the "electricity tiger" in reference to the way these officials make use of their "power" to line their own pockets. If someone needs an operation, then the doctor must be given lai see, or New Year gifts of cash. Headmasters and teachers receive gifts when a child starts school, and parents must meet the myriad and unreasonable demands made on them by schools. The effect is that people are left seething with anger, as they are forced to go along with what amounts to institutionalized bribery in order to obtain the relevant stamp of approval from various state-run monopolies.
At first sight, these issues appear to be rooted in a culture of unethical behavior in the working practices of various public utility services. While this explanation has some credibility, it does not explain the absolute nature of the graft, responsibility for which ultimately lies within the political system itself. During the mid-90s, when the Chinese people still retained some confidence in the system, articles frequently appeared in the media criticizing the immoral work practices among staff working in public utility sectors. Among them was an article published in China Youth Daily entitled "Survey Regarding Work Practices in Public Sectors." The article was based on a survey highlighting the eight most despised practices: use of public funds for lavish banquets and entertainment; refusing to deal with enquiries from the public; superficial responses to enquiries followed by chaotic and inefficient work performances; the chaotic and opportunistic charging of fees; the abuse of authority for personal gain; opportunistic levying of fines and penalties; abuse of expense accounts; and the seizure of assets by government and Party administrative organizations and their staff from work units and enterprises under their authority.[19]
The entrenched behavior of officials in public utilities is frequently dubbed as being "even worse than a whore." At least a whore, so the logic goes, provides a service in return for her money, and as such adheres to a "code of practice". This is in stark contrast to the staff of public utility services who take money without so much as a nod to any form of code of practice, in the process destroying all legitimacy. The salaries of these government officials are from taxes people pay, and the established motto of "serving the people" is nonsense in the face of this spreading corruption that undermines the very foundations of government, destroys its integrity, weakens its operation and even degrades the aims of social policy. By the latter half of the 1990s, when corruption had already completed the transformation from organized graft to systemic corruption, ordinary people were left with no option but to "accept" reality and manifest a high degree of tolerance.
Public servants notwithstanding, it is the behavior of doctors and teachers in their respective sectors where the total lack of occupational ethics has the most damaging impact on society. The lack of medical ethics is a prime example. Revelations of serious corruption and poor work practices by the director of a top-notch triple prize-winning hospital, owned by the Xinjiang Production and Construction Corporation, caused enormous consternation among the public. The director exposed senior hospital administrators for basing their duties purely on the grounds of profit, rather than health. If a department or ward was able to earn money, it was judged as efficient, regardless of its medical results. An entrenched form of rent-seeking established by nurses provided myriad opportunities for obtaining money from patients, by fair means or foul. The main modus operandi included:
1. Every time a doctor referred a patient for a CT scan, he or she would receive a kickback of 4.5 yuan from the CT department. According to statistics made available by the whistle-blowing director, each doctor made 60 such referrals every month, but only 20 percent of these were for patients who genuinely required a CT scan.
2. Between three and four overnight stay forms were registered for each hospital bed, in a practise that became know as "phantom beds". Each one of these was worth five yuan to the department. In reality, there would be only one patient per bed, and the patients named on the bogus forms were diagnosed and treated at home, even though they had to pay the fees for hospital accommodation.
Extra charges: A 16-year-old youth named Hu went to the same hospital with the same compliant three times in the latter half of 1997, and was diagnosed differently each time. The cost of treatment totalled over 5,000 yuan, of which 1,000 yuan was for fictitious diagnosis and treatment. This included being charged for the use of medical equipment that was not used and injections that were never given. On top of these charges, the teenager's parents also had to pay for the nights they stayed in the hospital with their child, as well as for nursing costs. The hospital director stressed that this was simply a randomly picked case, and was not a typical example of extra charges. He explained that the vast majority of nurses were simply concerned with money, receiving cash gifts and getting their share of kickbacks, all of which were common phenomena. In order to safeguard the reputation of the hospital, protect the position of the leaders and ensure the continuous supply of departmental and individual bonuses, the director stated that staff at all levels lied about the problems, testament to the absence of any sense of professional pride or morality.
The total annual income of the hospital was 80 milli, on yuan, a fair proportion of which ended up in the coffers of the local government’s Department of Health. Members of the public wrote letters of complaint about the hospital to the Department of Health on many occasions, but these were simply passed on untouched to the hospital authorities by officers from the Health and other Departments. As a result, those who complained were often the targets of revenge meted out by hospital staff.[20]
The lack of medical ethics was also an underlying cause behind the spread of HIV/ AIDS in the province of Henan, now a notorious and ongoing scandal. Poor needle management, including the use of dirty needles on people who were selling their blood, resulted in widespread HIV infection. This kind of practice is common throughout China. Hospitals in the city of Jinan, Shandong province—among them some well-known medical establishments—made a great deal of money by substituting industrial oxygen for higher-grade hospital quality oxygen, and charging patients requiring oxygen for the latter. Ignoring the safety of their patients, this scam was worth over 300,000 yuan a year.[21] The practice of hospitals forcing patients to buy expensive medicine and taking a kickback on each sale is extremely common in China. Over 60 doctors at the Wuhan city Number One Hospital in Hubei province made between 100 to 200 yuan per day from kickbacks obtained by forcing patients to buy expensive drugs.[22] In this overwhelmingly "sellers' market", patients have no bargaining power, and little choice but to go along with the medical staff's flagrant exploitation of their position. Rarely in civilized societies do occupational ethics sink to such a terrible status.
A "sense of responsibility" is an important moral base for any market economy, and the source of this must be the willingness of all individuals to accept moral responsibility for all the results of their own actions. Without moral responsibility, an occupational sector will quickly lose its social value. As far as society is concerned, it will be unable to efficiently realize its full professional functions, establish a beneficial service and organize itself as a social structure that can stabilize social values. And for individuals, a lack of ethics means that the sector cannot offer a long-term career path or allow staff and workers to accumulate personal skills. As such, the sector cannot make a contribution, or provide or serve society in any meaningful manner. Simply speaking, by losing people with a sense of responsibility, the conduct of the sector as a whole will degenerate into criminal behavior. I have concentrated on medical ethics for precisely this reason. The problems in the medical sector are no longer simply a question of occupational ethics, but of criminality.
4.The Influence of Corruption on Chinese Society
The large amount of hard evidence I have researched has led me to the observation that the starting point for the redistribution of wealth that we have witnessed during the reform process has been the commodification of political power. The essence of the process of primitive capital accumulation in contemporary China can be found in the 'power for money' exchange, and parallel activities such as rent seeking, that has distinguished the behavior of political and economic elites and their hangers-on in contemporary Chinese society. These two elites are carving up the country's wealth between them. The main target of this profoundly predatory form of primitive accumulation are the public assets that have been built from more than forty years of hard work, sweat and blood by the people as a whole. The chief technique for this plunder is to rely on power. And the consequences of this pillage - and I count systemic corruption among them - have now descended on China. And they are dire in the extreme.
A.Large-Scale Capital Flight
Because modern China's process of primitive capital accumulation is racked with immoral and criminal behavior, the country's new rich have two chief considerations. The first is the enormous wealth gap that has emerged. The extremely sharp social contradictions of this fact have rendered China a high-risk society. The second is that an overwhelming proportion of the income and wealth of the aforementioned elites comes from the "gray area" between legitimate entrepreneurial activity and criminality. This renders them sitting ducks for the inherently unstable "struggle against corruption." Consequently, the majority of China's nouveau riche combines their questionable economic activities with a ready passport and preparations for departure. Once enough money has been accumulated, many leave the country permanently. As of January 2001, China had over 4,000 individuals categorised as "corrupt" people who had succeeded in spiriting away over five billion yuan out of the country.[23] But this figure represents only a tiny portion of the capital that has left - and is leaving - China.
Modern technology has presented unprecedented opportunities for the movement of capital, and it has reached new levels as a result. The trend of capital flight from China is upward. According to one researcher the total capital flight since 1985 amounts to 52.3% of the increase in foreign debt. This is higher than the average capital flight figure notched up by the world's 15 most heavily indebted nations during the 1980s.[24] As we entered the 1990s, capital flight was close to, or even surpassed, annual increases in foreign debt. In other words, at the same time as China borrowed heavily from foreign sources, over half of the capital borrowed was leaving China via various channels. Some of this cash then “disappeared”, never to return. Mr Wool, a consultant for the Royal Commission on International Questions in the UK, pointed out in a report presented to the Organization for Economic Cooperation that between 1989 and 1995, overall levels of capital flowing out of China had probably surpassed US$100 billion. Approximately half was not approved by the government.[25] According to research data from the general office of the Ministry of Finance published in "A Positive Financial Policy," capital flight in 1997 and 1998 reached US$36.5 billion and US$38.6 billion respectively. The situation was partially brought under control in 1999, but the level was still at US$23.8 billion. In 2000 capital flight again spiralled to approximately US$48.billion more than actual foreign investment, which stood at US$40.7 billion.[26]
The fact is that only a portion of this capital flight comes from private entrepreneurs who are shifting capital abroad due to anxieties about China's political instability. Corrupt officials involved in money laundering activity make use of all the methods at their disposal to give a respectable veneer to their ill-gotten gains so as to be able to spend the loot as freely as possible. Much of it is used as investment and continues to appreciate in value.
The most devastating effects caused by the recent spate of corrupt officials fleeing overseas have been felt by finance departments and state-owned enterprises. The four top managers of the aforementioned Kaiping Branch of Bank of China successfully carried out their scheme to abscond with stolen funds. In 2001, of the 120-odd individuals charged with fleeing the country in cases filed by Beijing prosecutors, 70% were presidents, vice presidents or financial officers at state-owned enterprises. Many of the fugitives were also government office holders. One such example is the case of Cheng Sanchang, briefly hailed as a “model of SOE restructuring.” While jointly holding the positions of Mayor and Municipal Party Secretary of Luohe city in Henan province, Cheng sold off 27 state-owned enterprises, earning the nickname “Cheng Sell-off.” Via murky deals, “Cheng Sell-off” lined his pockets with funds embezzled from his sales of state-owned enterprises. In 1999, finding that the assets of the city’s public enterprises had largely been sold, he quit his official positions and moved to Hong Kong, where he served as CEO of the Yugang Corporation, a “window company” for the Henan Provincial Government. In May 2001, Cheng decided that the time was right to abscond, and he fled to New Zealand, taking with him his mistress and a sizable fortune.[27]
The government officials and heads of SOEs who flee the country with vast sums of embezzled funds, typically lay their plans carefully. Rather than waiting for their malfeasance to be exposed before taking action, they start the process of arranging family members, funds and property abroad and making mental preparations from an early date. Each element of their plans is set in motion at the appropriate time. A typical plan involves making seemingly innocuous arrangements, such as having their wives and children take residency abroad, while they use a variety of means to transfer large amounts of illegal assets overseas. During this time, the officials remain in China, continuing to engage in corruption and amassing wealth. There they bide their time until, at the first sign of danger, they run. With these methods, most of the corrupt officials who flee China get away scot-free – only one in six are tracked down and brought back. According to an official in the Foreign Affairs Bureau of the Supreme People’s Procuratorate, in recent years, the Bureau has actively pursued between 20 and 30 cases annually involving fugitive officials, but only approximately five cases resulted in extradition. The official went on to say, “But this could be just the tip of the iceberg, because a portion of the cases are not handled by us.”[28]
Since the 1990’s, the scale of capital flight in China expressed as a percentage of GDP has ranked second only to Russia, surpassing both Mexico and South Korea. In 1997, China’s capital flight as a percentage of GDP far exceeded that of Mexico in 1994-95, during the Mexican financial crisis, as well as that of South Korea in 1997, which was then experiencing its own financial crisis. Taking into account the possibility that, under China’s strict currency exchange policy, capital flows hidden in fraudulent trade reports and other kinds of hidden capital outflows may far exceed those of Mexico and Korea, one can conclude that the overall situation concerning capital flight from China may be much more severe than those two countries.[29]
Between 1979 and 1997, China received a total of US$348.3 billion in actual foreign direct investment. Beginning in 1993, China ranked second in the world behind the US as a recipient of foreign direct investment for five years running. Meanwhile, according to IMF statistics, capital leaving China accounted for 2% of the total volume of international capital flows in 1995, making China the eighth largest supplier of capital in the world, and the top-ranked developing nation in terms of foreign investment.
The kind of threat that capital flight poses to China is easy to see – the financial crises in Mexico and Thailand are evidence enough of this. It is reasonable to claim that China might well have encountered a financial crisis of its own long ago, were it not for the large amounts of foreign investment capital that have flowed into China since the 1990’s to replace the departing capital.
One aim of this paper is to emphasize the political significance of large-scale capital flight. In actuality, the flight of capital out of China demonstrates the ever-increasing sense of crisis among China’s bureaucratic class. To the corrupt officials who have secretly prepared their foreign passports, China is nothing more than a good place to enrich them.
B. The Influence of Organized Crime on Local Governments and the Gradual Merging of Crime and Authority
Perhaps the most foul-tasting fruit from the tree of widespread illegal land transactions by local governments has been the growing influence of organized crime syndicates – known in Asia as Triads – on local government. In fact, it is often hard to draw a line between government and Triad authority.
Data gathered from investigations and cases where a crime ring has been successfully broken show that these Mafia-type organizations have rapidly risen to prominence over a very short period of time. The social chaos they cause cannot be underestimated. One of the major reasons behind the rise of the Triads has been their links with local government officials – especially the PSB – with whom they collude very closely in an exchange of services and favours that are nothing more than protection rackets. China's Triads differ from their Western counterparts in one important aspect. In the West, the basis for most crime syndicates' power and influence is their contact with the police departments and judiciary ministries. But the antennae of China's criminal gangs are even longer, with cadres serving as a reliable source of power and influence for the gangs and a number of crime bosses also working as leading officials, donning what we call the "red cap." In the city of Wenling in Zhejiang province, syndicate boss Zhang Wei also held eight separate official posts stretching way beyond the borders of Zhejiang province. Zhang's posts included Deputy Chairperson of the Yidu city Political Consultative Conference in Hubei, a member of Youth Federation's Standing Committee and Deputy Director of the Young Entrepreneurs Association in Suizhou city, Director of a well-known news agency in Zhejiang, and four more leading official positions. Zhang Wei's case implicated 69 members of the government and Party members, including the Wenling city Mayor, Chief of Police (PSB), 42 government or Party cadres, 15 members of the judiciary, and ten people from financial organizations. A copper plate hanging on the gate of Zhang's residence announced "Key Protection Unit of the Wenling PSB", encouraging local people to dub him "the red gang boss.”[30]
The execution of Jilin’s most important crime boss, Liang Xudong,[31] Liaoning’s notorious Liu Tong,[32] and Guangxi’s Zhou Shounan,[33] are all reminiscent of the Zhang Wei case. The evidence revealed during these trials proved beyond all doubt the existence of an “alternative” authority operating under the protection of powerful officials and their networks, and causing untold social damage.
Even worse, a recent report by the Ministry of Public Security has revealed that Triad forces had permeated into government offices at county and city level. They were succeeding in getting chosen as government "representatives", and taking leading roles in local Congresses. As such, corrupt officials are transforming organs of public power into channels for Triad activity. The overall picture is of a merging or blurring of the lines between the police and criminal gangs, who rule society between them. This is possibly the worst-case scenario for any given society.
One result of these developments that should not be ignored has been the spread of criminal behavior and values into society at large. The pernicious values of Triads and organized crime have had a serious influence on the daily behavior of Chinese people since the 1990s. This trend has shown itself particularly clearly in power struggles that frequently involve the activities of Triad groups, and it is against this background that the phenomenon of “officials killing officials” has emerged in recent years. Some of the more notorious cases include: the hiring of a contract killer by Chen Jinyun, the Anyi County Magistrate in Jiangxi province, to murder the county Party Secretary Hu Cigan and his deputy Wan Xianyong in 1995; the March 1997 conspiracy to murder the former mayor of Yangchun city in Guangdong province and his associates, hatched by Yangchun Party Secretary Yang Wenyao, Deputy Mayor Yang Qizhou, Deputy Director of the City Finance Office Lin Qiju and others; the June 28, 1999 murder of Lu Jingyi, leader of a nearby Batai town, and his wife by former Party secretary of Wugang city, Li Changhe; the March 16, 1999, murder of a public prosecutor named Huang Conghua by an official at the national tax bureau on Hainan island; the killing of a local county head by the leader of the Fushin city judiciary on March 26, 1999,
There are over ten cases of government officials resorting to criminal methods that are normally the terrain of organized crime. The contract killers themselves are either Triad “gophers”, or extremely poor and marginalized members of society.
It is true that competition for posts between officials in China was not previously conducted by relying on more commonplace criteria such as an individual’s moral integrity, skills, diligence and ability to get results. Chinese society has already been heavily punished for its preferred method of cadre selection. The recent added ingredient of organized crime will only serve to aggravate a system that is already devoid of procedure. Worse still, the entry of organized crime and its evil methods into political life will encourage other sections of society to imitate their methods. Cases of kidnap and ransom and murder have already become a common feature of everyday life over recent years. Ordinary people in China suffer from a profound lack of security as a result of living under an authoritarian and dictatorial system. The addition of alternative power structures dominated by a casual use of violence and Triad activity will do nothing but add to their insecurity and fear.
C. A Widening Wealth Gap Gives Rise to Acute Social Tensions
One result of rampant rent-seeking activities is that the income gap that has been steadily widening since the 1990s has begun to show a clear trend towards “polarization”, where the rich get richer while the poor become even poorer.
China’s income gap can be measured using two methods: Gini coefficients and the distribution of bank deposits.
According to calculations by the World Bank, in 1978, before China embarked on the policy of “reform and opening”, the Gini coefficient for personal income distribution in cities and towns was just 0.15. This was essentially the lowest in the world at the time, and reflected the effects of China’s egalitarian ideology and the “big rice bowl” system. From the mid-1980s onwards, however, the income gap grew rapidly, as the following table of Gini coefficients illustrates:
Table: Changing Gini Coefficients
Note: The Gini coefficient for 2001, as reported by the National Bureau of Statistics, does not distinguish between urban and rural incomes. See Economic Daily, 29 October 2001: page 7.
It should be noted that the Gini coefficients reported by the Chinese government do not entirely coincide with the perceptions of ordinary people. For, while the statistics for middle and lower income families presented in these surveys are fairly reliable owing to the relative transparency of these families’ incomes, the figures for the upper income brackets should be viewed with skepticism, as these families tend to have hidden sources of income. Nevertheless, even going by these vastly under-reported official government figures, it is undeniable that in the brief span of 20 odd years, China has changed from an egalitarian society into one in which the gap between rich and poor causes social unrest. In 1998, those in the top 20% of the urban income scale earned 9.6 times the income of the bottom 20%; the top 10% earned 38.4% of total income; while the bottom 20% earned a meager 5.5% of total income.[34] According to a 1998 report by the World Bank, China has already overtaken Eastern Europe and many of its Asian neighbors with its steadily rising levels of income inequality. Unless China’s current taxation policies are changed and increasing levels of official corruption reigned in, China’s income gap will continue to widen.
The distribution of banking deposits reveals the “inverted pyramid” structure of wealth distribution in China. Data on personal bank deposits show that in 2000, just 1.26 per cent of depositors owned 27 per cent of the 7 trillion yuan of total bank deposits, and 7.8 per cent of depositors owned 65 per cent of the total. Other data shows that currently in China, 15per cent of the population owns 85 per cent of society’s wealth, with the remaining 85per cent controlling just 15 per cent of the wealth[35] – a perfect inverted pyramid.
As the data cited in this paper show, we can depict income distribution in China as an inverted pyramid and the following observations can be made:
The top 10 per cent of income earners, who occupy a place at the very top of the pyramid, save most of their income and control more than half of China’s private wealth. The villas, upscale apartments, fancy imported cars and luxury boutiques – so far beyond the reach of ordinary Chinese – are for their consumption only. In the race to accumulate wealth, these individuals have become rich not, in most instances, as a result of merit, but because of their personal connections and the positions they hold. Evidence of their "success" might be measured in the observation that the food these people give to their pets is of a higher quality than the food the poor have to feed their children.
At the bottom of the pyramid are the 20 per cent of the population who live in poverty, the vast majority of whom are accumulating debt. Their circumstances are described above.
At the middle of the pyramid sits the vast wage-earning class. They are able to save only a small portion of their hard-earned salaries. Judging from the urban living conditions of the 1990s, the “wealth” of the wage-earning class primarily consists of furniture, other household articles and a meager amount of cash savings, government bonds, stocks and the like. In coastal regions such as Shenzhen, the typical “wealth” of the wage earning class might consist of a “welfare apartment” (i.e. a state-subsidized home) that cannot be resold on the housing market. A portion of these families (those falling below the middle line of the pyramid) must constantly struggle lest they fall to the bottom. The speed at which they are able to increase their savings is far outpaced by the rate with which the government introduces new measures aimed at emptying out their pocketbooks.
This group makes up more than 80 per cent of the population and bears the “costs of reform”, while the per cent in positions of power enjoy the “fruits of reform”. This pattern of wealth distribution will eventually lead to a scenario in which those at the bottom, unable to make a living, resort to violence to seize back the wealth that was taken from them.
D. Barriers to the Free Flow of Information in Society
The most direct threat that official corruption poses to China’s government does not come from a decline in public trust. China’s government is not elected and, ever since the Mao era, has followed the violent political doctrine that “power issues from the barrel of a gun,” though it always proclaims that it represents the will of the people. Rather, the greatest threat to the Chinese government is the softening of political power, where the pursuit of individual interests on the part of government officials is based overwhelmingly on the contravention of laws and the flouting of ethical standards. Such a “softening” of political power will inevitably put the Communist regime’s hold on power in jeopardy.
In the process of this gradual dissipation of government authority, the aspect that is most damaging to the government’s functioning is the habitual falsification of information by corrupt officials. Time and time again, the Chinese government has fallen into traps created by the reporting of bogus figures by officials, where policy decisions made using faulty information often exacerbated the very problems they were designed to address.
Falsification of information is hardly a new problem for China’s government. Indeed, there is a longstanding tradition of fabrication in the political culture of the Communist Party. During the notorious “Great Leap Forward” period, official fabrications reached new peaks of absurdity. Although the problem receded in the early Deng Xiaoping era (the 1980s), the Chinese government’s accustomed practice of falsifying information returned in full force during the administration of Jiang Zemin, when official appointments and compensation for cadres became tied to a handful of economic development indicators, encouraging fraudulent reporting by officials on a large scale. The public’s take on the illegitimate use of statistics is vividly captured by such sayings as, “The village cheats the township, the township cheats the county, each level cheats the next level up,” and “Officials make the numbers, numbers make the officials.”
The Chinese government has publicized a number of cases where punishments were imposed for the falsification of data. In the second half of 1997, a nationwide investigation into the implementation of statistical regulations was jointly conducted by the State Bureau of Statistics, the Ministry of Supervision and the Bureau of Legislative Affairs of the State Council. The investigation uncovered more than 60,000 violations of statistical regulations, 56.7% of which involved the misreporting, concealment, fabrication, or doctoring of statistical data. According to Ye Changlin, director of the Department of Policies and Legislation of State Bureau of Statistics, these were relatively minor infractions, hence the name “violations of statistical regulations”; an additional 15,000 cases nationwide, involving more serious statistical illegalities, were investigated, and those responsible punished.
One such case provides a good illustration of the problem: Since assuming the post of Magistrate of Xichong County in Sichuan Province in 1993, Liu Rongzhi repeatedly forced data collectors to report fraudulent statistical data to suit his own purposes. For instance, in 1995, the actual countywide gross industrial product was 179.21m yuan, but the reported figure was 289.55m yuan – an overstatement of 110.34m yuan, or 61.57 per cent of the actual measured value. The worst instances of over-reporting involved township enterprises, where reported numbers were 1.18 times the actual figures.[36]
In 2001, China’s national statistical system saw more than 62,000 violations of statistical regulations were investigated and punished.[37]
Falsification of data is not confined to government. The practice of issuing falsified financial reports in conjunction with fraudulent accounting practices on the part of accounting firms – which are entrusted to uphold the interests of society – has grown into a chronic and intractable disease in Chinese society.
In 2000, China’s Ministry of Finance instructed various local financial supervisory offices to investigate the quality of accounting data for the 1999 financial year from a sample of 159 companies. The investigation included companies doing business in the sectors of foreign trade (import-export of foodstuffs and chemicals), telecommunications, automobiles and machinery, along with the 117 accounting firms who had prepared the companies’ audit reports. It was found that 147 of the 159 companies under investigation had misreported their assets: asset value totaling 1.848 billion yuan had been over-reported, and 2.475 billion yuan in the value of actual assets had gone unreported, representing a 0.95 per cent rate of misreporting on assets. The investigation found misreporting of owners’ equity in 155 of the companies. The amount over-reported totaled 1.936 billion yuan, and 1.817 billion yuan of equity went unreported, representing a 1.82 per cent rate of misreporting. And 157 of the companies had misrepresented their earnings figures. Altogether, 1.472 billion yuan was over-reported and 1.943 billion yuan was under-reported, representing a 33.4 per cent rate of false reporting of earnings.[38]
Accounting irregularities are commonplace among the state-owned enterprises in Shanghai. Falsification of balance sheets is rampant, many enterprises engage in bogus financial record keeping and reporting, and there are major inaccuracies in profit and loss accounts. In 1998 an audit of 22 enterprises under municipal administration and 202 of their subsidiaries conducted by the Shanghai Municipal Audit Office found that 114 companies had overstated their profits by a total of 2.269 billion yuan, and that 65 companies had underreported profits by a total of 493 million yuan. These discrepancies balance out to 1.776 billion yuan in overstated earnings, representing 67.15 per cent of the 2.645 billion yuan in pre-audit reported earnings.[39]
In 1998, the Chinese Institute of Certified Public Accountants took disciplinary action against accounting firms and individual accountants in various cities. Incomplete statistics show that the Institute imposed various sanctions against 478 firms with relatively poor records. The penalties included dissolution, warnings, suspensions and fines, and confiscation of illegal earnings. One hundred and three firms were dissolved along with nearly 1,000 branch offices. Other firms that failed to meet professional standards were given deadlines for reforming themselves.[40]
China’s stock markets are rife with illegalities and rule-breaking, including sham business offers, fraudulent packaging for share listings, phony listings, fake restructurings, inflated earnings reports and fraudulent accounting. When the scams are investigated, it is inevitably the case that the company in question was colluding with an accounting firm. Notary agencies whose wrongdoing has been exposed include the Zhongtianqin Accounting Firm, Hualun Accounting Firm, Lihua Accounting Firm and Huapeng Accounting Firm. In response to the revelations that have emerged in recent years about China, one foreign observer wrote an essay entitled “People’s Republic of Cheats,”[41] describing the alarming collapse of China’s institutions of economic trust.
E. Links between Corruption, the Plundering of Natural Resources and Wholesale Environmental Degradation
Because of corruption, the policy making process for China’s officials is no longer based on the long-term interests of the people, but rather on a calculation of how each decision will benefit the officials personally. The result of these calculations is the plundering of China’s natural resources and rapidly progressing environmental devastation.
Internationally, China suffers the highest rate of mining accidents of any country. The high frequency of mining accidents is a direct result of the predatory exploitation of mineral resources, which in turn relates directly to the way that officials pursue their own self interest alongside the interests of their social group or elite. Annual fatalities from mining accidents nationwide numbered 10,435 in 1990, 9,777 in 1991, 9,683 in 1992,[42] 10,572 in 1995, and 9,974 in 1996.[43] Between March 4 and April 11 of 1997, 98 migrant workers from Baihe County in Shanxi Province were killed in three different coal mining accidents. According to Baihe County government figures, up to 22,000 rural residents have left home each year for work in the years since 1994. Each year, more than 80 die in accidents of various kinds, and approximately 20 suffer crippling injuries.[44] Only after the 2001 accident in the Nandan mine in Guangxi Province did it become publicly known that the actual numbers of yearly fatalities far exceeded the numbers reported by the mine: In 2000, 259 people were killed in mining accidents, but only 57 deaths were reported; and from January to July, 2001, 264 people died, but only 94 deaths were reported.[45] This kind of underreporting of accident-related fatalities is extremely common throughout China. Mine operators can willfully engage in this kind of fraud because they have the backing of local officials and top managers of large state-run mining companies. There is ample data to show that the reason small-scale, accident-prone mining operations are able to exist in large numbers is because they provide lucrative sources of income for local governments. In Jiao town in Yongxin County, Hunan Province, township cadres take turns going to the township’s small-scale coal mine for a “duty shift.” In reality, they go to collect a daily “fee” of 1200 yuan.[46] Some small coal mines are started by the heads of large state owned mining companies who either contract them out or sell them to operators of other small-scale mines for their own personal gain. The above-mentioned individuals form a group with common interests, so whenever an accident occurs at a small mining operation, local governments and the managers at the big state-owned mines typically cover up for one another.[47] At present, half of China’s more than 7000 mines have either halted operations completely or have partially shut down production.
Over the past 20 years, China’s public works have been a graft-generating machine. Consider the Three Gorges Dam project, which almost certainly destined to be judged harshly by history. The project owes its existence to the endless machinations of powerful hydropower interests. Construction on the project has also provided rent-seeking opportunities for a large number of corrupt officials. For example, much of the land set aside for the construction of resettlement communities for displaced people was illegally seized by agencies and local governments hoping to profit from the resettlement efforts, and then transferred at a profit. In one such case, the government of Shibao town in Zhong County, Sichuan, took land that it had expropriated and traded at an inflated price to development companies and individuals. A land transfer fee of over 90,000 yuan per mu was charged in 1997; that price has increased to more than 200,000 yuan per mu today. While officials reaped staggering profits, the farmers who had lost their land and their livelihoods were denied the compensation to which they were entitled by law.[48]
Since construction began on the Three Gorges Dam project, more than 97 government officials involved in the project have been convicted of corruption-related crimes; one was sentenced to death. According to officials at the National Audit Office, funds totaling US$52 million earmarked for resident resettlement have vanished without a trace. Faced with corruption on such a massive scale, one of the government’s responses has been to prohibit the victims from petitioning for redress. When He Kechang, Wen Dingchun, Jiang Qingshan and Ran Congxin, four farmers from Gaoyang Township in Yunyang County, Chongqing Municipality, reported the embezzlement of relocation funds by local officials to the government, they were arrested and charged with “inciting the public to disrupt social order” and “leaking state secrets.” While in prison, the petitioners were tortured, and He Kechang, already in his sixties, nearly died.[49]
Despite a strict ban on public discussion inside China about the serious environmental pollution generated by the Three Gorges Dam project, the situation is commonly known outside of China. The kinds of environmental harm caused by the project include damage to air and water quality[50] as well as an unremitting series of geological calamities. In the eight years since construction began on the project, there have been 3,465 landslides and more than 1,190 instances of collapses and deformations.[51] While the environmental changes brought on by the project are relatively indirect and slow, cases of pollution coming directly from the project have also been reported. For instance, there is a mountain of garbage in Fengjie county, Sichuan, from which more than 2000 tons of waste are dumped into the Yangtze River annually;[52] and the city of Chongqing pumps more than 400 million tons of residential wastewater straight into the Yangtze each year.[53]
5.The Overall Strategy for Maintaining Communist Party Rule during the Nineties
With corruption wreaking havoc, robbers roaming the streets, the rich getting richer and the poor getting poorer, unemployment stalking both the towns and countryside, and organized crime rapidly extending its power, one might assume that China was on the verge of disintegration. In fact it is only the government's adoption of tyrannical measures that has prevented such a collapse. In reality, it has already abandoned any serious efforts to bring corruption back under control. The government is profoundly aware of the absurd dialectic that has accompanied the arrival of systemic corruption. Namely that "to kill corruption will kill the Party, not to kill it will kill the country." To be sure, they can buy more time, fill their pockets and then disappear abroad by maintaining the current state of affairs. Any reform to the current system that protects their corrupt practices would very possibly mean losing the gains these people have already made. It is with an eye to this reality that the government has adopted a series of heavy -handed measures since 1999.
Firstly the government has strengthened its various means of social control and resorted to measures that are now rarely used by civilized countries such as political violence and the widespread use of secret police. These forces strangle at birth any group that has the potential to develop into an organized entity, thereby ensuring that Chinese people are left in a state of permanent disunity – like grains of sand on piece of paper – and with no means of developing organized resistance. Secondly, the government has adopted somewhat inglorious methods to control its own officials, such as using the campaigns against corruption as a check on their behavior. The aim is not to stamp out corruption, but rather to carry out an internal cleansing operation that serves to remind officials that they are far from indispensable. Chinese officials are well aware of the seriousness of China’s situation, and also that ordinary people are fully conscious of their shenanigans in this violent world of "money and power politics.” But they also know that as individuals, they are no more than tiny cogs in an enormous wheel of a still-operational state machine. If they don’t play their part, they’re finished.
But more important than all this has been the government’s timely adoption of a new ideological strategy, it’s centralizing of control over public life, and the construction of an alliance between economic and intellectual elites. Thus, in a relatively short period of time, it has successfully upheld so-called “social stability”.
a. Ideological Strategy
In implementing its new ideological strategy and strengthening control over the public domain, Jiang’s government has been far more rigorous and effective than anything we endured in the Deng Xiaoping era. The government has entirely concurred with Jiang Zemin’s intention to "pull up by the roots all factors with the potential to cause instability," and no truly independent non-government organization has been able to emerge in such an oppressive environment. Looking at the results of the Jiang government’s adoption of the “hard cop soft cop” approach, it is clear that it has proved even more effective than the straightforward jackboot-style political oppression that distinguished the Mao era. Jiang's approach also enjoys the happy coincidence of avoiding international attention and condemnation.
The mutually supportive pincer strategy of on the one hand placing vilification of Western democratic political systems at the core of the Party’s ideological tactics, and increased control of public life on the other, has worked well for the Party. This is achieved, for example, through:
Intensifying ideological education in schools and colleges through the subjects of literature, history and politics, young people have been imbued with countless political lies and fantasies. This helps to explain the contradictory attitude of alternately loathing and worshipping all things American that Chinese youth hold towards the US. The “loathing” is rooted in the compulsory ideological education; and the “worshipping” is the result of an accumulation of information from non-official sources.
Thorough control of the media. The Chinese government exercises a monopoly over almost all media outlets and, compared to the Mao era, has “moved with the times” in improving its management and administration of this monopoly. Journalists are also targeted and are continually reminded, in no uncertain terms, who is paying their wages and on which side their daily bread is buttered. Even the reporters themselves acknowledge that they are merely “Party mouthpieces,” a fact that leaves those members of the intellectual elite who still entertain a conscience with no reliable outlet through which they can truthfully express their opinions. From 1999 onwards, the government has continually channelled large amounts of investment into enlisting the services of university educated computer specialists who are appointed as “Internet cops.” It has also formulated regulations aimed at management of the Internet, in the hope that it can tame this “wild horse.”
The tactics of either “buying off” or “beating down” intellectuals. Following the violent suppression of the “1989 Democracy Movement,” members of the intellectual elite faced a new and puzzling environment. Throughout the 1990s the government used every order of academic honour and rank, along with material gain, as bait to lure the majority of intellectuals into lining up with the status quo. As for the few intellectuals who maintained a critical approach to their research, the government adopted a much less conciliatory approach that included ordering media outlets not to publish an individual’s research or written articles, and instructing employers to find a suitable non-political excuse to fire him or her, forcing them into financial difficulties. Intellectuals that have succeeded in amassing a degree of influence are subject to even more sinister measures, such as being trailed by members of the secret police, who also search their apartments and subject them to general personal persecution, usually with the aim of forcing them to flee abroad. The application of this hard-soft policy has effectively neutralized the critical capacities of China’s intellectual elites. Most are prepared to tailor the political direction of their work to fit their personal financial resources and adopt a cynical and perfunctory attitude to political and social issues.
b. The Formation of Alliances Among Elites
At the beginning of the last decade, the Chinese government was still clinging on to the notion that it represented the working class – even as its officials established intimate and profitable private relations with the economic elite. Between them they have bagged 85 per cent of all wealth in China, and constitute China's super-rich. In light of this reality, the government had no choice but to make a strategic adjustment to its class allegiances, and so Jiang Zemin’s “Three Represents Theory” was wheeled out, giving political and economic elites much greater room to cooperate and expand. His call to “allow private capitalists to join the Party” was nothing more than a device awarding economic elites a stake in the system and a legal political voice.
Without doubt the most serious delusion among China’s intellectual circles during the eighties was that a mature middle class would demand democratic rights. The following decade extinguished this daydream forever. The Party’s political tactics have consisted of allowing the economic elite, along with appropriately submissive intellectuals, to take a stake in the system and jointly share some of its power – a far cry from the creation of a new democratic politics.
As for unrest and turmoil from the poor and dispossessed, the government has had to rely on increasingly violent repression. Extinguishing small-scale local protests has already become part of the normal working day for China’s local government officials who have consequently accumulated a wealth of experience in this field. The “carrot and stick” approach has proved easily the most effective response to collective protests by peasants and unemployed workers. The “carrot” usually consists of a small pay off – one or two months’ worth of livel, ihood subsidies – aimed at dispersing the unemployed workers’ protests and getting them off the streets. The “stick” is invariably aimed at worker or peasant leaders. The government, without exception, comes down hard on such “trouble makers” whenever it gets its hands on them. Mostly it is happy ju
Within China, there is no great divergence among those with a grasp of the situation concerning the damage that government and Party corruption is wreaking. But faced with the prospect of a possible collapse of central government authority leading to a social anarchy, the majority of intellectuals look to the internal power of the CCP as being able to rectify the present critical situation. Those who argue that the Party has the capacity and skills to control the current situation are basing their judgement on what I would call the “fire-brigade theory.” Namely that the government is similar to a highly efficient, well-drilled and integrated "fire brigade," fully-equipped with the latest "fire-fighting gear" and armed with a "fire prevention system" that includes control over the media and public opinion, a high degree of political repression, squadrons of riot police, and an entire state security apparatus appointed with the task of upholding social stability. But in China, the fire hazards are not simply the outcome of random areas being covered by dry firewood. The sources of danger are the underground fires that are already raging out-of-control, and are likely to erupt to the surface in any place and at any time. Even the most technically advanced fire-fighting equipment has its limits when faced with such hazards. Or, to put it another way, the day will eventually dawn when the Chinese Communist Party will not be able to control the fires it has lit. Moreover, the net result of a collapse of its long rule in a "one party state" will possibly signal the disintegration of China itself. The experience of Communist Party rule will leave us with constrictions that were absent after the fall of past dictatorships. The unprecedented growth in China's population, widespread ecological and environmental destruction and the total collapse of social morality are just some of the factors that will make the already enormous task of reconstructing China even more difficult. Perhaps more difficult than any previous period of reconstruction.
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[1] For example, Municipal Committee Secretary of Dongfang City, Hainan Province,Wei Huogui, Mayor and Municipal Committee Vice Secretary of Anyang City, Henan Province, Yang Hanxiu, Zhoukou Regional Administrative Office Expert and Regional Vice Secretary Zeng Jincheng, Hebi City Mayor and Municipal Vice Secretary Zhu Zhenjiang, etc, who carried out large-scale trading of official posts and titles. See Southern Daily Weekend Edition, .4.24.1998.
[2]Yang Haipeng, "A Power-crazed Village Sorcerer", Shenzhen Fazhi Bao (Shenzhen Legal Newspaper), .12.16.1999.
[3] Jin Yan: "Wang Xuebing's Dream of a Big Banking Family", Sanlian Shenghuo Weekly, .8.17.2002
[4] "Chinese car tycoon disappears", The Times, .8.26.2002
[5] Shenzhen Commercial Daily, Section A3, .11.12.2000.
[6] China Business Times, ..6.19.1998, fifth edition.
[7] Southern Daily Weekend Edition, .3.22.2001, "Defying the Anshan Iron and Steel Company Charter: How much lost to corruption? Rmb 1,000 billion every year".
[8] Yan Jianhong is the wife of Guizhou Provincial Committee Secretary [Wang Jianye], whose case was given detailed coverage in many mainland journals. The earliest long editorial on the case appeared in China Market Economy, 1.26.1995. Since 1994, the case of Wang Jianye was covered extensively in Shenzhen newspapers. After Wang Jianye's sentencing and execution on 12.28.1995, Shenzhen Legal News featured detailed serialized coverage of the case from 28 to 30 December.
[9] Zhongxin Network, Guangzhou News, 12.13.2001 "Wantonly Using Female Family Connections to Amass his Illegal Fortune: Exposing the Case of Former Shenzhen Mayor Wang Ju".
[10] Reform magazine, Issue 2, 1997: "Beihai Real Estate Speculation Scandal Exposed".
[11] Southern Daily Weekend Edition, 8.23.2002.
[12] Guangdong-Hong Kong Information Daily, 7.2.1996
[13] China Economic Times, 8.10.1999, eighth edition
[14] Zhongxin News Agency broadcast, Beijing, 6.10.2001, reported in World Daily, 6.11.2001, Section A7.
[15] Legal Daily News, 1.23.1996.
[16] Southern Daily Weekend Edition, 10.25.1996, "The inner sanctum of an independent financial empire.”
[17] Finance and Economics, Issue 9, 2002.
[18] "Profits may drop again: appropriately tight fiscal measures will remain in place", data from article and conversations with Dai Xianglong, China Business Times, 7.16.1996
[19] China Youth Daily, .3.10.1995.
[20] Shenzhen Business News, 8.16.1998, eighth edition
[21] Shenzhen Business News, 6.8.2001, eighth edition
[22] Zhongguo Jianbao (China Clippings), .6.25.1999, first edition
[23] Xinhua News Agency TV broadcast, Beijing, .1.18.2001.
[24] Reform magazine, Volume 5, 1996, Wang Ku: "Analysis of Volume and Composition of China's Capital Outflow".
[25] Britain's Financial Times, 12.27.1996: "China becoming a major source of the world's capital", by Mr. Wool (Wo Ke). From an extract in China's Reference News, 1.8.1997.
[26] Chinese News Net broadcast 5.30.2001
[27] Nanfeng Chuang (South Wind Window), March 2003, Volume 1
[28] Nanfang Zhou Mo (Southern Daily Weekend Edition),.6.13.2002.
[29] Chinese Township and Village Enterprise Journal, 2.8.2001
[30] Zhongxin Network News, Ningbo, 4.27.2001, "The Final Confession of Zhang Wei, the Notorious 'Black Gang' Boss of Wenling, Zhejiang Province"
[31] Southern Daily Weekend Edition, 9.28.2000, "Exposing the Triad Bosses in the Police Force"
[32] Sanlian Shenghuo Zhou Kan (Sanlian Life Weekly), 3.9.2001, Shenyang: "The Declining Fortunes of Despotic Gambling Mayors and 'Black Gang' Agents".
[33] Xinhua News Agency Special Report: "Crazy Evildoers Finally Get Their Comeuppance - Guangxi's First Case in the "Smash the "Black Gang" Campaign", eye-witness report byXinhua News Agency reporter Cheng Yifeng, Nanyang News Network, .5.17.2001
[34] South Wind Window, April 2001, Volume 2.
[35] South Wind Window, April 2002, Volume 2.
[36] "Fraudulent Fake Suicide Comes Back to Life: How do Statistics Become Just a Numbers Game?", Liaowang (Outlook) Volume 15,1998.
[37] Zhongxin Network News, Beijing 12.15.2001
[38] Beijing Youth Daily, 12.22.2000.
[39] China Business Times, 9.2.1999.
[40] China Business Times, .8.11.1998 "Effects of the Reorganization of the Chartered Accountancy Industry".
[41] Far Eastern Economic Review, 6.14.1996.
[42] Labour Health and Safety, January Issue, 1996, "Occupational Hazards in China -- Overview and Countermeasures"
[43] Labour Health and Safety, January Issue, 1996, "Occupational Hazards in China -- Overview and Countermeasures"
[44] Labour Protection, September 1997
[45] South Wind Window, June 2002 (first part), "Solving the Riddle of the Nandanren Disaster"
[46] Nanfang Urban News, .6.9.2001, Section A18
[47] China Economic Times, .6.3.1998, third edition: "Why are disasters so frequent in township and village coal mines?"; China Mining News, 12.02.1998 : "Corruption: The Foundation of Small Coalpits"
[48] Yangcheng News Weekly, 5.15.2000.
[49] Amnesty International Appeal for Three Gorges Dam Protesters, .4.23.2001, issued by Amnesty International's London headquarters.
[50] "Flooding the Land, Warming the Earth: Greenhouse Gas Emissions from Dams", http://www.irn.org/wcd/IRNGHGsfromDams.pdf
[51] "Problems Emerging in Three Gorges Project: Trying to Make Water Flow Uphill", Hong Kong's Sun newspaper, .4.24.2002.
[52] Xinhua Network Chongqing Channel .2.1.2002: "Spring Festival Garbage Mountain Polluting Yangtze River".
[53] "Problems Emerging in Three Gorges Project, Making Water Run Uphill", Hong Kong's Sun [...]
This paper will attempt to clarify and address the following problems:
1.The relationship between political corruption and the social system;
2.The areas where there is a high occurrence of corruption and its forms;
3.The unfavorable influence of corruption on social development;
4.The methods employed by the Chinese government to strengthen social control.
The paper concludes that, under the current social system, the government is incapable of finding a solution to a problem that it has itself created. As a Chinese saying puts it, even the sharpest blade cannot be used on itself! The government's measures against corruption in China are comparable to a surgeon performing an operation on himself. Serious corruption has devastated the very foundations of Chinese society and enveloped the country in a state of crisis—a volcanic landscape dotted with underground fires—and on the brink of erupting.
In response, a number of academics have put their faith in the government’s capacity to maintain stability through its “fire brigade” approach to the problem. This includes increasingly widespread and violent political oppression, a reliance on informers and espionage, and tight control of the country’s media and the Internet. Important too has been the Party’s recent willingness to open a narrow door to power and authority to China's economic and intellectual elites, allowing them to share in society’s wealth.
The author’s opinion is that while this unstinting willingness to throw money around in order to survive will lengthen the ruling life of the Chinese Communist Party (CCP), it will fall short of overcoming the corruption crisis.
1. The Special Characteristics of Phases of Corruption in China
Early in 1999, the author wrote an essay expounding the argument that from the mid-90s onwards, China had entered a stage of systemic corruption. Beginning with the [economic] reforms, governmental corruption has gone through the following stages of evolution: From 1980 until the early 1990s, corruption was chiefly limited to the venal behavior of individuals. Yan Jianhong, General Manager of the Guizhou China International Trust and Investment Corporation (CITIC), Gao Senxiang, President of the Shenzhen Branch of CITIC Industrial Bank and Wang Jianye, head of the Planning Department of the Shenzhen Planning Bureau are typical examples.
From 1995 onwards, corruption developed from individual acts into an organized pattern of behavior. Organized corruption includes: 1. Corrupt behavior by leading figures and subordinates in social organizations—including government departments—becoming the norm within the organization; 2. Exchange of power for money or other liquid assets by members of an institution; 3 Use, by relatively low-level government organizations and enterprises, of public resources at their disposal in order to bribe higher officials. These bribes are aimed at obtaining increased levels of public finance, favorable policies or more opportunities in general.
The case of Deng Bin in Wuxi of Jiangsu province displayed the typical characteristics of "organized corruption". Another prime illustration of such activity was the notorious Zhanjiang smuggling case, which led to the "collapse" of the Party Secretariat, Mayor and leading officials from, among others, the departments of Finance and Customs, as well as the exposure of smuggling operations organized by military authorities.
Beginning in 1998, the organized corruption described above began the transition to systemic corruption. Evidence of this transition can be seen from the following: Firstly, corruption has permeated into the political system itself and was now dominant throughout the government apparatus. The departments of Industry and Commerce, Customs and Excise, Finance, Land, Education and Public Health have been particularly prone to systemic corruption over the years. Secondly, corruption has become a system of resource allocation in itself. Society's political, economic and cultural resources are thus a principal target. Each case of the sale of official posts and titles represents an example of systemic corruption.[1] Thirdly, the campaign against corruption has itself—on one level—become a tool for obtaining gain or prosecuting a political struggle. For example, part of the political and economic life of the city of Rui’an in the Wenzhou area of Zhejiang fell under the control of a local village gangster after he used the corrupt behavior of the officials as a lever to gain influence over official appointments.[2]
In recent years, the Organization Department of the CCP’s Central Committee has even used information on the private affairs of its cadres—matters that they would rather keep quiet—to control their behavior. The so-called “struggle against corruption” has been stained by its use as a weapon to attack political rivals. For example, the purging of Zhu Xiaohua and Wang Xuebing from Zhu Rongji’s team of officials was allegedly on the grounds of corruption, but this was, in fact, simply a case of using the campaign against corruption to purge them from office.[3]
Because corruption has seeped into the daily life of the majority of government departments, officials who try to maintain an honest approach to their work are often squeezed out by others, who are fearful that such honesty will block their own route to riches. In what is surely testament to how low public values and social consciousness in China have sunk, it is now the case that all officials are taking kickbacks. This is how 'things gets done' and the size of the kickback is the measure of “success.” At times, government departments have actually been known to strike deals with criminals in order to protect higher-level officials and avoid exposure of their corruption. The case concerning the business activities of the Huachen Group’s Managing Director, Yang Rong, in August 2002 is a good example.[4]
The reliance on what amounts to blackmail to restrain the behavior of officials and the use of the campaign against corruption to liquidate political rivals, has now become the glue that unites political elites together. In these circumstances, regulations against corruption will not act as deterrents. Instead, they will encourage political elites to guard against any divisions in their ranks and adopt various new measures to prevent the emergence of a strong and influential opposition faction. In recent years, universal recognition of corruption and widespread exchange of power for money has reduced previously audible appeals from China’s political elite for political reform to a muffled whisper. Friction within the political system has diminished. On the issue of corruption, all the established political power holders are in agreement: the upholding of the current political system and status quo is in the interests of those who have already acquired riches.
In fact, “corruption with Chinese characteristics” is almost identical to the forms of corruption in Latin America and South Asia. Although there are differences between China’s political system and those of the nations of these two continents, the supremacy of power over law is common to all these systems. In China, those who have become rich through corruption and have power and wealth at their disposal are situated at the very top of the social hierarchy. Because the source of their wealth is unclear, the vast majority of ordinary people are highly suspicious of the legitimacy of their prosperity, and, from a moral perspective, hold such people in low esteem. In 1997 and the first half of 1998, a number of social and political commentators welcomed Jiang Zemin’s “Theory of the Three Represents”, and the “July 1 Speech" recommending “the entry of private entrepreneurs into Party.” The so-called theory is employed as an attempt to justify the current social order in China and to open up an institutionalized route for the integration of China’s political and economic elites.
2. Causes of Systemic Corruption in China
The point is that corruption in present-day China is not a transitional phenomenon, nor is it the product of capitalism as Chinese official media proclaims. The structure of political power in Chinese society determines the inseparable relationship between corruption and the country’s social system itself. Relying on anti-corruption measures and posturing from the CCP government will yield no real results on institutionalized corruption. To begin with, the CCP formulates the Constitution and all laws, as well as industrial and commercial regulations. The latter are especially important as they ensure that the powerful interest groups within each sector are also those that take part in the government and Party's legislative process. In the process of formulating laws, a clear systemic bias emerges. It becomes even more pronounced as the CCP government simultaneously performs the three roles of formulating, implementing and monitoring all laws. Apart from the CCP, there is no other existing power that can perform any monitoring of the government. And unsupervised power is the breeding ground of corruption. Secondly, the CCP is not simply the allocator of resources in China, it is also the chief beneficiary of this allocation. Such a system gives pole position to government officials, who are able to use their posts to get the first bite of society’s cake. Thirdly, in the “market economy with Chinese characteristics”, the CCP government not only fixes the rules, it takes part in the competition and acts as referee as well.
A great deal of attention has been focused on the two most important changes to the Chinese economic system since 1978, namely the dissolution of the command economy and the expansion of the non-state sector. Faced with this transformation, many researchers have employed the "planned economy or free market economy” either/or formula to arrive—with alarming alacrity—at the reductionist conclusion that the market already occupies the dominant position in the Chinese economic system. Such a simplistic conclusion misses a key point. That is, following the dissolution of the command economy in China, the system that filled the vacuum wasn’t necessarily a market economy. To be sure, there is no doubting the disintegration of the command economy, but this has not led to a reduction of interference in economic life by the government or monopolistic state institutions. It has simply rendered it a random, as opposed to, systemized intervention. It is not the market that dominates the economic process in China. Rather, there exists a “twin-track system”, which relies on the interplay of more or less equal measures of market forces and random government intervention. This is not the same as the classical market systems we see in Western Europe, and is also different from the market systems that have evolved in the non-socialist countries of East Asia. It is instead a hybrid that blocks the efficient allocation of resources, and provides an increasingly fertile breeding ground for corruption.
Political expedience dictates that the government restricts its definition of reform to a “reform of the planned command economy and adjustment to the ideology that rejected private economic activity.” Over the course of time, academic custom and practice has led even respected scholars to accept the government's limited definition of reform, and allow its propaganda to permeate into their thinking. In other words, intellectuals "accept" that the formation of a market economy in China is thus reduced to the turning of various ideological and macro-economic levers. The ideological room required for a market economy to operate is duly provided; controls over prices, production, the money supply, and labor are removed, to a greater or lesser degree. More decision-making power is permitted to devolve from the center to local governments. But in fact a socialist system is not simply a matter of "a command economy plus ideology." A mature socialist system gives rise to and nurtures its own social structures and institutionalized norms and culture. It is simply not possible for China's lame duck reforms—which have excluded any political progress or reform—to "disappear" these socialist social structures and their cultural appendages. Far from it in fact. They have clung tenaciously to their own existence while ensuring their familiar "traces" have remained well-hidden throughout the economic transformation. The result is an economic system that acknowledges the original power structures, and accepts the market—as a method of exchange—being grafting on to existing political and social foundations.
The two foundations of the former planned economy that have remained in place despite the disappearance of its form are:
1.The huge Party-state machinery and monopolistic state organizations that constitute its organizational pillars, running from the center down to local village government, that have not yet been disbanded. Some of these have merged while others have just changed their names. The power of these organizations to involve themselves at any time in daily economic activity has in no way diminished, let alone been cancelled out.
2.The high political and social status still enjoyed by China’s ten million CCP cadres and the twenty million staff members employed by monopolistic state institutions. While the environment in which these powerful groups exist has undergone tremendous changes, their capacity to act in their own interest is even greater than it was in the pre-reform era. The changes include, firstly, the significant weakening of the top-down disciplinary restraints that were a feature of the former, highly centralized system. This weakening has allowed organizations and individuals within them much more room to manoeuvre. Secondly, the goals and objectives of individuals and organizations have changed. In the past, the goals were to work hard at ensuring that orders from above were fully implemented, in order to secure and expand an organization's power and gain personal promotion in the process. Since the reforms, these aims have modified into striving to establish "income opportunities" for an organization, which in turn transforms the goals of individuals, from seeking promotion and status, to the exclusive pursuit of money, legal or illegal.
The disintegration of the planned economy resulted in the government treasury no longer being able to hold on to total control of the country's resources. With the decline in the dimensions of public finance, the higher authorities have been left unable to fully finance the normal activities of the lower levels of their organizations and state institutions. They are thus incapable of meeting the continual demands for better wages and benefits issuing from the people who staff these institutions.
In this context, the behavior of institutions and the cadres who staff them has naturally undergone considerable modification. While they are no longer the docile tools of central government, simply carrying out orders of the latter, they are certainly not civil servants subject to the checks and balances of genuine civil society. Moreover, they are no more disposed to abandon their social-political status than they are to accept a drop in their economic standing. Hence, on the one hand they represent the government by carrying out public duties and, on the other, make use of the power this gives them to obtain personal economic gain. Familiarity with the "job" has rendered them highly adept at identifying and seizing opportunities for advancement. From a moral perspective, their motives could best be described as driven by a determination to make use of the power at their disposal before it reaches a "sell-by date". To put it crudely, "get it—and spend it—while you can."
The widespread administrative interference in economic activity by the government or its monopolistic institutions has also manifested itself in the trend of commercialization of state administration organs and public services that emerged during the nineties. Because the organs of state administration were originally dependent solely on public finance for their existence, they could not avoid falling into a state of "semi-starvation". In order to ensure their membership of Deng's vanguard class of nouveau riche, the overwhelming majority of public or government officers spend their time in office meticulously calculating how to make the best use of their power for the greatest possible personal gain. This process has produced a unique systematized culture: the capitalization of political power and corporatization of government behavior. The results manifest themselves in a myriad of ever present "wealth creation" activities. This was originally regarded as an inevitable makeshift and stop-gap phenomenon, but the term "wealth creation" has since become a specialist term that appears regularly in official documents.
The most common concrete expression of this scenario is the exchange of the power and opportunities possessed by state institutions for direct or indirect economic gain. Administrative institutions and departments brazenly use their power to apportion or allocate wealth by various means: "compensated reports" in the news media, short-term "training courses" in educational institutions and universities, the concoction of various pretexts to sell educational diplomas, the sale of places in primary and middle schools, the enrolment of "high-price students," the sale of publication permits by publishing houses and hospitals forcing the recipients of publicly-funded medical services to buy expensive and unnecessary medication when they are being treated for illness. The authority to check tax evasion and smuggling, broadcast and publish news, bestow academic qualifications, publish materials etc. which in the past had no connection with commercial activity, have become the essential tools of "wealth creation". "Market exchanges" have expanded into government organizations and public services, and the parameters of this so-called "market economics" are far wider than those in any of the developed countries, greatly enlarging the space available for "rent seeking" as state institutions, organizations and work units continuously seek and create opportunities to interfere in social and economic life in search of financial gain. This interference has become increasingly lawless and random—a direct result of the lame duck reform process.
With public finances under increasing pressure and no corresponding reduction in the size or budgets of state organizations and institutions, this kind of activity can, in the short term, reduce financial burdens on the government and simultaneously increase the income of the officers of these institutions and government departments, while bringing a measure of stability and continuity. It is for this reason that the central government has largely turned a blind eye to "rent seeking" and has at no point seriously attempted to curtail it. Yet the social consequences are real enough. The current situation not only brings chaos to society's economic activity. It also profoundly weakens moral standards and even corrodes the fabric of society itself. When work units indulge in this kind of activity it is, more often than not, explained away in terms of "revitalizing 'income-creation' economics". In contrast, if an individual officer is caught out and convicted of using a public office for private gain, his or her activities are invariably labelled as "corruption."[5]
For example, when institutions of higher education auction off diplomas and academic places, it is deemed to be "income-creation" and receives the endorsement of staff and teachers alike. If, on the other hand, an individual teacher is discovered to be selling marks to students, the teacher is condemned, and their reputation is left in tatters. When a top level lecturer at a medical school in the city of Urumqi in Xinjiang was found to be selling marks to students for a few hundred dollars in exchange for successful examination grades, he was condemned as corrupt. 5 But in reality, there is no difference between an institutional engaging in organized "income creation" and an individual doing the same thing by using the name of an institution. The term "income creation" and "corruption" are entirely interchangeable and provide a mutual shield.
Many of the individual victims in the resulting chaos are the same people who create the disorder in the first place and are capable of presenting one of two public faces according to particular situations. When evaluating their own behavior, they will unashamedly start by looking to their own interests, and conduct a bold, high-sounding defense of inappropriate activities. In evaluating the same kind of behavior by others, they will swiftly climb to the moral high ground, and sternly censure those who have been caught with their fingers in the proverbial till. The blackmail and extortion case involving Shang Meiying, a Deputy Director of the Trademark and Advertising Administration House, and an officer in the Xianyang City Bureau of Commerce and Industry in Shaanxi province, is a good example. In June 1997, Shang deemed that the Buzhang Company was adopting irregular trademark and advertising policies in the area under her jurisdiction, and proceeded to blackmail the person responsible at the company by threatening to send letters to all 151 of the company's clients, besmirching its reputation. Despite pleas from the Buzhang Company to lower the amount, Shang Meiying insisted that the price tag for not sending an individual letter was 10,000 yuan, a total of 1.5 million yuan. The company was left with no option but to report Shang to the police who detained her for a number of days before ordering her release on bail. On her emergence from prison, the Xianyang Commerce and Industry Bureau went so far as to formally organize a grand ceremony to welcome her back. The clearly corrupt Deputy Director of a government department was feted as a returning heroine.[6]
As mentioned above, what has emerged in China in the long period since the dissolution of the command economy is a "twin track economy" that has little in common with the former system. In other words, China's developing market system exists alongside administrative interference. By the latter, I do not refer to the normal macro-economic management of the economy by government, but chiefly to two sets of circumstances: firstly the implementation of policies aimed at satisfying influential sectors in society. This includes, for example, the continued willingness of the banks to follow orders and issue new loans to loss-making state owned enterprises already way behind on instalments from previous loans. Secondly, the improper interference in society's regular economic activity by powerful institutions and individuals bent on economic advantage for themselves. By its nature, this kind of interference is not subject to regulatory supervision, and consequently the central government cannot effectively control it. The government’s response is limited to occasional anti-sleaze and anti-graft campaigns to try and restrain improper interference. In fact, the plague currently afflicting China's “twin track” system of random administrative interference and market economics cannot be cured from within. Propaganda campaigns that rely on heavy punishments and the example of designated individual people as "models" of morality will not have any genuine effect.
The current "twin track" may well last into the foreseeable future as it does partially fulfil the functions of a market economy by bringing market regulation to exchanges between producers, and between producers and consumers, thereby ensuring continued economic activity. Another factor ensuring its continuing existence is that the "twin track" not only acknowledges and retains the original structure and organization of power, but, moreover, it has actually injected the original structure with a new lease of life that has consolidated its existence. Consequently, the overwhelming majority of civil servants, government officials and staff of various public institutions have emerged as the big winners in the "reform" process, and their support for the process is thus ensured. As a result, the Chinese government will definitely not launch any political reforms that will even slightly touch this present power structure in the short-term future.
Hot Spots of Corruption
A.Government Departments
Table 4~1: Statistics on Corruption Cases Investigated by Inpsection Bodies
Year No. of Cases No. of Officials involved
(county level and above)
1988 36,500
1989 58,926 742
1990 51,373 1,188
1991 46,219 924
1992 98,876 915
1993 56,491 1,037
1994 60,312 1,827
1995 63,953 2,262
1996 61,099 2,699
1999 38,382 2,200
2000 45,113 2,680
2001 54,367 2,670
Note: These statistics are from annual reports compiled by China's Supreme Procuratorate. However, there are two peculiarities to the figures that need to be noted. Firstly, there are inconsistencies in the annual specifications (or: annual statistical presentation); and secondly there are inconsistencies in the methodology. For example, the cases covered in the four-year period from 1988-1991 are presented as annual totals, but the figure for 1992—compiled in 1993—is presented as a sum of the five-year period from 1988 to 1992. In other words, the figure of 98,876 cases for 1992, was arrived at by subtracting the accumulated figure of 115,422 for the four-year period 1988-1991 from the total figure 214,318 for the five-year period 1988-1992. The 1998 Procuratorate report states the total number of cases for the five-year period 1993 to 1997, and shows different statistical specifications than in previous reports. The 1999 report has different specifications, and so the previous two years (1997-1998) are left blank.
Beginning in the 1990s, the following trends began to emerge in corruption:
The number of Party and government officials implicated in cases of economic corruption rose continuously. There was also a marked rise in the number of high-level officials involved in corruption. Among those sentenced for corruption and bribery were former Vice Chairman of the National People's Congress (NPC) Standing Committee, Cheng Kejie; former Deputy Governor of Jiangxi province, Hu Changqing; former deputy minister of the Ministry of Public Security, Li Jizhou; Vice Governor of Liaoning province and mayor of Shenyang city, Mu Suixin; former Governor of Yunnan province, Li Jiating, and former Anhui province Vice Governor, Wang Huizhong. The tentacles of corruption have also reached out to officials of the Procuratorate (Chinese prosecution service) and officers of the government's civil and legal administration bureaucracy. Criminal behavior by staff members includes extortion, blackmail, acceptance of bribes, perverting the course of justice and the use of public office to protect illegal business of their family and relatives. As the scale of corruption has grown, so has the incidence of people absconding with large amounts of ill-gotten cash. Criminals have forged links across provinces and countries in order to facillitate their activities. This phenomenon of widespread organized corruption is causing enormous harm to the reputation of the reforms and, to a degree, the political and economic stability of the country itself.
The corruption so far highlighted and exposed is limited to venal officials who have been publicly exposed. According to data gathered, only 42.7 of every 100 cadres who have been subjected to Party and government disciplinary punishment were formally investigated, and only 6.6 of them were actually sentenced by the courts. With a punishment rate of just 6.6 percent, the benefits clearly outweigh the risks, and it is hardly surprising that no sooner is one corrupt Chinese official caught another steps in to take their place. In the latter half of the 1990s, direct economic losses and losses to consumers—in the form of welfare and benefits—amounted to an annual average of between 987.5 billion and 1.257 trillion yuan - 13.2 and 16.8 percent of GDP! [7]
B.The Government Offices in Charge of Resource Allocation
The so-called "market economy" established during the course of the reforms is in fact little more than mimicry of the real thing. The power to allocate and distribute resources is still basically in the hands of the government and its officials, who, at all levels, remain the ultimate arbiters of who gets what. This reality gives appointed officials in ministries with control over resources, such as the State Bureau of Land Administration, the State Planning Bureau and financial organizations and institutions (state banks and securities companies, for example), considerable opportunities for rent-seeking activity. The methods these people resort to in order to gain advantage are hardly subtle and crystallized in the acceptance of bribes and the diversion of public funds. In 1995, there were a number of cases that serve as typical examples of this kind of corruption: Yan Jianhong, who served first as the Deputy Director of the Guizhou province Planning Committee and later as the Managing Director of the Guizhou CITIC, and Wang Jianye, head of the Shenzhen Planning Bureau’s Department for Finance and Trade. These government departments are in a position to approve or deny the use of materials and resources designated in government plans, as well as control the use of capital and various funds, which, in the particular environment of China’s “twin track” pricing system, amounts to nothing less than possessing the Midas touch. It is not rare for a single authorized “approval note” to immediately transform such people into millionaires.[8]
During the 1990s the China Procuratorate Publishing House published the “Records on the Elimination of Corruption in Modern China,” along with a publication entitled “Justice and Evil—Records of the Latest Important Cases in the Punishment of Corruption” compiled by the CCP’s Central Commission for Discipline and Inspection.” The cases featured in these two books clearly revealed that corruption existed at all levels of government, state and Party activity, from the Central Committee down to the county level, and even lower.
The State Bureau of Land Administration, which, as its name suggests, allocates land resources, is where corruption is especially severe, and it appears in the majority of cases that come to light. The investigation into the activities of Wang Ju, Deputy Mayor responsible for urban construction in the city of Shenzhen, ended with prosecution in 2001. The case found that 32 officials were involved in corrupt activities and the affair enveloped almost all officials working at the city’s Land and Urban Construction departments. The sheer amount of cash involved left the public—already accustomed to large-scale corruption—in a state of shock. The Wang clan, via Wang Ju’s daughter Wang Tao and her control of the project, harvested 120 million yuan in profits from the Windsor Square real estate development alone. According to government regulations, the plot was worth 150 million yuan, but Wang Ju ordered his subordinate, the Deputy Director at the Shenzhen Land Planning Bureau, Pang Chenghong, not to go through official land value procedures when dealing with the Windsor project. The price was subsequently valued at 27.6 million yuan, 122 million yuan less than its real value.[9]
The city of Beihai in Guangxi province has been hit particularly hard by the phenomenon of "land speculation", a problem exacerbated by the even more common occurrence of insider trading. Following a two-year investigation by the Central Investigation Group, 123 people were implicated in the Beihai "land enclosures" scandal, involving embezzlement and bribery. Five provincial-level cadres and 20 department-level cadres were caught up in the case, which involved a sum of 110 million yuan. Three standing committee members of the Beihai city Party Committee were punished for the large sums garnered via embezzlement and the acceptance of bribes. They were the Beihai Deputy Mayor in charge of day-to-day affairs, Wang Fangchun, the Secretary for the Committee of Politics and Law, Peng Fuqin, as well as the Director of the Department of Organization, He Youxue.[10]
The corruption case against Deputy Governor of Anhui province and Secretary of the Fuyang city Party Committee, Wang Huaizhong, involved 100 million yuan, the bulk of which appeared to come from profits from the resale of state land. According to the data that was made public, Wang Huaizhong oversaw the disappearance of state assets worth up to one billion yuan by approving various land sales beginning in 1996. In fact, at least ten tycoons have emerged in China whose wealth is rooted in the continuous flow of profits from the sale of state land.[11]
The province of Guangdong has been a hotspot for corruption arising from improper land transactions. Between 1992 and 1994, there were 13,894 cases involving ratification of various forms of land use that violated the relevant laws and regulations. The total land put to illegal use came to 152,000 mu of which 80 per cent was government-owned. In 1996, Guangdong province underwent a "find waste, eliminate waste" inspection and campaign, which revealed that out of the 238,000 mu of non-agricultural construction land lying idle, 70 per cent was rendered idle by the government.[12]
In 1998, there were 287,000 cases of illegal sale or use of land on the public record alone. Of the 1.2 million mu of land involved, 387,000 mu was arable land.[13] On June 10 2001, Meng Xianlai, the Director of the Executive and Supervision Bureau of the Ministry of Land Resources, announced that there were 170,000 cases of land use violation in 2000, leading to an annual loss of 10 billion yuan in state-owned land. Despite this extraordinarily large number of violations, the ratio of cases thoroughly investigated remained small, and those successfully concluded even less.[14]
Financial institutions in China have become known as “cash captains” and are enveloped in similar corrupt work practices as the departments responsible for land, public security industry and commerce and taxation. If ordinary citizens need to acquire loans or mortgages, they have no choice but to resort to bribery. This practice is so widespread that it has been dubbed the “All Chinese People’s Banking and Loan Service”, meaning that the people serve as an improper source of funds for the institutions. This kind of scandal is frequently reported in the press and other media channels. However, the underlying reason why this behavior is difficult to investigate and punish is because it is collective. A veritable sea of bribe-taking was exposed in the district of Linfen in Shanxi province in 1995. The manager of the Linfen Construction Bank, Liang Tianrong, and more than sixty colleagues working in the local financial system and enterprises were directly implicated in the case.[15]
For many years the Puqi city branch of the Bank of China in Hubei province enjoyed a golden reputation as a “model advanced enterprise,” and was frequently the focus of attention as news media vied to report on the bank’s successful management. Almost out of the blue, the branch was revealed as a nest of maggots who, headed by its Director, Xiong Xuebin, were worming their way at will through the bank's finances. The scale of graft and misuse of funds was so great that the bank’s operations resembled those of an independent kingdom. More than ten people, including the Deputy Bank Manager, Liu Shaoqin, Credit Department Manager Wei Jianxin, and Chief Accountant Li Junfeng, were involved in the operation. It was described locally as an organized mafia led by a 'triumvirate of chariot-drivers to carry out the daily routine of graft'. From 1988 onwards, the bank’s accounts were distorted to a point that in 1995, when the gang’s activities were brought to a halt, the figures bore absolutely no relation to the real financial situation of the bank.[16]
Cases of meticulously planned scams by bank directors are a common occurrence. In April 2002, a massive case involving the theft and misappropriation of assets came to light in Kaiping, Guangdong province. Beginning in 1993, three successive bank managers made use of a mutually beneficial relationship to obtain personal financial gain. The criminal activities of Xu Chaofan,Yu Zhendong and Xu Guojun spanned nine years, during which they stole a total of US$483 million. The theft was carried out via the financial system of the Bank of China itself, and apart from a few token investment loans in Kaiping, the vast majority of cash was diverted out of the country into private bank accounts - and subsequently spent. Following the success of this criminal activity, the three crooks left the country in October 2001, and disappeared. At the same time, the Guangdong branch of the Bank of China was enveloped in a mushroom cloud of graft, as fresh financial scandals emerged in all areas of its activities. The crisis was worsened by the Wang Xuebing case at its New York branch, and the Bank of China (Hong Kong) had no option but to abandon plans to list on the US (New York) and Hong Kong stock exchanges.[17]
At present, the percentage of bad debts at the Bank of China is 30 per cent,[18] a figure directly related to the corrosive activities of corrupt officials. Although there are serious limits on the reporting of their activities in the media, the cases already revealed demonstrate a scale of corruption in administrative and law enforcement departments. These include the Public Security Bureau, the Procuratorate, the Department of Industry and Commerce, as well as Customs and Taxation, a revelation that has caused genuine alarm—even a sense of dread and foreboding—among the ordinary citizens of China.
C: Public Utilities
Many of the sectors responsible for the provision of public services in China such as housing, electricity, communications, health and education, have their monopolies. Consequently, Chinese people come into frequent contact with the officials running these monopolies—they have no choice. The often-voracious behavior of the staff and administrative personnel has led to various utilities being dubbed "tigers." People refer to the "housing tiger" or the "electricity tiger" in reference to the way these officials make use of their "power" to line their own pockets. If someone needs an operation, then the doctor must be given lai see, or New Year gifts of cash. Headmasters and teachers receive gifts when a child starts school, and parents must meet the myriad and unreasonable demands made on them by schools. The effect is that people are left seething with anger, as they are forced to go along with what amounts to institutionalized bribery in order to obtain the relevant stamp of approval from various state-run monopolies.
At first sight, these issues appear to be rooted in a culture of unethical behavior in the working practices of various public utility services. While this explanation has some credibility, it does not explain the absolute nature of the graft, responsibility for which ultimately lies within the political system itself. During the mid-90s, when the Chinese people still retained some confidence in the system, articles frequently appeared in the media criticizing the immoral work practices among staff working in public utility sectors. Among them was an article published in China Youth Daily entitled "Survey Regarding Work Practices in Public Sectors." The article was based on a survey highlighting the eight most despised practices: use of public funds for lavish banquets and entertainment; refusing to deal with enquiries from the public; superficial responses to enquiries followed by chaotic and inefficient work performances; the chaotic and opportunistic charging of fees; the abuse of authority for personal gain; opportunistic levying of fines and penalties; abuse of expense accounts; and the seizure of assets by government and Party administrative organizations and their staff from work units and enterprises under their authority.[19]
The entrenched behavior of officials in public utilities is frequently dubbed as being "even worse than a whore." At least a whore, so the logic goes, provides a service in return for her money, and as such adheres to a "code of practice". This is in stark contrast to the staff of public utility services who take money without so much as a nod to any form of code of practice, in the process destroying all legitimacy. The salaries of these government officials are from taxes people pay, and the established motto of "serving the people" is nonsense in the face of this spreading corruption that undermines the very foundations of government, destroys its integrity, weakens its operation and even degrades the aims of social policy. By the latter half of the 1990s, when corruption had already completed the transformation from organized graft to systemic corruption, ordinary people were left with no option but to "accept" reality and manifest a high degree of tolerance.
Public servants notwithstanding, it is the behavior of doctors and teachers in their respective sectors where the total lack of occupational ethics has the most damaging impact on society. The lack of medical ethics is a prime example. Revelations of serious corruption and poor work practices by the director of a top-notch triple prize-winning hospital, owned by the Xinjiang Production and Construction Corporation, caused enormous consternation among the public. The director exposed senior hospital administrators for basing their duties purely on the grounds of profit, rather than health. If a department or ward was able to earn money, it was judged as efficient, regardless of its medical results. An entrenched form of rent-seeking established by nurses provided myriad opportunities for obtaining money from patients, by fair means or foul. The main modus operandi included:
1. Every time a doctor referred a patient for a CT scan, he or she would receive a kickback of 4.5 yuan from the CT department. According to statistics made available by the whistle-blowing director, each doctor made 60 such referrals every month, but only 20 percent of these were for patients who genuinely required a CT scan.
2. Between three and four overnight stay forms were registered for each hospital bed, in a practise that became know as "phantom beds". Each one of these was worth five yuan to the department. In reality, there would be only one patient per bed, and the patients named on the bogus forms were diagnosed and treated at home, even though they had to pay the fees for hospital accommodation.
Extra charges: A 16-year-old youth named Hu went to the same hospital with the same compliant three times in the latter half of 1997, and was diagnosed differently each time. The cost of treatment totalled over 5,000 yuan, of which 1,000 yuan was for fictitious diagnosis and treatment. This included being charged for the use of medical equipment that was not used and injections that were never given. On top of these charges, the teenager's parents also had to pay for the nights they stayed in the hospital with their child, as well as for nursing costs. The hospital director stressed that this was simply a randomly picked case, and was not a typical example of extra charges. He explained that the vast majority of nurses were simply concerned with money, receiving cash gifts and getting their share of kickbacks, all of which were common phenomena. In order to safeguard the reputation of the hospital, protect the position of the leaders and ensure the continuous supply of departmental and individual bonuses, the director stated that staff at all levels lied about the problems, testament to the absence of any sense of professional pride or morality.
The total annual income of the hospital was 80 milli, on yuan, a fair proportion of which ended up in the coffers of the local government’s Department of Health. Members of the public wrote letters of complaint about the hospital to the Department of Health on many occasions, but these were simply passed on untouched to the hospital authorities by officers from the Health and other Departments. As a result, those who complained were often the targets of revenge meted out by hospital staff.[20]
The lack of medical ethics was also an underlying cause behind the spread of HIV/ AIDS in the province of Henan, now a notorious and ongoing scandal. Poor needle management, including the use of dirty needles on people who were selling their blood, resulted in widespread HIV infection. This kind of practice is common throughout China. Hospitals in the city of Jinan, Shandong province—among them some well-known medical establishments—made a great deal of money by substituting industrial oxygen for higher-grade hospital quality oxygen, and charging patients requiring oxygen for the latter. Ignoring the safety of their patients, this scam was worth over 300,000 yuan a year.[21] The practice of hospitals forcing patients to buy expensive medicine and taking a kickback on each sale is extremely common in China. Over 60 doctors at the Wuhan city Number One Hospital in Hubei province made between 100 to 200 yuan per day from kickbacks obtained by forcing patients to buy expensive drugs.[22] In this overwhelmingly "sellers' market", patients have no bargaining power, and little choice but to go along with the medical staff's flagrant exploitation of their position. Rarely in civilized societies do occupational ethics sink to such a terrible status.
A "sense of responsibility" is an important moral base for any market economy, and the source of this must be the willingness of all individuals to accept moral responsibility for all the results of their own actions. Without moral responsibility, an occupational sector will quickly lose its social value. As far as society is concerned, it will be unable to efficiently realize its full professional functions, establish a beneficial service and organize itself as a social structure that can stabilize social values. And for individuals, a lack of ethics means that the sector cannot offer a long-term career path or allow staff and workers to accumulate personal skills. As such, the sector cannot make a contribution, or provide or serve society in any meaningful manner. Simply speaking, by losing people with a sense of responsibility, the conduct of the sector as a whole will degenerate into criminal behavior. I have concentrated on medical ethics for precisely this reason. The problems in the medical sector are no longer simply a question of occupational ethics, but of criminality.
4.The Influence of Corruption on Chinese Society
The large amount of hard evidence I have researched has led me to the observation that the starting point for the redistribution of wealth that we have witnessed during the reform process has been the commodification of political power. The essence of the process of primitive capital accumulation in contemporary China can be found in the 'power for money' exchange, and parallel activities such as rent seeking, that has distinguished the behavior of political and economic elites and their hangers-on in contemporary Chinese society. These two elites are carving up the country's wealth between them. The main target of this profoundly predatory form of primitive accumulation are the public assets that have been built from more than forty years of hard work, sweat and blood by the people as a whole. The chief technique for this plunder is to rely on power. And the consequences of this pillage - and I count systemic corruption among them - have now descended on China. And they are dire in the extreme.
A.Large-Scale Capital Flight
Because modern China's process of primitive capital accumulation is racked with immoral and criminal behavior, the country's new rich have two chief considerations. The first is the enormous wealth gap that has emerged. The extremely sharp social contradictions of this fact have rendered China a high-risk society. The second is that an overwhelming proportion of the income and wealth of the aforementioned elites comes from the "gray area" between legitimate entrepreneurial activity and criminality. This renders them sitting ducks for the inherently unstable "struggle against corruption." Consequently, the majority of China's nouveau riche combines their questionable economic activities with a ready passport and preparations for departure. Once enough money has been accumulated, many leave the country permanently. As of January 2001, China had over 4,000 individuals categorised as "corrupt" people who had succeeded in spiriting away over five billion yuan out of the country.[23] But this figure represents only a tiny portion of the capital that has left - and is leaving - China.
Modern technology has presented unprecedented opportunities for the movement of capital, and it has reached new levels as a result. The trend of capital flight from China is upward. According to one researcher the total capital flight since 1985 amounts to 52.3% of the increase in foreign debt. This is higher than the average capital flight figure notched up by the world's 15 most heavily indebted nations during the 1980s.[24] As we entered the 1990s, capital flight was close to, or even surpassed, annual increases in foreign debt. In other words, at the same time as China borrowed heavily from foreign sources, over half of the capital borrowed was leaving China via various channels. Some of this cash then “disappeared”, never to return. Mr Wool, a consultant for the Royal Commission on International Questions in the UK, pointed out in a report presented to the Organization for Economic Cooperation that between 1989 and 1995, overall levels of capital flowing out of China had probably surpassed US$100 billion. Approximately half was not approved by the government.[25] According to research data from the general office of the Ministry of Finance published in "A Positive Financial Policy," capital flight in 1997 and 1998 reached US$36.5 billion and US$38.6 billion respectively. The situation was partially brought under control in 1999, but the level was still at US$23.8 billion. In 2000 capital flight again spiralled to approximately US$48.billion more than actual foreign investment, which stood at US$40.7 billion.[26]
The fact is that only a portion of this capital flight comes from private entrepreneurs who are shifting capital abroad due to anxieties about China's political instability. Corrupt officials involved in money laundering activity make use of all the methods at their disposal to give a respectable veneer to their ill-gotten gains so as to be able to spend the loot as freely as possible. Much of it is used as investment and continues to appreciate in value.
The most devastating effects caused by the recent spate of corrupt officials fleeing overseas have been felt by finance departments and state-owned enterprises. The four top managers of the aforementioned Kaiping Branch of Bank of China successfully carried out their scheme to abscond with stolen funds. In 2001, of the 120-odd individuals charged with fleeing the country in cases filed by Beijing prosecutors, 70% were presidents, vice presidents or financial officers at state-owned enterprises. Many of the fugitives were also government office holders. One such example is the case of Cheng Sanchang, briefly hailed as a “model of SOE restructuring.” While jointly holding the positions of Mayor and Municipal Party Secretary of Luohe city in Henan province, Cheng sold off 27 state-owned enterprises, earning the nickname “Cheng Sell-off.” Via murky deals, “Cheng Sell-off” lined his pockets with funds embezzled from his sales of state-owned enterprises. In 1999, finding that the assets of the city’s public enterprises had largely been sold, he quit his official positions and moved to Hong Kong, where he served as CEO of the Yugang Corporation, a “window company” for the Henan Provincial Government. In May 2001, Cheng decided that the time was right to abscond, and he fled to New Zealand, taking with him his mistress and a sizable fortune.[27]
The government officials and heads of SOEs who flee the country with vast sums of embezzled funds, typically lay their plans carefully. Rather than waiting for their malfeasance to be exposed before taking action, they start the process of arranging family members, funds and property abroad and making mental preparations from an early date. Each element of their plans is set in motion at the appropriate time. A typical plan involves making seemingly innocuous arrangements, such as having their wives and children take residency abroad, while they use a variety of means to transfer large amounts of illegal assets overseas. During this time, the officials remain in China, continuing to engage in corruption and amassing wealth. There they bide their time until, at the first sign of danger, they run. With these methods, most of the corrupt officials who flee China get away scot-free – only one in six are tracked down and brought back. According to an official in the Foreign Affairs Bureau of the Supreme People’s Procuratorate, in recent years, the Bureau has actively pursued between 20 and 30 cases annually involving fugitive officials, but only approximately five cases resulted in extradition. The official went on to say, “But this could be just the tip of the iceberg, because a portion of the cases are not handled by us.”[28]
Since the 1990’s, the scale of capital flight in China expressed as a percentage of GDP has ranked second only to Russia, surpassing both Mexico and South Korea. In 1997, China’s capital flight as a percentage of GDP far exceeded that of Mexico in 1994-95, during the Mexican financial crisis, as well as that of South Korea in 1997, which was then experiencing its own financial crisis. Taking into account the possibility that, under China’s strict currency exchange policy, capital flows hidden in fraudulent trade reports and other kinds of hidden capital outflows may far exceed those of Mexico and Korea, one can conclude that the overall situation concerning capital flight from China may be much more severe than those two countries.[29]
Between 1979 and 1997, China received a total of US$348.3 billion in actual foreign direct investment. Beginning in 1993, China ranked second in the world behind the US as a recipient of foreign direct investment for five years running. Meanwhile, according to IMF statistics, capital leaving China accounted for 2% of the total volume of international capital flows in 1995, making China the eighth largest supplier of capital in the world, and the top-ranked developing nation in terms of foreign investment.
The kind of threat that capital flight poses to China is easy to see – the financial crises in Mexico and Thailand are evidence enough of this. It is reasonable to claim that China might well have encountered a financial crisis of its own long ago, were it not for the large amounts of foreign investment capital that have flowed into China since the 1990’s to replace the departing capital.
One aim of this paper is to emphasize the political significance of large-scale capital flight. In actuality, the flight of capital out of China demonstrates the ever-increasing sense of crisis among China’s bureaucratic class. To the corrupt officials who have secretly prepared their foreign passports, China is nothing more than a good place to enrich them.
B. The Influence of Organized Crime on Local Governments and the Gradual Merging of Crime and Authority
Perhaps the most foul-tasting fruit from the tree of widespread illegal land transactions by local governments has been the growing influence of organized crime syndicates – known in Asia as Triads – on local government. In fact, it is often hard to draw a line between government and Triad authority.
Data gathered from investigations and cases where a crime ring has been successfully broken show that these Mafia-type organizations have rapidly risen to prominence over a very short period of time. The social chaos they cause cannot be underestimated. One of the major reasons behind the rise of the Triads has been their links with local government officials – especially the PSB – with whom they collude very closely in an exchange of services and favours that are nothing more than protection rackets. China's Triads differ from their Western counterparts in one important aspect. In the West, the basis for most crime syndicates' power and influence is their contact with the police departments and judiciary ministries. But the antennae of China's criminal gangs are even longer, with cadres serving as a reliable source of power and influence for the gangs and a number of crime bosses also working as leading officials, donning what we call the "red cap." In the city of Wenling in Zhejiang province, syndicate boss Zhang Wei also held eight separate official posts stretching way beyond the borders of Zhejiang province. Zhang's posts included Deputy Chairperson of the Yidu city Political Consultative Conference in Hubei, a member of Youth Federation's Standing Committee and Deputy Director of the Young Entrepreneurs Association in Suizhou city, Director of a well-known news agency in Zhejiang, and four more leading official positions. Zhang Wei's case implicated 69 members of the government and Party members, including the Wenling city Mayor, Chief of Police (PSB), 42 government or Party cadres, 15 members of the judiciary, and ten people from financial organizations. A copper plate hanging on the gate of Zhang's residence announced "Key Protection Unit of the Wenling PSB", encouraging local people to dub him "the red gang boss.”[30]
The execution of Jilin’s most important crime boss, Liang Xudong,[31] Liaoning’s notorious Liu Tong,[32] and Guangxi’s Zhou Shounan,[33] are all reminiscent of the Zhang Wei case. The evidence revealed during these trials proved beyond all doubt the existence of an “alternative” authority operating under the protection of powerful officials and their networks, and causing untold social damage.
Even worse, a recent report by the Ministry of Public Security has revealed that Triad forces had permeated into government offices at county and city level. They were succeeding in getting chosen as government "representatives", and taking leading roles in local Congresses. As such, corrupt officials are transforming organs of public power into channels for Triad activity. The overall picture is of a merging or blurring of the lines between the police and criminal gangs, who rule society between them. This is possibly the worst-case scenario for any given society.
One result of these developments that should not be ignored has been the spread of criminal behavior and values into society at large. The pernicious values of Triads and organized crime have had a serious influence on the daily behavior of Chinese people since the 1990s. This trend has shown itself particularly clearly in power struggles that frequently involve the activities of Triad groups, and it is against this background that the phenomenon of “officials killing officials” has emerged in recent years. Some of the more notorious cases include: the hiring of a contract killer by Chen Jinyun, the Anyi County Magistrate in Jiangxi province, to murder the county Party Secretary Hu Cigan and his deputy Wan Xianyong in 1995; the March 1997 conspiracy to murder the former mayor of Yangchun city in Guangdong province and his associates, hatched by Yangchun Party Secretary Yang Wenyao, Deputy Mayor Yang Qizhou, Deputy Director of the City Finance Office Lin Qiju and others; the June 28, 1999 murder of Lu Jingyi, leader of a nearby Batai town, and his wife by former Party secretary of Wugang city, Li Changhe; the March 16, 1999, murder of a public prosecutor named Huang Conghua by an official at the national tax bureau on Hainan island; the killing of a local county head by the leader of the Fushin city judiciary on March 26, 1999,
There are over ten cases of government officials resorting to criminal methods that are normally the terrain of organized crime. The contract killers themselves are either Triad “gophers”, or extremely poor and marginalized members of society.
It is true that competition for posts between officials in China was not previously conducted by relying on more commonplace criteria such as an individual’s moral integrity, skills, diligence and ability to get results. Chinese society has already been heavily punished for its preferred method of cadre selection. The recent added ingredient of organized crime will only serve to aggravate a system that is already devoid of procedure. Worse still, the entry of organized crime and its evil methods into political life will encourage other sections of society to imitate their methods. Cases of kidnap and ransom and murder have already become a common feature of everyday life over recent years. Ordinary people in China suffer from a profound lack of security as a result of living under an authoritarian and dictatorial system. The addition of alternative power structures dominated by a casual use of violence and Triad activity will do nothing but add to their insecurity and fear.
C. A Widening Wealth Gap Gives Rise to Acute Social Tensions
One result of rampant rent-seeking activities is that the income gap that has been steadily widening since the 1990s has begun to show a clear trend towards “polarization”, where the rich get richer while the poor become even poorer.
China’s income gap can be measured using two methods: Gini coefficients and the distribution of bank deposits.
According to calculations by the World Bank, in 1978, before China embarked on the policy of “reform and opening”, the Gini coefficient for personal income distribution in cities and towns was just 0.15. This was essentially the lowest in the world at the time, and reflected the effects of China’s egalitarian ideology and the “big rice bowl” system. From the mid-1980s onwards, however, the income gap grew rapidly, as the following table of Gini coefficients illustrates:
Table: Changing Gini Coefficients
| Year | Individual income of urban residents | Individual income of rural residents | Survey by Renmin University of China, PPS sampling |
| 1978 | 0.15 | ||
| 1982 | 0.22 | ||
| 1986 | 0.19 | 0.30 | |
| 1988 | 0.34 | ||
| 1990 | 0,23 | 0.31 | |
| 1994 | 0.370 | 0.411 | 0.434 |
| 2001 | 0.458 |
Note: The Gini coefficient for 2001, as reported by the National Bureau of Statistics, does not distinguish between urban and rural incomes. See Economic Daily, 29 October 2001: page 7.
It should be noted that the Gini coefficients reported by the Chinese government do not entirely coincide with the perceptions of ordinary people. For, while the statistics for middle and lower income families presented in these surveys are fairly reliable owing to the relative transparency of these families’ incomes, the figures for the upper income brackets should be viewed with skepticism, as these families tend to have hidden sources of income. Nevertheless, even going by these vastly under-reported official government figures, it is undeniable that in the brief span of 20 odd years, China has changed from an egalitarian society into one in which the gap between rich and poor causes social unrest. In 1998, those in the top 20% of the urban income scale earned 9.6 times the income of the bottom 20%; the top 10% earned 38.4% of total income; while the bottom 20% earned a meager 5.5% of total income.[34] According to a 1998 report by the World Bank, China has already overtaken Eastern Europe and many of its Asian neighbors with its steadily rising levels of income inequality. Unless China’s current taxation policies are changed and increasing levels of official corruption reigned in, China’s income gap will continue to widen.
The distribution of banking deposits reveals the “inverted pyramid” structure of wealth distribution in China. Data on personal bank deposits show that in 2000, just 1.26 per cent of depositors owned 27 per cent of the 7 trillion yuan of total bank deposits, and 7.8 per cent of depositors owned 65 per cent of the total. Other data shows that currently in China, 15per cent of the population owns 85 per cent of society’s wealth, with the remaining 85per cent controlling just 15 per cent of the wealth[35] – a perfect inverted pyramid.
As the data cited in this paper show, we can depict income distribution in China as an inverted pyramid and the following observations can be made:
The top 10 per cent of income earners, who occupy a place at the very top of the pyramid, save most of their income and control more than half of China’s private wealth. The villas, upscale apartments, fancy imported cars and luxury boutiques – so far beyond the reach of ordinary Chinese – are for their consumption only. In the race to accumulate wealth, these individuals have become rich not, in most instances, as a result of merit, but because of their personal connections and the positions they hold. Evidence of their "success" might be measured in the observation that the food these people give to their pets is of a higher quality than the food the poor have to feed their children.
At the bottom of the pyramid are the 20 per cent of the population who live in poverty, the vast majority of whom are accumulating debt. Their circumstances are described above.
At the middle of the pyramid sits the vast wage-earning class. They are able to save only a small portion of their hard-earned salaries. Judging from the urban living conditions of the 1990s, the “wealth” of the wage-earning class primarily consists of furniture, other household articles and a meager amount of cash savings, government bonds, stocks and the like. In coastal regions such as Shenzhen, the typical “wealth” of the wage earning class might consist of a “welfare apartment” (i.e. a state-subsidized home) that cannot be resold on the housing market. A portion of these families (those falling below the middle line of the pyramid) must constantly struggle lest they fall to the bottom. The speed at which they are able to increase their savings is far outpaced by the rate with which the government introduces new measures aimed at emptying out their pocketbooks.
This group makes up more than 80 per cent of the population and bears the “costs of reform”, while the per cent in positions of power enjoy the “fruits of reform”. This pattern of wealth distribution will eventually lead to a scenario in which those at the bottom, unable to make a living, resort to violence to seize back the wealth that was taken from them.
D. Barriers to the Free Flow of Information in Society
The most direct threat that official corruption poses to China’s government does not come from a decline in public trust. China’s government is not elected and, ever since the Mao era, has followed the violent political doctrine that “power issues from the barrel of a gun,” though it always proclaims that it represents the will of the people. Rather, the greatest threat to the Chinese government is the softening of political power, where the pursuit of individual interests on the part of government officials is based overwhelmingly on the contravention of laws and the flouting of ethical standards. Such a “softening” of political power will inevitably put the Communist regime’s hold on power in jeopardy.
In the process of this gradual dissipation of government authority, the aspect that is most damaging to the government’s functioning is the habitual falsification of information by corrupt officials. Time and time again, the Chinese government has fallen into traps created by the reporting of bogus figures by officials, where policy decisions made using faulty information often exacerbated the very problems they were designed to address.
Falsification of information is hardly a new problem for China’s government. Indeed, there is a longstanding tradition of fabrication in the political culture of the Communist Party. During the notorious “Great Leap Forward” period, official fabrications reached new peaks of absurdity. Although the problem receded in the early Deng Xiaoping era (the 1980s), the Chinese government’s accustomed practice of falsifying information returned in full force during the administration of Jiang Zemin, when official appointments and compensation for cadres became tied to a handful of economic development indicators, encouraging fraudulent reporting by officials on a large scale. The public’s take on the illegitimate use of statistics is vividly captured by such sayings as, “The village cheats the township, the township cheats the county, each level cheats the next level up,” and “Officials make the numbers, numbers make the officials.”
The Chinese government has publicized a number of cases where punishments were imposed for the falsification of data. In the second half of 1997, a nationwide investigation into the implementation of statistical regulations was jointly conducted by the State Bureau of Statistics, the Ministry of Supervision and the Bureau of Legislative Affairs of the State Council. The investigation uncovered more than 60,000 violations of statistical regulations, 56.7% of which involved the misreporting, concealment, fabrication, or doctoring of statistical data. According to Ye Changlin, director of the Department of Policies and Legislation of State Bureau of Statistics, these were relatively minor infractions, hence the name “violations of statistical regulations”; an additional 15,000 cases nationwide, involving more serious statistical illegalities, were investigated, and those responsible punished.
One such case provides a good illustration of the problem: Since assuming the post of Magistrate of Xichong County in Sichuan Province in 1993, Liu Rongzhi repeatedly forced data collectors to report fraudulent statistical data to suit his own purposes. For instance, in 1995, the actual countywide gross industrial product was 179.21m yuan, but the reported figure was 289.55m yuan – an overstatement of 110.34m yuan, or 61.57 per cent of the actual measured value. The worst instances of over-reporting involved township enterprises, where reported numbers were 1.18 times the actual figures.[36]
In 2001, China’s national statistical system saw more than 62,000 violations of statistical regulations were investigated and punished.[37]
Falsification of data is not confined to government. The practice of issuing falsified financial reports in conjunction with fraudulent accounting practices on the part of accounting firms – which are entrusted to uphold the interests of society – has grown into a chronic and intractable disease in Chinese society.
In 2000, China’s Ministry of Finance instructed various local financial supervisory offices to investigate the quality of accounting data for the 1999 financial year from a sample of 159 companies. The investigation included companies doing business in the sectors of foreign trade (import-export of foodstuffs and chemicals), telecommunications, automobiles and machinery, along with the 117 accounting firms who had prepared the companies’ audit reports. It was found that 147 of the 159 companies under investigation had misreported their assets: asset value totaling 1.848 billion yuan had been over-reported, and 2.475 billion yuan in the value of actual assets had gone unreported, representing a 0.95 per cent rate of misreporting on assets. The investigation found misreporting of owners’ equity in 155 of the companies. The amount over-reported totaled 1.936 billion yuan, and 1.817 billion yuan of equity went unreported, representing a 1.82 per cent rate of misreporting. And 157 of the companies had misrepresented their earnings figures. Altogether, 1.472 billion yuan was over-reported and 1.943 billion yuan was under-reported, representing a 33.4 per cent rate of false reporting of earnings.[38]
Accounting irregularities are commonplace among the state-owned enterprises in Shanghai. Falsification of balance sheets is rampant, many enterprises engage in bogus financial record keeping and reporting, and there are major inaccuracies in profit and loss accounts. In 1998 an audit of 22 enterprises under municipal administration and 202 of their subsidiaries conducted by the Shanghai Municipal Audit Office found that 114 companies had overstated their profits by a total of 2.269 billion yuan, and that 65 companies had underreported profits by a total of 493 million yuan. These discrepancies balance out to 1.776 billion yuan in overstated earnings, representing 67.15 per cent of the 2.645 billion yuan in pre-audit reported earnings.[39]
In 1998, the Chinese Institute of Certified Public Accountants took disciplinary action against accounting firms and individual accountants in various cities. Incomplete statistics show that the Institute imposed various sanctions against 478 firms with relatively poor records. The penalties included dissolution, warnings, suspensions and fines, and confiscation of illegal earnings. One hundred and three firms were dissolved along with nearly 1,000 branch offices. Other firms that failed to meet professional standards were given deadlines for reforming themselves.[40]
China’s stock markets are rife with illegalities and rule-breaking, including sham business offers, fraudulent packaging for share listings, phony listings, fake restructurings, inflated earnings reports and fraudulent accounting. When the scams are investigated, it is inevitably the case that the company in question was colluding with an accounting firm. Notary agencies whose wrongdoing has been exposed include the Zhongtianqin Accounting Firm, Hualun Accounting Firm, Lihua Accounting Firm and Huapeng Accounting Firm. In response to the revelations that have emerged in recent years about China, one foreign observer wrote an essay entitled “People’s Republic of Cheats,”[41] describing the alarming collapse of China’s institutions of economic trust.
E. Links between Corruption, the Plundering of Natural Resources and Wholesale Environmental Degradation
Because of corruption, the policy making process for China’s officials is no longer based on the long-term interests of the people, but rather on a calculation of how each decision will benefit the officials personally. The result of these calculations is the plundering of China’s natural resources and rapidly progressing environmental devastation.
Internationally, China suffers the highest rate of mining accidents of any country. The high frequency of mining accidents is a direct result of the predatory exploitation of mineral resources, which in turn relates directly to the way that officials pursue their own self interest alongside the interests of their social group or elite. Annual fatalities from mining accidents nationwide numbered 10,435 in 1990, 9,777 in 1991, 9,683 in 1992,[42] 10,572 in 1995, and 9,974 in 1996.[43] Between March 4 and April 11 of 1997, 98 migrant workers from Baihe County in Shanxi Province were killed in three different coal mining accidents. According to Baihe County government figures, up to 22,000 rural residents have left home each year for work in the years since 1994. Each year, more than 80 die in accidents of various kinds, and approximately 20 suffer crippling injuries.[44] Only after the 2001 accident in the Nandan mine in Guangxi Province did it become publicly known that the actual numbers of yearly fatalities far exceeded the numbers reported by the mine: In 2000, 259 people were killed in mining accidents, but only 57 deaths were reported; and from January to July, 2001, 264 people died, but only 94 deaths were reported.[45] This kind of underreporting of accident-related fatalities is extremely common throughout China. Mine operators can willfully engage in this kind of fraud because they have the backing of local officials and top managers of large state-run mining companies. There is ample data to show that the reason small-scale, accident-prone mining operations are able to exist in large numbers is because they provide lucrative sources of income for local governments. In Jiao town in Yongxin County, Hunan Province, township cadres take turns going to the township’s small-scale coal mine for a “duty shift.” In reality, they go to collect a daily “fee” of 1200 yuan.[46] Some small coal mines are started by the heads of large state owned mining companies who either contract them out or sell them to operators of other small-scale mines for their own personal gain. The above-mentioned individuals form a group with common interests, so whenever an accident occurs at a small mining operation, local governments and the managers at the big state-owned mines typically cover up for one another.[47] At present, half of China’s more than 7000 mines have either halted operations completely or have partially shut down production.
Over the past 20 years, China’s public works have been a graft-generating machine. Consider the Three Gorges Dam project, which almost certainly destined to be judged harshly by history. The project owes its existence to the endless machinations of powerful hydropower interests. Construction on the project has also provided rent-seeking opportunities for a large number of corrupt officials. For example, much of the land set aside for the construction of resettlement communities for displaced people was illegally seized by agencies and local governments hoping to profit from the resettlement efforts, and then transferred at a profit. In one such case, the government of Shibao town in Zhong County, Sichuan, took land that it had expropriated and traded at an inflated price to development companies and individuals. A land transfer fee of over 90,000 yuan per mu was charged in 1997; that price has increased to more than 200,000 yuan per mu today. While officials reaped staggering profits, the farmers who had lost their land and their livelihoods were denied the compensation to which they were entitled by law.[48]
Since construction began on the Three Gorges Dam project, more than 97 government officials involved in the project have been convicted of corruption-related crimes; one was sentenced to death. According to officials at the National Audit Office, funds totaling US$52 million earmarked for resident resettlement have vanished without a trace. Faced with corruption on such a massive scale, one of the government’s responses has been to prohibit the victims from petitioning for redress. When He Kechang, Wen Dingchun, Jiang Qingshan and Ran Congxin, four farmers from Gaoyang Township in Yunyang County, Chongqing Municipality, reported the embezzlement of relocation funds by local officials to the government, they were arrested and charged with “inciting the public to disrupt social order” and “leaking state secrets.” While in prison, the petitioners were tortured, and He Kechang, already in his sixties, nearly died.[49]
Despite a strict ban on public discussion inside China about the serious environmental pollution generated by the Three Gorges Dam project, the situation is commonly known outside of China. The kinds of environmental harm caused by the project include damage to air and water quality[50] as well as an unremitting series of geological calamities. In the eight years since construction began on the project, there have been 3,465 landslides and more than 1,190 instances of collapses and deformations.[51] While the environmental changes brought on by the project are relatively indirect and slow, cases of pollution coming directly from the project have also been reported. For instance, there is a mountain of garbage in Fengjie county, Sichuan, from which more than 2000 tons of waste are dumped into the Yangtze River annually;[52] and the city of Chongqing pumps more than 400 million tons of residential wastewater straight into the Yangtze each year.[53]
5.The Overall Strategy for Maintaining Communist Party Rule during the Nineties
With corruption wreaking havoc, robbers roaming the streets, the rich getting richer and the poor getting poorer, unemployment stalking both the towns and countryside, and organized crime rapidly extending its power, one might assume that China was on the verge of disintegration. In fact it is only the government's adoption of tyrannical measures that has prevented such a collapse. In reality, it has already abandoned any serious efforts to bring corruption back under control. The government is profoundly aware of the absurd dialectic that has accompanied the arrival of systemic corruption. Namely that "to kill corruption will kill the Party, not to kill it will kill the country." To be sure, they can buy more time, fill their pockets and then disappear abroad by maintaining the current state of affairs. Any reform to the current system that protects their corrupt practices would very possibly mean losing the gains these people have already made. It is with an eye to this reality that the government has adopted a series of heavy -handed measures since 1999.
Firstly the government has strengthened its various means of social control and resorted to measures that are now rarely used by civilized countries such as political violence and the widespread use of secret police. These forces strangle at birth any group that has the potential to develop into an organized entity, thereby ensuring that Chinese people are left in a state of permanent disunity – like grains of sand on piece of paper – and with no means of developing organized resistance. Secondly, the government has adopted somewhat inglorious methods to control its own officials, such as using the campaigns against corruption as a check on their behavior. The aim is not to stamp out corruption, but rather to carry out an internal cleansing operation that serves to remind officials that they are far from indispensable. Chinese officials are well aware of the seriousness of China’s situation, and also that ordinary people are fully conscious of their shenanigans in this violent world of "money and power politics.” But they also know that as individuals, they are no more than tiny cogs in an enormous wheel of a still-operational state machine. If they don’t play their part, they’re finished.
But more important than all this has been the government’s timely adoption of a new ideological strategy, it’s centralizing of control over public life, and the construction of an alliance between economic and intellectual elites. Thus, in a relatively short period of time, it has successfully upheld so-called “social stability”.
a. Ideological Strategy
In implementing its new ideological strategy and strengthening control over the public domain, Jiang’s government has been far more rigorous and effective than anything we endured in the Deng Xiaoping era. The government has entirely concurred with Jiang Zemin’s intention to "pull up by the roots all factors with the potential to cause instability," and no truly independent non-government organization has been able to emerge in such an oppressive environment. Looking at the results of the Jiang government’s adoption of the “hard cop soft cop” approach, it is clear that it has proved even more effective than the straightforward jackboot-style political oppression that distinguished the Mao era. Jiang's approach also enjoys the happy coincidence of avoiding international attention and condemnation.
The mutually supportive pincer strategy of on the one hand placing vilification of Western democratic political systems at the core of the Party’s ideological tactics, and increased control of public life on the other, has worked well for the Party. This is achieved, for example, through:
Intensifying ideological education in schools and colleges through the subjects of literature, history and politics, young people have been imbued with countless political lies and fantasies. This helps to explain the contradictory attitude of alternately loathing and worshipping all things American that Chinese youth hold towards the US. The “loathing” is rooted in the compulsory ideological education; and the “worshipping” is the result of an accumulation of information from non-official sources.
Thorough control of the media. The Chinese government exercises a monopoly over almost all media outlets and, compared to the Mao era, has “moved with the times” in improving its management and administration of this monopoly. Journalists are also targeted and are continually reminded, in no uncertain terms, who is paying their wages and on which side their daily bread is buttered. Even the reporters themselves acknowledge that they are merely “Party mouthpieces,” a fact that leaves those members of the intellectual elite who still entertain a conscience with no reliable outlet through which they can truthfully express their opinions. From 1999 onwards, the government has continually channelled large amounts of investment into enlisting the services of university educated computer specialists who are appointed as “Internet cops.” It has also formulated regulations aimed at management of the Internet, in the hope that it can tame this “wild horse.”
The tactics of either “buying off” or “beating down” intellectuals. Following the violent suppression of the “1989 Democracy Movement,” members of the intellectual elite faced a new and puzzling environment. Throughout the 1990s the government used every order of academic honour and rank, along with material gain, as bait to lure the majority of intellectuals into lining up with the status quo. As for the few intellectuals who maintained a critical approach to their research, the government adopted a much less conciliatory approach that included ordering media outlets not to publish an individual’s research or written articles, and instructing employers to find a suitable non-political excuse to fire him or her, forcing them into financial difficulties. Intellectuals that have succeeded in amassing a degree of influence are subject to even more sinister measures, such as being trailed by members of the secret police, who also search their apartments and subject them to general personal persecution, usually with the aim of forcing them to flee abroad. The application of this hard-soft policy has effectively neutralized the critical capacities of China’s intellectual elites. Most are prepared to tailor the political direction of their work to fit their personal financial resources and adopt a cynical and perfunctory attitude to political and social issues.
b. The Formation of Alliances Among Elites
At the beginning of the last decade, the Chinese government was still clinging on to the notion that it represented the working class – even as its officials established intimate and profitable private relations with the economic elite. Between them they have bagged 85 per cent of all wealth in China, and constitute China's super-rich. In light of this reality, the government had no choice but to make a strategic adjustment to its class allegiances, and so Jiang Zemin’s “Three Represents Theory” was wheeled out, giving political and economic elites much greater room to cooperate and expand. His call to “allow private capitalists to join the Party” was nothing more than a device awarding economic elites a stake in the system and a legal political voice.
Without doubt the most serious delusion among China’s intellectual circles during the eighties was that a mature middle class would demand democratic rights. The following decade extinguished this daydream forever. The Party’s political tactics have consisted of allowing the economic elite, along with appropriately submissive intellectuals, to take a stake in the system and jointly share some of its power – a far cry from the creation of a new democratic politics.
As for unrest and turmoil from the poor and dispossessed, the government has had to rely on increasingly violent repression. Extinguishing small-scale local protests has already become part of the normal working day for China’s local government officials who have consequently accumulated a wealth of experience in this field. The “carrot and stick” approach has proved easily the most effective response to collective protests by peasants and unemployed workers. The “carrot” usually consists of a small pay off – one or two months’ worth of livel, ihood subsidies – aimed at dispersing the unemployed workers’ protests and getting them off the streets. The “stick” is invariably aimed at worker or peasant leaders. The government, without exception, comes down hard on such “trouble makers” whenever it gets its hands on them. Mostly it is happy ju
st to break their spirit and dignity. But it does not shirk from killing them if it is deemed necessary. This is usually enough to frighten off potential leaders from becoming the “sacrificial lamb” whose “slaughter” usually signals the end of this or that collective protest.
Sure enough, the response of the poor to the increasingly dominant and powerful alliances forming among the nation’s various elites has been to protest – and even riot. But these incidents have been successfully confined to their immediate localities by the authorities' sealing off whole areas and towns. Effective suppression has meant that none of these protests have had the opportunity to develop into a force that might constitute a real threat to society as a whole. As far as this hooligan government is concerned, the concept of “human rights” has been deliberately distorted into the “right to exist,” reducing Chinese people to the level of animals at the trough – which is exactly how the government and its sycophants interpret the concept of the “right to exist.”
C. Future Options for China’s Elites
Generally speaking the international community has adopted an optimistic assessment of China’s future, chiefly relying on two gorgeous myths to console itself. The first is that entry into the WTO will encourage the democratization of Chinese politics; the second is that technical progress will bring about the rapid and free exchange of information helping to penetrate the “firewalls” and fences surrounding China’s news reporting system. Regarding the former, I can only say that this is no more than “wishful thinking” – albeit highly attractive. The WTO is basically an organization that regulates the international economy and we cannot expect or hope that it can change a country’s political system. The second myth is being dismantled by the Chinese government even as I write. It has invested billions of dollars in developing the “Golden Shield” project, the aim of which is to use technology to increase the government’s vice-like grip on society as a whole. Multinationals with dollar signs in front of their eyes have fallen over themselves to get in on the act.
But how do the Chinese elites themselves see the future?
Chinese society currently resembles a volcano laced with raging underground fires and on the verge of a major eruption. Practically the entire Chinese people can feel these fires raging under the earth's crust, but perhaps none are more aware of the heat than China's various elites. Collectively, they have arrived at a common understanding that their most profitable option is the maintenance of prevailing social-economic arrangements through a high degree of political oppression and domestic espionage. In practice, this means that all social disturbances must be dealt with via indiscriminate oppression as soon as they break out. This has been the starting point for the Party and government's prevention of, and defence against, turmoil from below throughout the last decade.
Within these elite alliances, it is the bureaucrats that have a much keener sense of crisis than the intellectuals. Beginning in the 1990s, large-scale capital flight became a widespread trend, with a considerable number of officials shifting their ill-gotten and new-found wealth to bank accounts outside China,-usually in countries where their relatives had already settled into comfortable and affluent lifestyles. In the eyes of these people, China has been reduced to a giant cash cow, where the pickings are both abundant and easily got at. Over recent years, countries in Europe as well as the US, Canada and Australia have moved to attract Chinese students going abroad, in order to develop their domestic economies. They have rightly recognized that demand for these places in China is enormous. According to the relevant statistics, the outward flow of funds related to Chinese students studying abroad is more than US$4 billion per annum. Judging by the arrangements they are making on behalf of their children and family members, China's elites have already made their view of the future very clear and are using hard currency to vote with their feet.
Sure enough, the response of the poor to the increasingly dominant and powerful alliances forming among the nation’s various elites has been to protest – and even riot. But these incidents have been successfully confined to their immediate localities by the authorities' sealing off whole areas and towns. Effective suppression has meant that none of these protests have had the opportunity to develop into a force that might constitute a real threat to society as a whole. As far as this hooligan government is concerned, the concept of “human rights” has been deliberately distorted into the “right to exist,” reducing Chinese people to the level of animals at the trough – which is exactly how the government and its sycophants interpret the concept of the “right to exist.”
C. Future Options for China’s Elites
Generally speaking the international community has adopted an optimistic assessment of China’s future, chiefly relying on two gorgeous myths to console itself. The first is that entry into the WTO will encourage the democratization of Chinese politics; the second is that technical progress will bring about the rapid and free exchange of information helping to penetrate the “firewalls” and fences surrounding China’s news reporting system. Regarding the former, I can only say that this is no more than “wishful thinking” – albeit highly attractive. The WTO is basically an organization that regulates the international economy and we cannot expect or hope that it can change a country’s political system. The second myth is being dismantled by the Chinese government even as I write. It has invested billions of dollars in developing the “Golden Shield” project, the aim of which is to use technology to increase the government’s vice-like grip on society as a whole. Multinationals with dollar signs in front of their eyes have fallen over themselves to get in on the act.
But how do the Chinese elites themselves see the future?
Chinese society currently resembles a volcano laced with raging underground fires and on the verge of a major eruption. Practically the entire Chinese people can feel these fires raging under the earth's crust, but perhaps none are more aware of the heat than China's various elites. Collectively, they have arrived at a common understanding that their most profitable option is the maintenance of prevailing social-economic arrangements through a high degree of political oppression and domestic espionage. In practice, this means that all social disturbances must be dealt with via indiscriminate oppression as soon as they break out. This has been the starting point for the Party and government's prevention of, and defence against, turmoil from below throughout the last decade.
Within these elite alliances, it is the bureaucrats that have a much keener sense of crisis than the intellectuals. Beginning in the 1990s, large-scale capital flight became a widespread trend, with a considerable number of officials shifting their ill-gotten and new-found wealth to bank accounts outside China,-usually in countries where their relatives had already settled into comfortable and affluent lifestyles. In the eyes of these people, China has been reduced to a giant cash cow, where the pickings are both abundant and easily got at. Over recent years, countries in Europe as well as the US, Canada and Australia have moved to attract Chinese students going abroad, in order to develop their domestic economies. They have rightly recognized that demand for these places in China is enormous. According to the relevant statistics, the outward flow of funds related to Chinese students studying abroad is more than US$4 billion per annum. Judging by the arrangements they are making on behalf of their children and family members, China's elites have already made their view of the future very clear and are using hard currency to vote with their feet.
Within China, there is no great divergence among those with a grasp of the situation concerning the damage that government and Party corruption is wreaking. But faced with the prospect of a possible collapse of central government authority leading to a social anarchy, the majority of intellectuals look to the internal power of the CCP as being able to rectify the present critical situation. Those who argue that the Party has the capacity and skills to control the current situation are basing their judgement on what I would call the “fire-brigade theory.” Namely that the government is similar to a highly efficient, well-drilled and integrated "fire brigade," fully-equipped with the latest "fire-fighting gear" and armed with a "fire prevention system" that includes control over the media and public opinion, a high degree of political repression, squadrons of riot police, and an entire state security apparatus appointed with the task of upholding social stability. But in China, the fire hazards are not simply the outcome of random areas being covered by dry firewood. The sources of danger are the underground fires that are already raging out-of-control, and are likely to erupt to the surface in any place and at any time. Even the most technically advanced fire-fighting equipment has its limits when faced with such hazards. Or, to put it another way, the day will eventually dawn when the Chinese Communist Party will not be able to control the fires it has lit. Moreover, the net result of a collapse of its long rule in a "one party state" will possibly signal the disintegration of China itself. The experience of Communist Party rule will leave us with constrictions that were absent after the fall of past dictatorships. The unprecedented growth in China's population, widespread ecological and environmental destruction and the total collapse of social morality are just some of the factors that will make the already enormous task of reconstructing China even more difficult. Perhaps more difficult than any previous period of reconstruction.
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[1] For example, Municipal Committee Secretary of Dongfang City, Hainan Province,Wei Huogui, Mayor and Municipal Committee Vice Secretary of Anyang City, Henan Province, Yang Hanxiu, Zhoukou Regional Administrative Office Expert and Regional Vice Secretary Zeng Jincheng, Hebi City Mayor and Municipal Vice Secretary Zhu Zhenjiang, etc, who carried out large-scale trading of official posts and titles. See Southern Daily Weekend Edition, .4.24.1998.
[2]Yang Haipeng, "A Power-crazed Village Sorcerer", Shenzhen Fazhi Bao (Shenzhen Legal Newspaper), .12.16.1999.
[3] Jin Yan: "Wang Xuebing's Dream of a Big Banking Family", Sanlian Shenghuo Weekly, .8.17.2002
[4] "Chinese car tycoon disappears", The Times, .8.26.2002
[5] Shenzhen Commercial Daily, Section A3, .11.12.2000.
[6] China Business Times, ..6.19.1998, fifth edition.
[7] Southern Daily Weekend Edition, .3.22.2001, "Defying the Anshan Iron and Steel Company Charter: How much lost to corruption? Rmb 1,000 billion every year".
[8] Yan Jianhong is the wife of Guizhou Provincial Committee Secretary [Wang Jianye], whose case was given detailed coverage in many mainland journals. The earliest long editorial on the case appeared in China Market Economy, 1.26.1995. Since 1994, the case of Wang Jianye was covered extensively in Shenzhen newspapers. After Wang Jianye's sentencing and execution on 12.28.1995, Shenzhen Legal News featured detailed serialized coverage of the case from 28 to 30 December.
[9] Zhongxin Network, Guangzhou News, 12.13.2001 "Wantonly Using Female Family Connections to Amass his Illegal Fortune: Exposing the Case of Former Shenzhen Mayor Wang Ju".
[10] Reform magazine, Issue 2, 1997: "Beihai Real Estate Speculation Scandal Exposed".
[11] Southern Daily Weekend Edition, 8.23.2002.
[12] Guangdong-Hong Kong Information Daily, 7.2.1996
[13] China Economic Times, 8.10.1999, eighth edition
[14] Zhongxin News Agency broadcast, Beijing, 6.10.2001, reported in World Daily, 6.11.2001, Section A7.
[15] Legal Daily News, 1.23.1996.
[16] Southern Daily Weekend Edition, 10.25.1996, "The inner sanctum of an independent financial empire.”
[17] Finance and Economics, Issue 9, 2002.
[18] "Profits may drop again: appropriately tight fiscal measures will remain in place", data from article and conversations with Dai Xianglong, China Business Times, 7.16.1996
[19] China Youth Daily, .3.10.1995.
[20] Shenzhen Business News, 8.16.1998, eighth edition
[21] Shenzhen Business News, 6.8.2001, eighth edition
[22] Zhongguo Jianbao (China Clippings), .6.25.1999, first edition
[23] Xinhua News Agency TV broadcast, Beijing, .1.18.2001.
[24] Reform magazine, Volume 5, 1996, Wang Ku: "Analysis of Volume and Composition of China's Capital Outflow".
[25] Britain's Financial Times, 12.27.1996: "China becoming a major source of the world's capital", by Mr. Wool (Wo Ke). From an extract in China's Reference News, 1.8.1997.
[26] Chinese News Net broadcast 5.30.2001
[27] Nanfeng Chuang (South Wind Window), March 2003, Volume 1
[28] Nanfang Zhou Mo (Southern Daily Weekend Edition),.6.13.2002.
[29] Chinese Township and Village Enterprise Journal, 2.8.2001
[30] Zhongxin Network News, Ningbo, 4.27.2001, "The Final Confession of Zhang Wei, the Notorious 'Black Gang' Boss of Wenling, Zhejiang Province"
[31] Southern Daily Weekend Edition, 9.28.2000, "Exposing the Triad Bosses in the Police Force"
[32] Sanlian Shenghuo Zhou Kan (Sanlian Life Weekly), 3.9.2001, Shenyang: "The Declining Fortunes of Despotic Gambling Mayors and 'Black Gang' Agents".
[33] Xinhua News Agency Special Report: "Crazy Evildoers Finally Get Their Comeuppance - Guangxi's First Case in the "Smash the "Black Gang" Campaign", eye-witness report byXinhua News Agency reporter Cheng Yifeng, Nanyang News Network, .5.17.2001
[34] South Wind Window, April 2001, Volume 2.
[35] South Wind Window, April 2002, Volume 2.
[36] "Fraudulent Fake Suicide Comes Back to Life: How do Statistics Become Just a Numbers Game?", Liaowang (Outlook) Volume 15,1998.
[37] Zhongxin Network News, Beijing 12.15.2001
[38] Beijing Youth Daily, 12.22.2000.
[39] China Business Times, 9.2.1999.
[40] China Business Times, .8.11.1998 "Effects of the Reorganization of the Chartered Accountancy Industry".
[41] Far Eastern Economic Review, 6.14.1996.
[42] Labour Health and Safety, January Issue, 1996, "Occupational Hazards in China -- Overview and Countermeasures"
[43] Labour Health and Safety, January Issue, 1996, "Occupational Hazards in China -- Overview and Countermeasures"
[44] Labour Protection, September 1997
[45] South Wind Window, June 2002 (first part), "Solving the Riddle of the Nandanren Disaster"
[46] Nanfang Urban News, .6.9.2001, Section A18
[47] China Economic Times, .6.3.1998, third edition: "Why are disasters so frequent in township and village coal mines?"; China Mining News, 12.02.1998 : "Corruption: The Foundation of Small Coalpits"
[48] Yangcheng News Weekly, 5.15.2000.
[49] Amnesty International Appeal for Three Gorges Dam Protesters, .4.23.2001, issued by Amnesty International's London headquarters.
[50] "Flooding the Land, Warming the Earth: Greenhouse Gas Emissions from Dams", http://www.irn.org/wcd/IRNGHGsfromDams.pdf
[51] "Problems Emerging in Three Gorges Project: Trying to Make Water Flow Uphill", Hong Kong's Sun newspaper, .4.24.2002.
[52] Xinhua Network Chongqing Channel .2.1.2002: "Spring Festival Garbage Mountain Polluting Yangtze River".
[53] "Problems Emerging in Three Gorges Project, Making Water Run Uphill", Hong Kong's Sun [...]
