State, Causes, Reform

What is the state of corruption in China? What are the

causes of Corruption in this developing nation? What

changes have been brought by Xi Jinping's "Anti

Corruption Campaign" and what have been the

consequent challenges?

Corruption: Brief overview & definition

State of corruption( 1949-1989 )

Present State

Causes

Reform: Anti Corruption Campaign

Impact

Challenges

Conclusion

What is corruption in China?

Corruption varies with time and place.

According to Chinese official terminology, the core element of the

definition of corruption in today’s China is the notion of the use of

public authority and public resources for private interests.

First, the core element of corruption is the “use” of public power for

private benefit.

Second feature of this definition, is the ambiguity of the term “private

interest” in contrast to “public interest”,

Third, the definition leaves open the question of the subject of

corruption.

Heidenheimer’s three-category classifications system

Corruption

Class A “black

corruption”

Class B “grey

corruption”

Class C “white

corruption”

graft, bribe, fraud,

embezzlement, extortion,

smuggling, tax evasion,

etc.

leaders of public institutions

using their institutional

power to increase the

revenue of their institutions

Nepotism and favouritism in the

personnel recruitment and

promotion,

Cadre corruption in post-1949 China lies in the "organizational

involution" of the ruling party, including the Communist Party

of China's policies, institutions, norms, and failure to adapt to a

changing environment in the post-Mao era caused by the market

liberalization reforms initiated by Deng Xiaoping.

Mao waged war on free speech, stifling the ability of citizens to speak

out against wrongdoing. He instituted a command economy that placed

commerce and property in government hands. He centralized authority,

investing more power in the state than ever before.

And he made life in China so difficult that people had no choice but to

turn to corruption for survival, during the food shortages of the Great

Leap Forward and the political witch hunts of the Cultural

Revolution.

It was survival!

In the pre-reform period, bribes most often were paid not in cash but

in kind, with cigarettes, liquor, and meat, the common mediums.

Much of the corruption during the Maoist period happened at “street

level,” involving relatively low-ranking officials

In late 1951, the party launched the Three Antis Campaign against

corruption, waste, and bureaucratism.

Subsequent campaigns, including the Socialist Education Movement

(1963-66) and the One Strike, Three Antis Campaign (1970-72) attacked

other forms of official malfeasance

By the late Maoist period, these repeated attacks on corruption and

the political environment ushered in by the Cultural Revolution had

largely eradicated most visible manifestations of corruption.

After the beginning of the post-Mao reform period in 1978-79,

China experienced a marked worsening of corruption.

why did corruption worsen?

In the early and mid-1980s, petty corruption flourished. Many

goods remained in short supply and would-be buyers found that

they still had to present officials with a carton of cigarettes and a

couple of bottles of Chinese liquor (baijiu) to obtain ration

cards.

Would-be entrepreneurs and private businessmen seeking to establish

new enterprises also found the only way to navigate the thickets of red

tape was to use personal connections and, increasingly, cash.

In the mid-1980s, the party decided to put off comprehensive price

reform in favor of a hybrid system wherein commodity prices were fixed

by the state based on whether they were being sold within the state-

planned economy or in emerging markets.

Because ongoing scarcity ensured that market prices were generally

much higher than in-plan prices, officials found they could earn quick

profits by diverting goods out of the planned sector and onto the

market. Arbitraging between the two sectors created by the so-called

“two track” price system, and fueled a wave of “official profiteering”

(guandao) during the late 1980s.

By the later 1980s, official profiteering had become so

widespread and visible that the perception that corruption was

enabling officials reap the lion’s share of gains from reform

became a major factor intensifying support for the anti-

government demonstrations that swept China in the spring of

1989.

According to Yan Sun, Associate Professor of Political Science at the City

University of New York, it was corruption, rather than democracy as such, that

lay at the root of the social dissatisfaction that led to the Tiananmen Square

protests of 1989.

In February 1980, Wang Shouxin, the party secretary of a local

fossil fuel company in Heilongjiang, was executed on the same

day she was convicted of bribery to the tune of 530,000 yuan

(HK$615,000).

Her show trial, billed as the largest corruption case since the

founding of the People’s Republic in 1949, took place in a

stadium filled with more than 5,000 people and was faithfully

documented by reporters and photographers.

To put the scale of her offence in context, the average monthly

salary of a worker was around 50 yuan

The extent of corruption has increased dramatically and sharply

since 1978 with the situation becoming even worse after in the

1990s!

Outside observers were so struck by the rapid spread of corruption during

the 1980s and early ‘90s, in 1995 Transparency International (TI)

ranked China the fourth most corrupt country in its Corruption

Perceptions Index.

Public surveys on the mainland since the late 1980s have shown that Corruption is

among the top concerns of the general public.

TRANSPARENCY INTERNATIONAL

A ring of smugglers colluded with local, provincial, and central

officials to run an estimated Y53 billion (US$6.4 billion) worth

of goods through the port of Xiamen in Fujian province in broad

daylight.

The group called Yuanhua Group, a prominent group of

upstart companies that took advantage of the economic

boom of Xiamen's status as a Special Economic Zone, was

founded by Lai Changxing.

China put more than 300 suspects on trial and sentenced

14 to death, including provincial officials and a former

vice minister of public security, in a case Beijing has used

for a propaganda campaign against corruption.

Lai Changxing, once considered China's most-wanted fugitive was

sentenced to life in prison on 18th May, 2012 for smuggling and bribery

in a lurid corruption case that reached into the highest echelons of the

Communist Party and involved a decade-long extradition fight with

Canada.

Trend showing China’s rank on the Transparency International

Corruption Perception Index from 1997- 2014

Implications for Businessmen:

1. The co-existence of dual economic systems during the whole

transition period provides plenty of incentives and opportunities

for corrupt practices.

2. The breakdown of the prior distribution of national income

among different social strata, i.e. the relative reduction of

officials’ income, drives government officials and public

institutions to seek extra income to supplement their own

or their staff’s relative low and fixed official salaries.

3. The loopholes in, and weakness of, regulatory policies

and institutions, certain policy failures, and a lack of

experience and technology in the anti-corruption agencies

tackling the new forms of corruption, all contributed to

the growth of corruption.

4. The incompleteness of political reform and the weakness

of the current political system undermine anti-corruption

efforts which, in turn, promote the further proliferation of

corruption.

5. The decline in the moral costs of corruption stimulates its

further spread.

Factors which have contributed to the decline in moral costs of corruption:

The first is the ideological change.

The second factor is the failure of ethical education among public and government

officials.

The final factor is the lack of commercial morality in economic life.

6. Certain traditional and international factors also

contribute to the growth of corruption.

Traditional Factors:

One is the cultural heritage of absolutist rule that lasted for 2000 years and only

ended at the beginning of this century.

Rulers treated the state as their own private property and bureaucrats

treated their power as theirs while the idea of public trust and

empowerment were non-existent. Such attitudes are still very common

among public officials

Second, many of the social customs and practices of agricultural society are still

very popular in today’s China.

A large proportion of public officials comes from peasant families. Consequently,

they bring many traditional practices linked to corruption into public life.

Particularist practices, i.e. people giving preferential treatment to those with whom

they have close relations, are still very common.

International Factors:

The opening of China to the outside world since 1978 has given birth to

additional factors .

One is the “revolution of rising expectations”. The high consumption life style

that exists in many western countries has had a strong “demonstration effect”

on both ordinary citizens and government officials.

Second, globalization has increased the difficulties of detecting and punishing

corruption as corrupt officials engage in cross border forms of corruption,

transfer their illicit profits into off-shore banks and emigrate before they are

caught and punished.

Past Campaigns: Since 1978, the Chinese government has launched four anti-corruption campaigns.

1. The first one, which began in 1982, targeted economic crimes with significant

success.136,024 cases of economic crime were investigated, of which 44,000 were brought to

trial with 26,000 people convicted and 44,000 persons surrendering themselves to the police.

2. The second anti-corruption campaign, which began in late 1983 and lasted until early

1987, concentrated on consolidating party organizations. During this movement, a large

number of party members who had violated party discipline or engaged in corrupt activities

were punished, including 35,616 senior officials at the county level and above.

3. The third anti-corruption campaign began in 1988 and reached at its peak in the late 1989.

Official statistics show, 116,763 cases of graft, bribery and other relevant crimes were heard

by the Procurators in 1989, of which 58,726 cases were investigated and prosecuted, 20,794

criminals were arrested, 482.86 million yuan were recovered, and 36,171 officials

surrendered themselves to the anti-corruption agencies from 15 August 1989 to 31 October

1989

4. The fourth anti-corruption campaign began in the late 1993 and has lasted to the present.

This campaign had three goals: addressing the issue of self-regulation of senior officials;

strengthening the investigation and prosecution of large-size corrupt cases, and forcefully

curbing unhealthy tendencies within the government departments.

LEGISLATION CONTEXT AUTHORITY

Criminal Law • Criminal Law Judiciary Interpretation

• Regulates both official bribery and

commercial bribery

Public Security Bureau

Procuratorate;

People’s courts

Anti-Unfair

Competition

Law(AUCL)

• Regulations concerning the

Prohibition of Commercial Bribery

Acts

• Regulates commercial Bribery

State administration for

Industry and Commerce and

its local counterparts

CPC Rules • Communist Party of China(CPC)

policies and rules

Commission for Discipline

and Inspection of the Central

Committee of CPC(CCDI)

“Catching Tigers and Flies”

An unprecedented anti-corruption campaign began after the

conclusion of the 18th National Congress of the Communist

Party of China held in Beijing in November 2012.

After being promoted to the post of General Secretary of

Chinese Communist Party, Xi Jinping declared that one of his

top priorities was to tackle corruption.

"Our party faces many severe challenges, and there are also many pressing

problems within the party that need to be resolved, particularly corruption,

being divorced from the people, going through formalities and bureaucratism

caused by some party officials," he said in the nationally televised speech. "We

must make every effort to solve these problems. The whole party must stay on full

alert," he said.

The agency directly charged with overseeing the campaign is the Central

Commission for Discipline Inspection (CCDI)

The CCDI's official mandate is to enforce party discipline, combat malfeasance,

and punish party members for committing offenses. CCDI investigates officials &

forwards evidence gathered to judicial organs, such as the Supreme People's

Procuratorate who proceeds to charge the accused with criminal wrongdoing and

move the case to trial.

Coordination of anti-corruption efforts in the provinces and state-owned

enterprises have been carried out by “Central Inspection Teams” which

reports to the Central Leading Group for Inspection Work, which like the

CCDI is also led by Wang Qishan.

Increasing Scrutiny of State Owned Enterprises.

Industry Sweeps

• Energy

• Telecommunications

• Media

• Automobile

• Banking

Dawn raids(frequently used by Regulators)

• Criminal Prosecution

• Administrative enforcement

Highlights in Anti Corruption Campaign

Enforcement against Chinese Government Officials:

Prosecution against foreign invested interprises

• GSK- a record fine of US$489 million

*Violation of 8-point regulation of the centre, first announced on 4 December 2012, at a meeting of

the Politburo of the Communist Party of China

TIGERSConvicted or tried

for criminal charges

FLIESPenalized for

breaking disciplinary rules*

“Fox Hunt”Illegal assets

recovered from abroad

100 90,000

> US$500

million

A report from the Carnegie Endowment asserts that direct economic losses due to

corruption represents “a large transfer of wealth… to a tiny group of elites” –

roughly 3% of GDP each year. Moreover, corruption in China is an underlying

cause of economic inefficiency and instability that, if left unsolved, could help turn

the current crisis into a future collapse.

Since China’s anti-corruption campaign was launched, some have asserted that

the effort has in fact hurt China, contributing to its slowing economy, due to

significant drops in luxury industries, such as five-star hotels.

Anti-corruption work in China faced considerable challenges

from the beginning. In fact, what is perhaps most surprising is

that corruption did not reach even greater levels and come to the

point at which so many officials were engaged in corruption that

the state’s emerging anti-corruption capabilities were simply

overwhelmed.

“The Chinese have a phrase they have used historically, and that is, ‘The

mountains are high and the emperor is far away,’ ” Dr. Cynthia Watson said.

“The reality is it’s a big country where the central government can make lots of

statements, but it can’t necessarily enforce them out in the provinces. Therein lies

a major problem that Xi Jinping and every predecessor and I predict every

successor will confront.

Steve Tsang, professor of Contemporary Chinese Studies at the

School of Politics and International Relations, says two things

stand in the way of Xi Jinping's anti-corruption drive –

the party's absolute power and the endemic exploitation by

leaders' relatives of their position for personal gain

Regardless of whether the real goal of Chinese President Xi

Jinping’s anti-corruption campaign is to benefit himself and

strengthen the Communist Party of China OR of cleaning up

government bribery and corruption — the movement has

reached further than any other in modern history, according to a

China expert.

The campaign has been the longest running campaign on

corruption in the world and it is not long due that China sees its

period of renaissance.

The renaissance of the Chinese nation is the greatest dream for the

Chinese nation in modern history- Xi Jinping.

Thank You :)