Global Policy Forum

By Simon Cartledge*

Corruption is part of China's fabric. But, surprisingly, to many Chinese it still comes as something of a shock when reports leak out of the detention of yet another prominent businessman or public official.

The problem reaches the highest levels of business and finance, and all but the top echelons of government. Convictions in recent years include a 16-year prison sentence for corruption for Chen Xitong, the Beijing Communist party secretary and mayor, and a suspended death sentence on Mu Suixin, mayor of the north-eastern city of Shenyang, for corruption, embezzlement and ties to local gangsters. Cheng Kejie, a vice-chairman of the Standing Committee of China's parliament, was executed for accepting $5m (£3m) in bribes in return for helping to arrange loans; Li Jizhou, the vice-minister of public security, was given a suspended death sentence for receiving bribes.

Corruption is also big business. A smuggling ring in the coastal city of Xiamen involved more than $2.8bn worth of goods and led to executions and prison sentences for a series of local Communist party and government leaders. The use of faked export receipts in the southern city of Shantou allowed local companies to claim central government tax rebates of more than $500m.

These are only the big cases. More than 43,000 cases of graft and dereliction of duty were investigated in 2001, leading to the recovery of illegal gains worth more than $400m; a mere fraction of the money that corruption is estimated to cost the economy. Hu Angang, one of China's most prominent economists, estimates that between 1995 and 2000 annual economic losses arising from corruption amounted to RMB1,000bn-1,300bn, the equivalent of 13-17 per cent of gross domestic product. Non-payment of taxes and customs duties accounts for half of this but the point remains: throughout the country, in every part of the economy, in government and the Communist party, there is corruption.

It is tempting to believe that the graft and bribery are an unfortunate but temporary by-product of China's tremendous economic success of the past two decades, when central planning has given way to market forces. As the country grows richer and the regulatory system is improved, officials and business people alike will be better rewarded and the temptation to demand pay-offs will lessen. As China's economy integrates with world markets, overseas supervisory authorities and the media will shine light on Chinese business practices. Instead, the greater openness of recent years has simply exposed the extent to which corruption now permeates Chinese business life.

Much of the problem can be traced to the weakening of the Chinese state and a growing ambiguity about the role of the Communist party. As China's economy has liberalised, the levers of power - supervision via the planned economy and Communist party involvement in all aspects of life - have weakened. Instead of the strict hierarchy of control once maintained by the Communist party, power now flows through informal networks of party cadres, government officials, bankers and business people. A better breeding ground for corruption is hard to imagine.

Establishing the right machinery for rooting it out will not be straightforward. For the big cases, the central government can mount nationwide investigations and China still has a formidable internal state security apparatus. But smaller scale offences that characterise everyday business activity - and which do so much to undermine the government's legitimacy - will not be easily eradicated.

Corruption alone will not end Communist party rule. But outrage at corruption transformed the 1989 student protest movement, involving the wider population of Beijing. It was also fundamental in ending the Kuomintang's five decades of rule in Taiwan, and in causing the popular unrest in Indonesia which led to the downfall of Suharto in 1998.

Judging from the endless series of anti-corruption campaigns, the Chinese leadership understands the threat to its legitimacy. As it should. For if public discontent at corruption were to bring about the Communist party's demise, the process will look more like the violent collapse of Suharto's Indonesia than the end to Kuomintang rule, which was peaceful thanks to the island's transition to democracy.

About the Author: The writer is the owner of Big Brains, a Hong Kong-based publishing and research company.

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