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Corruption in China

Corruption - the ugly side of the economic reform boom

PUBLISHED : Monday, 15 December, 2008, 12:00am
UPDATED : Monday, 15 December, 2008, 12:00am

For years, Shanghai could do no wrong, racing along with double-digit growth and offering a blueprint for a modern China. So when the city's highest leader, Communist Party secretary Chen Liangyu, was sacked for corruption in 2006, it tarnished the Shanghai model of development.

Chen used the Shanghai pension fund as his own personal bank, giving money to his cronies. But that was only the final act in a long history of corruption, stretching back to the time he was a district chief in 1988.

There is a widespread perception that 30 years of economic reforms have not only increased corruption on the mainland but raised the stakes, with cases involving ever-larger amounts of money.

Actually, analysts say, the abuses have been made possible by the combination of partial market reforms and continued state involvement in the economy.

As for perceptions of corruption, China ranked 72nd out of 180 countries - the same level as Mexico - in a survey this year by the independent group Transparency International. China scored 3.6 on a scale of 10, in which 1 is the most corrupt.

Another survey showed 148 companies and individuals reported demands for bribery in China for the year until June 30 - behind only Russia and India - according to US-based Trace International. It said the results did not necessarily make China the world's third most corrupt country, since reporting was voluntary.

Still, some believe corruption on the mainland is endemic and could threaten the very reforms that have allowed the country to prosper.

'The failure to contain official corruption will inevitably endanger China's economic development,' Minxin Pei, a senior associate at the Carnegie Endowment for International Peace, said in a paper last year. 'The experiences of other developing countries show that runaway corruption undermines critical governing institutions, fuels public resentment, exacerbates socioeconomic inequality, creates massive economic distortions and magnifies the risks of full-blown crises.'

He estimates corruption accounts for 3 per cent of the mainland's gross domestic product.

Beijing's own statistics show an increasing number of corruption cases. Mainland courts have sentenced more than 120,000 people for corruption over the past five years, up more than 12 per cent from the previous five-year period, according to the Supreme People's Court. Of the total sentenced, the number of officials ranked above the county level was 4,525, up nearly 78 per cent.

There have been recent examples of cases involving high-level officials. In October, a court sentenced former Beijing vice-mayor Liu Zhihua to death with a two-year reprieve for taking 7 million yuan (HK$7.9 million) in bribes. Shortly afterwards, a court sentenced former Suzhou vice-mayor Jiang Renjie to death for taking more than 108 million yuan in bribes.

'Whoever it is, no matter how high their position, anyone who violates party rules or national law will be severely punished,' the party has vowed. But analysts say the high- profile convictions and impressive statistics are only an indicator of the true scale of the problem.

Authorities lack the political will to go after top leaders out of fear it would threaten the party's and government's legitimacy, they say.

Some analysts believe Chen was ousted in a power struggle, not necessarily because he was corrupt, although that allegation was used against him by President Hu Jintao as he sought to consolidate his control over Shanghai. In the end, Chen received an 18-year jail term. Nearly 30 other government and state company officials were implicated, but none higher than the former party chief.

Chen was the highest-ranking official to be felled by corruption since former Beijing mayor Chen Xitong, also a member of the party's top-level Politburo, was jailed for graft in 1998. He received a 16-year jail term, but was reportedly released early. That case, too, was believed to have had a political motive, with then-president Jiang Zemin removing an adversary.

The lack of freedom of the press and oversight of the government has made the mainland more susceptible to corruption, concentrated in areas with high state involvement, such as infrastructure and property.

'The absence of a competitive political process and a free press in China makes these high-risk sectors even more susceptible to fraud, theft, kickbacks and bribery,' Mr Pei said.

The international real estate firm Jones Lang LaSalle has found that China showed the greatest improvement in transparency over the past two years in the Asia-Pacific region.

But while first-tier cities had achieved 'semi-transparency', second- and third-tier cities still showed 'low transparency' - only one step above the worst ranking of 'opaque', according to the annual rankings.