THE LIFEWORTH REVIEW OF 2008

Olympian graft

As well as the year that China first hosts the Olympics, 2008 marked the 30th anniversary of the beginning of that country’s programme of economic reform. The major social and economic changes that have occurred in those 30 years mean that corruption has become a major problem in Chinese society, as temptations have grown and social traditions declined. Thus, corruption has been a concern surrounding the Olympics. In January 2008, state media reported that 38 people were arrested in Beijing during 2007 in a crackdown on corruption connected to the Olympics. Beijing’s communist party chief Liu Qi, who also heads the Beijing Olympic organising committee, said the Games must be run in an ‘open and transparent’ manner, and previously ordered the stepping-up of audits and inspections on Olympic-related activities. The highest-profile Olympic graft case so far has yet to come to court. Liu Zhihua, a former vice mayor of Beijing, was fired in June 2006 after allegations of massive bribes concerning Olympic venues that cost more than a billion dollars to build.7

China has been increasing its anti-corruption drive in the past years, especially in major cities, where a number of scandals and shady deals involving top officials have been exposed. Wrongdoers have been fined, given jail terms or even death sentences. Such cases included the arrest of Shanghai’s party boss, who had been a member of the Communist Party’s Politburo, the power core in China, and the execution of the former head of the national food and drug regulation body. China ratified the United Nations Anti-Corruption Convention in 2005 to curb the flight of corruption officials who abscond with public funds abroad. It even participated in the anti-corruption initiatives of the Asia-Pacific Economic Cooperation and the Organisation for Economic Cooperation and Development (OECD), although it has not yet signed the OECD Convention on Combating Bribery.

Minxin Pei: corruption in China is a high-return, low-risk activity

Minxin Pei: corruption in China is a high-return, low-risk activity

Despite this stream of high-profile efforts to align national with international anti-corruption initiatives, Minxin Pei, director of the China programme at Carnegie Endowment, a Washington-based policy study group, revealed in his report that, in reality, only a ‘small proportion’ of officials tainted by corruption are punished. He told journalists that ‘The odds of an average corrupt official going to jail are at most three out of 100, making corruption a high-return, low-risk activity.’8

Pei’s report, entitled ‘Corruption Threatens China’s Future’, showed that, despite the Chinese government’s more than 1,200 laws, rules and directives against corruption, implementation has been inconsistent and ineffective.9 Analysts explain that China, as an economy, has been undergoing profound structural change. The general lack of obedience to the law is attributed to increasing market competition and the growing domestic economic gap. After the collapse of the promised cradle-to-grave life-long protection, many citizens doubted that their hard and honest effort under the new open-market economy would be enough to provide a decent income. According to the Asia Times, business people assume that, if they have bought political backing, they can get investigations into their affairs called off and stories in the state media killed.10

In the 2007 Transparency International Corruption Perceptions Index, China ranked 73rd out of 156 countries. It was, however, a few notches higher than China’s 78th place the year before. The index tracks how business people perceive corruption in a country. China is not the worst in Asia, but it’s in the company of many much poorer countries, such as Laos.

Pei is not convinced that corruption is just a stage in China’s development. He believes rather that it is actually a failure of political reform:

The Chinese government has consistently resisted steps to further reduce the role of the state in the economy, increase judicial independence and mobilise the power of the media and civil society, even though international experience shows that only such full-fledged efforts can root out systemic corruption.11

But, because of China’s one-party system, these channels don’t exist. Local Chinese party secretaries have sweeping control over the local media, legislatures and courts, breeding corruption and abuse of power.

Pei said that the direct costs of corruption, which could be as much as $86 billion each year, posed a ‘lethal threat’ to the country’s economic development. He acknowledged that corruption has not yet derailed China’s economic rise, sparked a social revolution, or deterred Western investors. ‘But it would be foolish to conclude that the Chinese system has an infinite capacity to absorb the mounting costs of corruption. Eventually, growth will falter.’12

Hu Jintao: corruption could destroy the Communist party

Hu Jintao: corruption could destroy the Communist party

At a meeting of the Central Commission for Discipline Inspection (CCDI) in January 2008, Chinese premiere Hu Jintao echoed much of this critique, warning that increasing levels of corruption could eventually destroy the Chinese Communist Party. He reviewed various regime changes across the world since the 1960s. Other than those due to foreign interference, he said the two main factors were the ruling party’s corruption, and social problems associated with economic recession.13 At the meeting special efforts were outlined in the fields of environmental protection, food and medicine safety, work safety, and land appropriation: areas where corruption has particularly direct impacts on the general population. In addition, supervision will be intensified on the management of social security funds and the special fund for poverty and disaster relief, an issue that came into light later in the year after a catastrophic earthquake.14

That many ordinary Chinese are concerned about corruption was highlighted just a few weeks before Hu’s speech, when the new website15 of China’s National Bureau of Corruption Prevention (NBCP) crashed soon after it was launched, ‘as Chinese people logged on in their droves to complain about corruption among the official ranks’. An NBCP official, who declined to be named, confirmed to Xinhua the breakdown had occurred because ‘the number of visitors was very large and beyond our expectations’.16 The scale of the problem indicates that firms in China will need to leapfrog the development of corporate responsibility in the West from compliance and philanthropy to become involved in promoting good governance (as ‘corporate citizenship’ means to some people).

» Foreign direct corruption

(The references are available in the pdf download and hard copy versions of this annual review, available from Lifeworth’s bookstore.)

This section can be referenced as:

Bendell, J., and N. Alam, S. Lin, C. Ng, L. Rimando, C. Veuthey, B. Wettstein (2009) The Eastern Turn in Responsible Enterprise: A Yearly Review of Corporate Responsibility from Lifeworth, Lifeworth: Manila, Philippines.
(Page numbers for this section are available in the pdf download and hardcopy.)

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