Corruption in China - Effects

Effects

Whether the effects of corruption in China are solely positive or negative is a subject of hot debate. Corruption favors the most connected and unscrupulous, rather than the efficient, and also creates entry barriers in the market for those without such connections. Favors are sought for inefficient subsidies, monopoly benefits, or regulatory oversight, rather than productive activity. Bribes also lead to a misdirection of resources into wasteful or poor-quality projects. Further, since corrupt payments are usually done secrecy, they are more likely to be used in the same way, driving the proceeds of illegal transactions into foreign bank accounts. Such capital flight costs national growth. Centralised corruption also carries with it the same defects, according to Yan. Rent seeking, for example, is costly to growth because it prevents innovation. Rent seeking activities are also self-sustaining, since such activity makes it seem more attractive compared to productive activity. Corruption is never a better option to honest public policy, Yan Sun argues, and it distorts and retards development.

Others, including local officials, play down the negative impacts of corruption, and local cadres frown on anticorruption efforts for three reasons: a preoccupation with rooting out corruption may lead to cautiousness about new practices; corruption may act as a "lubricant" to "loosen up" the bureaucracy and facilitate commercial exchanges; and thirdly, corruption is a necessary trade-off and inevitable part of the process of reform and opening up. They argue that the destructiveness of corruption in the Chinese context helps transfer or reallocate power from officials, perhaps even enabling the rise of a "new system" and acting as a driving force for reform.

Nevertheless, the deleterious effects of corruption were documented in detail in Minxin Pei's report. The amount of money stolen through corruption scandals has risen exponentially since the 1980s, and corruption in China is now more concentrated in the sectors the state is heavily involved with. These include infrastructure projects, real estate, government procurement, and financial services. The lack of a competitive political process means these are high-risk areas for fraud, theft, and bribery; Pei estimates the cost of corruption could be up to $86 billion per year.

Corruption in China also harms Western business interests, in particular foreign investors. They risk human rights, environmental, and financial liabilities, at the same time squaring off against rivals who engage in illegal practices to win business.

Long term, corruption has potentially "explosive consequences," including widening income inequalities within cities and between city and countryside, and creating a new, highly visible class of "socialist millionaires," which further fuels resentment from the citizenry.

Ordinary Chinese are sometimes the victims in official corruption, as in the case of Hewan village in Jiangsu province, where 200 thugs were hired to attack local farmers and force them off their land so Party bosses could build a petrochemical plant. Sun Xiaojun, the party chief of Hewan village, was later arrested. One farmer died. Officials themselves are increasingly victims of official corruption when they target each other out of jealousy, hunger for promotion: there have been high-profile cases of mainland bureaucrats employing hit men or launching acid attacks on rivals. In August 2009, a former director of the Communications Bureau in Hegang, Heilongjiang, who hired hitmen to kill his successor, supposedly because of the latter's ingratitude was given the death penalty.