Corruption in China: This will blow your mind

September 15, 2015 11:02
Ling Jihua, a former chief aide to ex-president Hu Jintao, is among the latest to fall in China's corruption crackdown. Photo: Kyodo

Is Xi Jinping (習近平)’s anti-corruption campaign crushing it or embarrassingly ineffective?

You make the call.

It was widely reported the year before Xi assumed office that upwards of 18,000 corrupt officials had fled China since 1990 with about US$120 billion.

In early 2012, the Ministry of Supervision released figures saying almost 36,000 government officials were punished for violating laws and regulations in 2011.

Fast forward to today.

Since vowing to crack down on graft almost immediately after he rose to power at the 18th Party Congress, Xi’s dragnet has punished more than 270,000 people for bribery.

This includes heads of China's biggest state-owned conglomerates, more than 50 provincial-ministerial level officials, high-ranking generals from the PLA, former Politburo Standing Committee member and security chief Zhou Yongkang (周永康) and former Hu Jintao (胡錦濤) chief aide Ling Jihua (令計劃).

But while the hit list and numbers are certainly extraordinary, experts say that Xi’s Central Commission for Discipline Inspection, under the watch of disciplinary chief Wang Qishan, is just scratching the surface.

Noted China scholar Roderick MacFarquhar, for example, thinks 40 million people -- at minimum -- should be prosecuted.

That’s not a typo.

How he got to this astounding number is worth noting.

"Suppose that only 10 percent of grassroots party cadres are corrupt, almost certainly a gross underestimate," MacFarquhar wrote recently in The New York Review of Books. “That's eight million people."

"Then add in family members, who the Wen Jiabao (溫家寶) case suggests may well also be corrupt. With a spouse, the figure becomes 16 million; add in a child, 24 million; add in a sibling, 32 million; and with the sibling’s spouse, one has 40 million people who should be prosecuted,” he said.

"And that’s with only a 10 percent corruption rate,” MacFarquhar notes.

Logistics aside, arresting 40 million people won't be easy -- or even feasible.

As noted by the Chicago Tribune, the risks to Xi are clear: if he keeps going with his corruption campaign, threatened party officials could turn against him. If he pulls up short, the corrosion will continue.

Last week, a senior party official said what China's Communist Party fears most is a crisis over corruption which would threaten its hold on power.

In unusually frank comments before a group of mostly Chinese and western academics and smattering of diplomats, Wang Jiarui, head of the party's international department, said being in power as long as the party had, since 1949, had bred a corruption problem, according to Reuters.

"Under such circumstances, certain people will naturally be spurned and kicked out, but if there are many such officials, it will cause a crisis for the ruling party, though we've obviously not reached that stage," Wang is quoted as saying.

Wang did not say when the party would consider going into “crisis” mode -- 270,000 people punished for bribery since the beginning of 2013 evidently doesn’t qualify.

Wang also did not acknowledge that at least part of the problem is getting suspected corrupt officials and assets back from overseas.

Western countries have balked at signing extradition deals with China, partly out of concern about the integrity of its judicial system and treatment of prisoners, said Reuters.

China does not have extradition treaties with the United States or Canada -- the two most popular destinations for suspected economic criminals.

In practice, in fact, North American companies may be helping corrupt officials move money offshore, inadvertently or otherwise.

Some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money that is often used to buy real estate in Vancouver, according to an investigation by The Globe and Mail.

Financial institutions in the area have flagged more than 8,200 suspicious transactions since 2012.

A recent study said 70 percent of clients who paid more than US$3 million for Vancouver houses last year were from China.

It is illegal for Chinese citizens to take out more than US$50,000 a year from China without government permission, partly to stop corrupt millionaires from fleeing with their money, said The Globe.

But a review of B.C. court cases found they have worked around this restriction by sending millions of dollars into Vancouver-area banks through multiple wire transactions of smaller amounts by family and friends.

In the US, regulators last week fined Caesars Entertainment Corp. US$9.5 million for deficient anti-money-laundering controls at its Caesars Palace VIP rooms, which cater mainly to Chinese high-rollers, said the Wall Street Journal.

Caesars admitted that it had openly allowed wealthy patrons to gamble anonymously in private rooms at its flagship casino in Las Vegas and that it had failed to properly monitor transactions at international marketing offices in Hong Kong and elsewhere that recruited the players, said WSJ.

Caesars Palace’s private VIP rooms, reserved for gamblers with deposits or credit lines of at least US$300,000, catered mainly to Chinese gamblers who might wager millions during a visit.

Last month, the New York Times reported that covert Chinese agents were operating in the US as part of a global program, called Operation Fox Hunt, to coerce Chinese expats and fugitives into returning home.

The Obama administration demanded a halt to the activities.

Last week, a deputy head of the Chinese Communist Party's graft watchdog visited Interpol as part of a trip to France to push for greater international cooperation in China's fight against corruption, said Xinhua.

According to reports, Interpol might lend a hand.

Still, by whatever numbers you want to use, China’s corruption problem is out of control.

-- Contact us at [email protected]


A strategist and marketing consultant on China business