Corruption in China’s Communist Party, government and big businesses is so pervasive and widespread that China has established a coordinated system to prevent corrupt officials from fleeing the country.
“Authorities estimate that about 4,000 officials from across China fled overseas over the past three years and took with them more than US$50 billion obtained illegally,” reported the Shanghai Daily (“‘Runaway’ corruption targeted”, Jan. 11, 2010). The Shanghai Daily is the English-language paper serving China’s commercial and business capital and is read for current information on China’s business policies by the expatriate business elite.
Government officials have always been at the apex of power in China. The idea of checks and balances, and the existence of a civil society and business community free of the state, is a foreign import.
Business, particularly big business, is the servant of the state. What Lenin called the “commanding heights” of the economy are still under firm Communist Party control.
Corruption in state-owned enterprises (SOEs) is a particular problem. These are the same enterprises that are investing billions in Australia.
Dozens of corrupt executives were netted by the Communist Party’s anti-graft organisation last year, the China Daily reported in its main front-page article. (“SOE execs under graft scanner”, Jan. 8, 2009) Among them were Zhang Chunjiang, 50, former vice-chairman of China Mobile, who falsified accounts involving 20 billion yuan (A$3 billion) when he was head of another giant telecoms SOE, China Netcom. Another top SOE executive Chen Tonghai, 61, former chairman of Sinopec, one of China’s major oil companies, was sentenced to death, later suspended, for having taken almost 200 million yuan (A$30 million) in bribes.
According to Lin Yueqin, an economist at the Chinese Academy of Social Sciences, the rising tide of corruption among top executives “stems from the current appointment system”.
He said: “Executives of SOEs, especially in monopoly industries, are mostly appointed by the central authorities” – in other words, by the Communist Party.
Almost all executives at SOEs held high-level positions in the government and Communist Party before being appointed. Officials in the government, Communist Party and big business move interchangeably between the three organs of power in China.
“Given their background, these executives tend to abuse power because even the board cannot check their authority,” added Lin.
Lin cited Sinopec’s Chen as a prime example of corruption and incompetence at the top among these party favourites. Chen approved a 200-million-yuan (A$30 million) investment after just 40 minutes of talks with a company. The SOE executives “parachuted” from the Party or government are often not adept at running companies, said Lin. “I am not exaggerating, you see the loss of 20 billion yuan (A$3 billion) caused by Zhang Chunjiang. They are selling the nation.”
This has important implications for Australia. First, the oft-cited defence by Chinese companies attempting to take over Australian companies that they are “independent businesses” is completely fanciful. They are arms of the Chinese state, run by political appointees.
Second, the idea that somehow those independent businesses will provide a counterbalance to the state is also misdirected. The Communist Party is actively recruiting private business people as members of the Communist Party.
As Kellee Tsai made clear in her 2007 book, Capitalism without Democracy, Beijing expends considerable effort to neutralise mechanisms by which independent business can form a system of checks and balances.
“One main strategy has been to keep the private sector loyal to the ruling Communist Party. In 2003, for example, some 34 per cent of private entrepreneurs were party members, up from just 7 per cent in 1991.” (Quoted in the UK Financial Times, Jan. 16, 2010).
This brings up the most important point. Will capitalism bring democracy to China?
Former Beijing bureau chief for the Los Angeles Times, James Mann, noted in his 2007 book, The China Fantasy, that although it is still theoretically possible that China may yet morph into a democracy that promotes civil liberties and fosters an independent judiciary, the belief that this outcome is inevitable, even likely, is sheer self-delusion.
He wrote: “America hasn’t thought much about what it might mean for the United States and the rest of he world to have a repressive, one-party state in China three decades from now because it is widely assumed that China is destined for political liberalisation, leading eventually to democracy.”
The idea that a commercially aggressive, and fundamentally corrupt, Chinese state might dominate commerce in the Asian region, and in Australia in particular, must cause concern.
The idea that Chinese state-owned enterprises are somehow “commercial” bodies that act independently is incorrect. They function as arms of the state, or, to be more correct, of the Communist Party.
Corruption cannot be rooted out. It is an inevitable component of Communist Chinese governance.