Corruption in China

A policy brief by Minxin Pei at the Carnegie Endowment claims that corruption poses one of the greatest threats to China's economic expansion and political stability. Mr. Pei also calls on the United States to aid the Chinese government in combating corruption. Here is a summary of the key findings of the paper:

1. "The odds of a corrupt official going to jail are less than three percent, making corruption a high-return, low-risk activity."
2. "Corruption in China is concentrated in sectors with extensive state involvement, such as infrastructure projects, real estate, government procurement, and financial services. "
3. "The direct costs of corruption could be as much as $86 billion each year."
4. "Corruption both undermines social stability (sparking tens of thousands of protests each year), and contributes to China’s environmental degradation, deterioration of social services, and the rising cost of health care, housing, and education."
5. "China’s corruption also harms Western economic interests, particularly foreign investors who risk environmental, human rights, and financial liabilities, and must compete against rivals who engage in illegal practices to win business in China. "
6. "The U.S. government should devote resources to tracking reported cases of corruption in China, increase legal cooperation with China and insist on reforms to China’s law-enforcement practices and legal procedures."

Mr. Pei's paper is very informative and full of statistics which are as recent as 2006. All policy papers should be taken with a grain of salt, though. The Carnegie Endowment does put out a lot of good scholarship, but I sometimes question what their motives are. This leads me to try and derive the thesis hidden between the lines of their publications. Mr. Pei is the Director of the China Program at Carnegie, and most of his publications seem to be about the dangers posed by the CCP's autocratic control of China and its economy. This, combined with the Carnegie Endowment's sponsorship of a writer for the National Review drove me to the conclusion that the most important of the key findings from Mr. Pei's perspective is number 2.

Number 2 argues that the state's extensive involvement in these economic sectors, which largely belong to the private sector in the United States, makes corruption easier and more lucrative. Free up the market and corruption should decrease. I agree, but it becomes a catch-22 when juxtaposed with the China conservatives who claim that the opening of China in the '80s led to more corruption. Freeing markets brings corruption, and freeing markets lowers corruption?

For more on Mr. Pei, see All Roads Lead to China's insightful post.