Bracing for China’s reform drive

A couple of decades ago, a Korean student in Japan said that all of his Chinese friends studying there were bluffing. There were only a few who didn’t claim their fathers were high-flying bureaucrats. But while working in Hong Kong, I came to believe that the Chinese students might not have been bluffing at all.

A lot of Hong Kong businessmen conduct trade on the mainland. To succeed, they need connections with senior officials in the government. One way to win their favor is to send their offspring to study overseas and pay for their expenses. The children of Chinese officials in this case become their collateral.

Chinese bureaucrats cannot afford to educate their children abroad. According to the Chinese State Council in 2006, the country’s top executive, or president, earns about 3,000 yuan ($482) a month. A public servant hardly can think of sending his son or daughter to study abroad unless on full scholarship.

Shrewd Hong Kong businessmen deciphered business opportunities by exploiting education obsession among elite Chinese over their single child. A government official cannot neglect a Hong Kong businessman who is paying for his child’s education. This kind of shady connection bred corruption in all levels of the government based on the Chinese endemic tradition of valuing guanxi - or relationships.

There is even a Chinese word for them - naked official - in referring to Chinese officials who embezzled money and snuck out of the country. According to the Chinese central bank, about 18,000 Chinese officials accumulated wealth through questionable means and fled to other countries with their families between 1988 and 2008.

These so-called naked officials took as much as 800 billion yuan, which could account for half of our country’s annual spending. Their malfeasance commonly has been carefully planned. First, they tour overseas under the pretext of a business trip. They use their official overseas trips to research the best place to move. Then they send their families abroad - first the child to study and the wife to look after the son or daughter. The wife applies for permanent residency. Once settled in, the official discreetly transmits personal wealth via a paper company. The less venturous would head to Southeast Asia while the gluttonous ones who built a vast fortune through gray income go to North America.

Corruption is so deep-seated and widespread in the public sector that one cannot believe the authenticity of some of the stories. Tian Fengshan, then minister of land and resources, was found guilty for a list of corruption and expelled from the party in 2003. His long list of crimes included running a business selling hundreds of government jobs. During the anti-corruption protests by Wukan residents in southern Guangdong Province last year, protestors said a director-level position in local Communist Party was traded for 2 million yuan.

China’s notorious legacy of bureaucratic corruption dates back to as far as the Han Dynasty (206 BC-220). When the royal palace caught fire in 185 in the later Han period, renovation was called for. To raise money for the reconstruction, the emperor’s steward demanded a contribution from officials leaving for local posts as a kind of prebendal commissions as they were likely to fatten themselves with properties and taxes stolen from local peasants.

Zhu Yuanzhang, from a poor peasant family, implemented radical reforms upon founding the Ming Dynasty. He proclaimed that he would execute all corrupt officials, but soon lamented that “when one falls in the morning, another emerges in the evening.” The Republic of China has been ceaselessly fighting corruption. In last month’s party congress to launch new leadership, outgoing President Hu Jintao warned that if widespread corruption is not reined in, both the party and country could be doomed. His successor Xi Jinping also promised a battle against corruption as a top state priority. According to the China Youth Daily, some 77.8 percent of Chinese Internet users anticipated that the new leadership would keep its word on strong anti-corruption actions.

The man to spearhead Xi’s challenging and extensive anti-corruption campaign is Wang Qishan, a no-nonsense personality who served as the vice premier in charge of economy, energy and financial affairs under Premier Wen Jiabao and earned a reputation as a troubleshooter. He has been regarded as the best candidate to head the Communist Party’s new Central Commission for Discipline Inspection. Despite his “princeling” background, Wang remains unattached to any particular faction. A capable man does not need a flock.

Wang has been groomed by former primer Zhu Rongji, a rarity in China’s elite bureaucracy who was merciless against corruption. He survived several death threats during his anti-corruption mission. Wang is said to have inherited the upright and tough working style from the popular retired leader.

In the first year of Hu Jintao’s rule in 2003, 13 ministerial and vice ministerial-level officials were charged for corruption. The new anti-corruption czar would likely be more aggressive to restore credibility and authority of the party following the scandalous fall of Bo Xilai. His first task would be addressing sprawling questions about family fortunes of his former boss Wen Jiabao. Chinese authorities are under pressure to investigate the bombshell report on Wen by a U.S. newspaper.

Mao Zedong’s secretary Tian Jiaying recalled that the charismatic leader might have ruled the world but could not control those closest to him, referring to the excesses of his last wife Jiang Qing.

The planned reform drive should raise vigilance among Korean businesses. They could find themselves at gunpoint if they continue to rely on guanxi and the old business practices. Foreigners too cannot escape corruption scrutiny.

* The author is a JoongAng Ilbo specialist on China.

by You Sang-chul