Will Corruption Bring China to Its Knees

Chinese political development is necessary for its economic rise to be sustainable as corruption thrives in the current system. Corruption threatens to undermine the rule of the party and its ability to effectively gain foreign investment. Domestic transparency is therefore the key to China’s sustainable rise.

China commemorated its 60th anniversary on October 1st with the biggest ever national day military parade. The military trained for months and the parade was executed with breathtaking perfection. Such order and perfection is something regrettably unseen in China’s political performance. Although China has not experienced the effects of the current international economic recession to the same extent as the United States and Europe, it has undergone its own crisis in different areas.

China’s overall rise would be sustainable if political leaders could manage to get urgent domestic issues under control in the medium run. The increasing gap between rich and poor and the social unrest manifested after the events in Xinjiang province last July, are just two examples of the many challenges that the Communist Party of China must overcome. Others would be large-scale corruption and environmental threats that not only pose a problem to the Chinese population but could also be a source of conflict with neighbouring countries.

The People’s Republic of China has moved well beyond its initial burst following the success of the Five Year Plan and the Great Leap Forward of 40 years ago. Since the late seventies the communist leaders have promoted a “capitalism with Chinese characteristics”  as a result of which China has seen it’s GDP grow 9% annually for more than 20 consecutive years. But, rapid economic growth has gone hand in hand with rampant corruption which has become a major liability for China’s economy as well as a significant obstacle to long-term political and social development. Besides considerable economics losses, the government is also faced with a serious challenge to its legitimacy. Despite the fact that China signed the UN Convention against Corruption and the UN Convention against Transnational Organized Crime, in 2000 and 2003, respectively, misappropriation accounted for the largest proportion of fraud. Thereafter, the number of officials receiving bribes has risen gradually. According to Transparency International, bribery in China is not only concentrated in personnel appointments, public procurement and contracts, but it is also rampant in banking and administrative monopoly industries. Corruption in personnel appointment is increasingly severe, thereby further damaging the government’s image.

According to the Global Corruption Report released earlier this year, China is in 72nd place out of the 180 featured countries. Although corruption is most visible at the local level, recent scandals have shed light on the dimension of the problem. Earlier this month, for instance, the former Taiwanese president Chen Shui-bian was sentenced to life in prison after being found guilty on charges of money laundering, bribery and embezzlement of government funds.

Corruption not only fuels social unrest and contributes to the rise in socioeconomic inequality within China but has major implications beyond its borders for foreign investment, international law, and environmental protection. Moreover, China’s corruption also harms Western economic interests, particularly those of foreign investors. They risk environmental, human rights, and financial liabilities, and must compete against rivals who engage in illegal practices to win business in China.

From the Chinese perspective the absence of competitive political processes and free press make these high-risk sectors susceptible to fraud, making transparency an ever more important goal to achieve. Credibility both inside and outside the country could affect China’s economic and political sustainability. Hu Jintao and his successors from 2012 onwards, will have to deal with these important challenges.