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China’s Mafia…. Whaddya know?

By Dan Harris on Posted in Good People

I have often wondered about the mafia in China. I have asked lawyer friends about it and I usually get pretty much the same answer: “The Communist Party destroyed it and has continued to keep it at bay. It can have no rival. That’s in Hong Kong and Macao, not here.”
I was always skeptical.
Today, China Stakes ran a story, entitled, “China’s Mafia Economy Spreads Its Wings,” painting a much worse picture than what I had been told. The article focuses on Chongqing, which is “notorious” for its mafia influence. The numbers, if correct, are pretty stunning:

In 2008, loan sharking in Chongqing is estimated to have totaled over 30 billion yuan, equal to 1/3 of the city’s total fiscal income. The total assets of one gang reached over 3 billion yuan, a quarter of which came from loan sharking.

I have to say though that none of our clients have ever told us of having mafia problems in China, though I also have never asked.
So what is going on out there? How big is China’s mafia? Does it steer clear of foreign companies, particularly those from the West? Is it big in Chongqing, yet far less so elsewhere? What do you know? Let’s get a discussion going….
UPDATE: Interesting post, entitled, “Chongqing’s Judicial Chief Shot off Horse,” over at the Inside-out China blog. Post is on the downfall of a police chief who was long believed to be tightly connected to local gangs.

  • Alex

    In any system with opaque legal proceedings and a lack of enforcement there will emerge a mafia of sorts.
    Loan sharking is huge. How else do small and medium sized companies get access to finance, certainly not from banks? There is an entire industry of informal banks across the country.
    Regarding ‘neighbourhood protection’ in my experience that’s limited to any business involved in vices, and strictly limited to them.
    I’m really surprised that you’re surprised by this.

  • LoveChinaLongTime

    PLA? CCP? Chongqing Mafai? Taiwan Triads? Cosa Nostra? What’s da difference??

  • http://www.chinalawblog.com Dan

    Alex,
    I am not surprised by any of what you describe nor was I surprised by the existence of the mafia in China. I define mafia as organized and far-flung crime. Of course I knew about loan sharking in China. But that does NOT mean the loan sharking is being done by a large and organized groups. In fact, my impression has been that it is actually being done by rather small and disorganized groups.

  • amp5

    I’ve also asked my Chinese friends about this and the answer I usually get is along the lines of ‘The CCP is our version of the mafia.’

  • Sun Kim

    The difference between organized crime “syndicates” in China and elsewhere is that the CCP has the power, will, and the might to crush any syndicate that it deems “inappropriate” virtually overnight. These “mafia” u describe are ragtag groups that undoubtedly operate with the unspoken approval of the provincial government and/or the CCP as they ultimately help support the economy, albeit in shady terms.

  • Tim

    Dan,
    Actually Qingdao also has a burgeoning mafia as well. From my understanding much of it centers around the construction business. ‘China Underground’ by Zachary Mexico discusses this along with a myriad of other stories about China’s underbelly.

  • Richard

    Organized crime has returned to South China with a vengeance over the past 10 years and operate in Guangzhou, Shenzhen, the Chao Shan area, and Fujian Province quite extensively. It’s no big secret and it’s well-reported in the Chinese media.
    Triads and other organized crime groups run illegal casinos, prostitution rings, drug smuggling rings, money laundering activities (often through Macau), pyramid schemes, weapons smuggling, weapons manufacturing, counterfeiting operations, etc.
    Frequently, money from such organizations finds its way into “legitimate” operations, usually in manufacturing and real estate. Local government backing and official involvement is certainly not out of the question.
    Like Alex, I’m surprised you’ve never encountered this, but I will say that a lot of Western companies are unaware of some of these issues.

  • Phil Hand

    Dunno about mafia activity, but I can vouch for the loansharking being the work of small groups, more local associations than mafia. My wife’s family had/has connections with loan sharks in our local area (Xiamen), and would “invest” with them for suitably high returns. They were never involved in the nastier end of the business, though it does of course persist – one of her cousin’s spouses got into some gambling debt, and was informed by a group of young men that his home would be forfeit. My mother-in-law paid them off eventually – hard to know what the consequences would have been otherwise.
    I don’t go into brothels as a rule, so that’s harder to know, but I did see a gang of youths take iron bars to one little red light shop near my old flat. They were just destroying the property, not the people (thank goodness), so I assume that had something to do with local “management” of the industry.
    And smuggling… again, being in Xiamen, this just makes me think of the Lai Changxing case. Was he ever a gangster?
    I kind of agree with Sun Kim that it’s hard to imagine organisation on the level of the Italian/American mafia being allowed here.

  • Alex

    I have a friend in a Chinese prison. He was sentenced for a money laundering type crime which he was guilty of. The process of how he got involved in this was fascinating (and he did not reveal to me or other close friends), I’ll spare the details, other than to say in this experience, and in later research, I observed that money laundering schemes appear to operate in a similar way to terrorist cell organisations in that they’re very independent, with only a thin line of hierarchical reporting. If a cell is busted, or gets into trouble, the hier-ups in the hierarchy will be aware, but the lower downs will have no means to call on them, or often even know who they are. Only where the connection is thought to be very important/damaging will higher-ups exercise pressure, and that will be rare.
    I have another friend in the business of selling financial derivatives to wealthy individuals. While not on their books, Western companies are complicit in supporting an illegal activity and assisting in the laundering of money. They probably see it as a ‘grey area’ under Chinese law, rather than the reality.
    @Tim I’ve heard similar of Yantai at least r.e. construction.

  • Blue Lantern

    Firstly, lets get this right, the Mafia is Sicilian, not Chinese.
    In China the organised gangs are called Triads, and they are very strong in the North-East and South of China. They are also far stronger than the Mafia, and control much of the global drug trade.
    They started out as underground resistance to the Qing Emperor which is why they have strong connections to North China. Triad hits in Hong Kong or elsewhere in Asia are usually subcontracted out to mainland Triads.
    Existing Triad societies include the Black Dragon, Wo, Rung, Tung, Chuen, Shing, Fuk Yee Hing, Yee On, 14K, and Luen. They usually leave foreigners alone, but don’t mess with them. Call them mafia again and you’re likely to end up with your hand chopped off for disrespect.

  • RuiRamosu

    IME pretty much every bar, nightclub, ktv, and sexual services shop (‘bath house’, ‘massage parlor’ and ‘hair salon’) in China will have organized crime connections—the difference being, as someone above quite cogently noted, is that the government is ultimately able to control the organized crime, but turns a blind eye to it as long as it stays under control. I would say that this holds true for all first and second tier cities in China.

  • http://everymanscritic.blogspot.com Chinamatt

    The day before we moved out of China, our landlord went on a tirade and demanded the key back early AND money. He claimed he was part of some gang/mafia or whatnot. I laughed at him. I wish I knew how to say, “I’m from New Jersey and my neighbors are the mafia. Would you like some cement shoes?” I was tempted to call the police on that idiot.

  • Falen

    Without getting into too much of the complexities, there’s a certain truth to the “CCP is the Mafia” talk. Large organized crimes exist because of the “economy of law breaking” as in the cost-vs-return of breaking laws.(Like the profitability of smuggling alcohol during Prohibition) Such condition does not exist because CCP exists where a mafia possibly would in a highly law-based society.
    The CCP is essentially running the mafia out of business, and it’s not like the mafia can out gun the CCP.
    In China, CCP is the entrenched local power everywhere, and if there’s such a local gang boss that’s getting too powerful, you can bet CCP would haul him off to be executed, and probably to the cheers of the people too.

  • James G

    Where there is rampant prostitution (China) there will always be organized crime. Where there is large scale drug use – as in China – there will most definitely be organized crime.
    China hasn’t really done a good job of eliminating organized crime. They have done a superb job or hiding it from foreigners, though.

  • Glen

    La cosa nostra = “我们这个东西？”
    I wonder if there are translation’s of Mario Puzo’s novels in Chinese.

  • David

    Mafia = any small powerful or influential group in an organization or field. Also engages in criminal activities.
    Based on that definition it could be argued that the party itself is the biggest Chinese version of a mafia organization.

  • Kim Jong Il

    The Art of Contract Negotiation in China—”Don’t worry…. I’ll make him an offer that he can’t refuse. Now, if there’s no more ‘business’, and if you don’t mind, I’d like to attend my daughter’s wedding.”
    “And what should we give to your daughter’s new ‘foreign devil’ husband?”
    “Uh…give him a living, but don’t let him into The Family Business.”

  • Jay

    It’s common for Chinese businesses to hire thugs to beat up opponents, scare people out of housing, etc. I was just wondering if those thugs for hire were part of the mafia?

  • http://blog.woodsb.net/ Woods

    A friend of mine was working in a company that was building a new factory (somewhere around Wuhan if I remember well). This company had its factory done on time but they were stunned to see that the road arriving to warehouse was missing the last 30 meters. Then came the “Mafia of the roads”, who asked for a fat check to finish the job…
    – Woods

  • http://twofish.wordpress.com/ Twofish

    First of all, not all loan sharking or even most loan sharking in China is “mafia.” There is a whole network of money lenders that aren’t “mafia-like” in any way that I can see,
    Second, there is one huge element of the mafia in southern Italy that is missing in most parts of China, which is that the authorities are seen as legitimate. If someone beats you up, then it’s not considered a bad thing to go to the police. The police may or may not do anything, but if they don’t this is considered a bad thing.

  • Laobaixing

    I spent a summer at Middlebury, which was probably equal parts grad students, undergrads, people working in some manner of intelligence and Mormons. The last night of the program I talked to a guy, a “civilian consultant to the coast guard” who was looking at Chinese organized crime and its role in the drug trade. He said that a lot of Chinese crime organizations tended to be much more loosely organized than the stereotype of their Italian counterparts – not a rigid hierarchical organization, but a loose network of semi-autonomous groups and individuals that work with each other on different projects. I’m not sure how much stock to put in to what he said, but it was an interesting conversation.
    Oh, by far the most interesting thing he suggested was that former GMD soldiers turned opium warlords were working with corrupt members of their former enemies in the PLA to smuggle heroin over the border from Burma into Guangzhou and Hong Kong and off into the world.
    Ko-Lin Chin at Rutgers has done the only study of Chinese crime organizations that I’m aware of (not that I’ve looked for others) focusing on human trafficking. From what I recall of reading Smuggled Chinese he describes a lot of mom and pop organizations working with each other, rather than some well integrated crime family. http://rutgers-newark.rutgers.edu/rscj/faculty/chin.html

  • Avalon

    Every city has am organised crime syndicate. Entrepreneurs, Politicians, Police chiefs, Prison Wardens, Restauranteurs, Bar owners, Hoteliers, Entertainment gurus etc. I think it is normal and acceptable that active and successful people have their fingers on the pulse of the city and share their views of all matters pertaining to the health of the city. They also go to other cities as representatives and socialise formally and informally as human beings do with their counterparts or equivalents. They are aware of the purpose and ability of the law to encourage or stifle ‘business’ and pleasure. They are human and have the usual human weaknesses for sensual pleasures. They find themselves in postions of favour and take advantage of that to a greater or lesser degree. What matters is when they lose control and judgment and make serious mistakes which cause great harm to innocent individuals and society. Mafia is an alternative style of government for those who don’t like the flavour of corruption supported by the legally empowered establishment.

  • http://www.centrevoyage.com/ Johnny

    Every country got a problem with some kind of mafia look at for example Japan and the Yakuza. So its not surprising , and as far the client saying they never had any problem, even if they had a problem with a Gang, they will not say anything to the autority for fear of reprisal.

  • Leuss

    I got robbed by some chinese thugs I could catch one of them and I took him to police, he was laughing and I couldn’t know why till we reach the police station, you can imagine what happened there… At first I was treated just like a criminal because I am black then they say come tomorrow for statement, I asked why not now? But they say no need now, so I left, but not for real I waited in some corner to make sure what is going on there, and no surprise the thug went out about 10min after me and grab a cab.
    Just to say local police work with the mafia.