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China Corruption By The Numbers.

Posted in China Business, Legal News

I gave a talk yesterday at a China seminar on litigating against Chinese companies in which I discussed suing Chinese companies in China. At one point, while musing about the cases my firm has overseen in China I remarked that I was not aware of any cases having been decided based on corruption. I then riffed on how we also had never once been hit up for “extra” fees when registering a company or registering IP or registering anything else.

I then talked of how corruption in China is somewhat overrated in that China is usually ranked in the high middle of most world corruption indexes, but with respect to foreigners should perhaps be ranked even higher. I said this because corruption involving foreigners is way lower in China than it is involving Chinese citizens. 

I then mentioned how in one country in which my firm does a lot of work, we are often asked for extra money to “expedite” our filings, which is really code for telling us that if we do not pay this extra fee, our registration will languish in a corner for an extra six months. That country does extremely (almost shockingly) poorly in the TI ranking.

Upon further reflection, however, this domestic-foreign dichotomy is probably true in many other countries as well, as I know that to be the case in at least a few other countries as well. After the seminar, I went out with a couple of the speakers and one of them, a very experienced China practitioner, revealed that he too had never been hit up for a bribe. 

We then talked though of how foreign companies must still be very much on guard for corruption but our focus from that point forward was on one’s own employees. We talked of examples we had seen of companies being asked to give kick-backs in buy-sell transactions and of China-based companies of which we were aware whose existence pretty much depended on shady dealings.

So I am not saying corruption is not an issue for foreign companies doing business in China, as it obviously is. For more on that, check out “The FCPA And China. Do I Need To Get All Loud On You?” But when it comes to handling China’s legal formalities, I ain’t seeing it.

And apparently I am not alone in this. 

Transparency International just came out with its 2010 Corruption Perceptions Index and China does fairly well in it (again).  Denmark, New Zealand, and Singapore come out tied for least corrupt — no big surprises there. Canada is number 6, Hong Kong 13, Japan 17, the United Kingdom 20, Chile 21, and the United States 22.  Maybe I am too close to see things right, but I find it very difficult to believe Japan is less corrupt than the United States, but whatever.  Taiwan is 33, South Korea 39, Macau 46, Malaysia 56, China and Thailand tied at 78, India 87, Indonesia 110, Mongolia and Vietnam 116, Philippines 134, and Cambodia, Russia, and Laos at 154. For an interesting (and scary) article on what it can be like to practice law in Russia, click here

Without nit-picking too much, these numbers seem very roughly accurate to me.

What do you think? Any real surprises here?

  • Bill Bergman

    Found you off a Google search on the TI survey this morning, happy I did. I’d like to learn more about how TI constructs their survey, first of all. And you mention that you may be too close to things in Japan — well, some of us may be too close to things in the US, and I wonder if there is a good case that the US is overranked. But it depends on how you define and measure ‘corruption.’ Broadly conceived, I think the financial crisis in recent years has taught us a lesson to consider the costs of corruption, and to reconsider whether we are all that pristine.

  • AC

    I’d like to see where various provinces and municipalities rank on this kind of measure. I bet there is pretty significant variation within China.

  • Bill Rich

    I wonder whether the Central is interested in conducting a ranking study of corruption among provinces and municipalities, and allow the result to be published, and the publisher won’t be jailed for releasing of state secret ?

  • http://www.chinaeconomicreview.com Nicholas M

    I’ve experimented with trying to bribe shop attendants and the like, in Shanghai, to “bend rules” before, often offering them several times their weekly pay to do a small favor, such as let me on to a computer without a passport (at a place where they already had my passport scan ON FILE!); never once has it succeeded. Nor have I ever had to pay an unnecessary bribe or fine (500 kuai once, for failing to register my house for nine months(!), is the extent of my experience with fines and penalties in China).
    In general, corruption in China is probably not as bad as in much of the developing world; like many things in China, however, a phenomenon that is relatively small per-capita can become massive in aggregate. Overall, though, it’s hardly a kleptocracy. Like Bill & AC, however, I wonder about regional differences here; Shanghai is seldom representative of the rest of the country.

  • Tianjin Ren

    “China does fairly well again”? Huh? In 78th place, together with Thailand? That’s good?
    .

  • http://YourGuideToChina.com Steve

    Great post. How about Intellectual Property Protection in China? Have you any cases related to this?

  • Twofish

    I’ve not seen very much of the “bribing type” of corruption in Chinese courts. There are issues with political interference in court cases or also conflicts of interest, but those situations are something quite different. If a judge rules a certain way because the Party has ordered them to do so, an under the table payment will not get him to change his mind.
    Also I don’t think that corruption is something that is that easily measured by a single numerical scale.
    One of the jobs of journalists in the major state-owned newspapers is to conduct internal investigative reports for the Party. From time to time, journalist that work for Xinhua and People’s Daily will investigate an issue, but rather than print it publicly, it goes into an internal report that goes to Party leaders to figure out what to do.

  • http://www.commencepartners-usa.com Kevin

    I totally agree. In 12 years doing business her (in China), we or our clients have never been “hit up” for so-called expediting fees. Certainly coruption exists here but it is a lot better than it was 10 years ago. It’s the exception rather than the rule.

  • Chris

    Nicholas M your 500RMB fine for failing to register your address with the PSB was a legal penalty not a corrupt bribe. I’ve had a similar fine. It is actually also the minimum they can fine you for violations of the Entry-Exit regulations, so we got off lightly. I presume you have to pay via a bank direct to a PSB fine account, so again no individual gain there or corruption involved.
    My company has offices all over China and broadly speaking all is OK across the country. Foreign enterprises treated well and Govt officials do not hit on FIEs for bribes.
    Dan’s overall point that in terms of the legal side of setting up and operating a foreign enterprise, China is refreshingly clean of bribery. Dan’s other point that foreign enterprises involved in bribery / corruption tend to be trying to sell something to Chinese Govt entities and that issues are clustered in certain areas (hospitals come to mind), also astute and spot on.

  • Angela S.

    I have been running my business here in Shanghai for six years and I have not once had a problem with corruption. I know it is out there (especially for my Chinese competitors) but I agree with you that it is overrated.

  • Twofish

    Funny but true story that I witnessed myself.
    Friend of mine, who was local, had a legal issue in China, and needed help from an official. The official was extremely helpful and the issue was resolved. My friend then insisted on giving the official a gift, and the official protested saying that this was strictly against policy and the official was just doing their job. They were arguing about this for over week, and each time my friend and the official met, it was my friend trying to give the official a gift, and the official refusing. There were some points over the week where my friend was quite literally forcing cash into the official’s hand (which the official was extremely firm in refusing) and hiding gifts in their office.
    Finally, what happened was that my friend hid some moderately expensive gifts in the officials office, and the official knew about this but did not protest. About two days later, my friend got a set of gifts from the official which were worth roughly the same amount as the gifts that the official got, which resolved the issue.

  • aaron

    No corruption in China? You’re all barking mad.

  • anon this time

    Chinese people pay bribes for all sorts of “official” things, from being able to quit your job (and get out of a contract, this was before the new employment laws took hold) to getting their kids into good schools, especially in competitive areas. I have two friends who, circa 2004/2005, had to buy their way out of jobs to seek employment elsewhere. Even with the tight control over the media, just a month long perusal of some regional papers is “wow” inducing.
    Kickbacks to HR Managers for getting jobs. Bribes and “favors” to your professor or the school administration. QC related bribes, bribes to look the other way… but I guess if you drop a huge wad of money on repeated, lavish dinners and gifts, rather than just a fattened envelope
    China isn’t nearly as much of a “bare your soul/sins in public” country as the U.S. is. People quietly handle things in the manner called for, and few if any people know about it.
    I wonder do many people read the daily papers in the U.S. Bribery is rampant here. I do mean rampant. Building inspectors, politicians of all stripe – stuffing your freezer full of money! – etc. After awhile, you become so inured to it that you barely notice it. Moreover, in the U.S. we are very dependent on the media telling us about cases, or doing investigative reporting to determine how something went down. How many of Illinois recent governors are in jail? How many aldermen from Chicago have been caught taking cash, too stupid to even have the money wired to their accounts?

  • Eric

    While the likelihood of encountering bribery and corruption (grand or petty) in China will vary somewhat depending on location and industry, it bears mentioning that of the hundreds of Foreign Corrupt Practices Act (FCPA) enforcement actions brought by the U.S. Department of Justice and U.S. Securities and Exchange Commission over the past several years against U.S. and foreign multinationals, the most frequently cited jurisdictions have been:
    #1 Iraq (almost exclusively the Oil-for-Food cases)
    #2 Nigeria (principally the KBR/Halliburton and Panalpina sets of cases)
    #3 China

  • Twofish

    One problem with those examples is that it’s not always clear what is a “bribe” and what isn’t. Paying someone a lump sum in order to get out of a contract is something that I wouldn’t consider to be a bribe as long as it isn’t against the law, and as long as the payment goes to the “principal” rather than the “agent.”
    Also giving teachers and HR managers gifts is not always a bribe (and in my social group it usually isn’t). Gifts can easily become bribes, and trying to draw the line between a “friendly gift” and an “outright bribe” is something that gives compliance managers headaches (not just in the China, you have these sorts of problems in the US).
    One other problem that you have in China was that under Maoism, any payment that involves self-interest was a corrupt bribe. If you handed someone money to give you food, that was a corrupt bribe and harshly punished. One thing that China has been trying to figure out is to distinguish between “good payments” and “bad payments.”
    This is harder than it sounds. Suppose I give you money in exchange for you giving me your car. This is either good or bad depending on whether you “own” the car. However, if the state owns everything, then transferring the car to me is automatically bad. If you want people to be able to buy and sell cars or anything else, you then have to come up with rules for “ownership” and that took about a decade.
    In the US, a reasonable rule is anything against the law is automatically bad. China is developing a legal system for which that’s a reasonable rule, but in 1975 that didn’t work, because any sort of private enterprise was illegal.
    Also looking at corruption through FCPA cases may be misleading for two reasons:
    1) because a lot of companies in China are state owned, they are covered under FCPA in a way that companies in other countries are not. FCPA does not outlaw commercial bribery, but because companies in China invariably have state and party officials, commercial bribes become covered by FCPA in China in a way that they do not in other countries. If you look closely at the FCPA cases involving US companies in China, they just would not have happened if the same payment had taken place in Thailand, Indonesia, or Russia.
    2) bribes in other countries can count on some support from the government. If the USDOJ and SEC opens an investigation for FCPA violations in Russia, they will generally be working against the Russian government. In particular, any payment that is allowed by the written law of the country involved is not covered by FCPA.
    However, most FCPA investigations that the USDOJ and SEC opens involved people that are not protected by the Chinese government, and in a lot of the enforcement actions, the USDOJ is getting the cooperation or at least the non-objection of the Chinese government. If the USDOJ starts investigating someone that the Chinese government does not want investigated, all the government has to do is to authorize the payment.
    One thing that happened in the 1990′s was that Chinese companies listed on the NYSE specifically so that they would be covered under SEC regulations, although that’s stopped because after Enron and Madoff, no one trusts the SEC.

  • Chris

    aaron… “No corruption in China? You’re all barking mad.”
    Dan’s point was not to deny corruption in China but to identify that in registering, setting up and the general operations of **foreign** enterprises in China, there is surprisingly little bribery expected or involved. This is spot on. Chinese Govt officials do not hit on FIEs for bribes… Tax department officials will want more tax, Bureau of Industry officials will want you to stick within approved business scope, Labour Dept officials will want you to demonstrate HR compliance and to urge your employees to set up a union, Environment officials will audit your environmental credentials etc…
    No-one denies the existence of corruption or bribery in China, including among foreign enterprises. Those issues are serious but unrelated to business registration. They might be internal (purchasing staff taking supplier kickbacks for example) or external (your sales team bribing either commercial clients or Govt departments to secure sales). All these require strict monitoring & compliance.
    There are huge issues with bribery & corruption within China and these are reported in the newspapers daily. However, Dan’s point that foreign enterprises are not hit upon for bribes in ordinary interactions with responsible Govt department is correct.

  • http://EfficientEquity.com paul

    Here is an article about the fruits of corruption for those in power.
    http://www.moneynews.com/Economy/Hidden-Trillions-Widen-China–Wealth-Gap/2010/08/13/id/367467

  • Richard

    I can’t really say how the service industry operates in Shanghai, but I’m not sure that you all know of which you speak.
    Anyone in manufacturing will tell you that nepotism, bribery, kickbacks, and fraud pretty much make industry function. Whether or not foreign partners or managers know about this is another story…
    Suppliers looking to secure contracts frequently bribe (or “give gifts to”) the other party…unless of course the other party is someone’s relative. The webs of corruption between manufacturers in South China are quite striking. Many manufacturers also pay off the government for various reasons–whether its to skirt environmental regulations or avoid getting raided for IPR infringement. Let’s also not fail to mention how many third party auditors are on the take. Ask any factory manager down here to produce an ISO certification and they will obtain one for a few hundred USD on the black market.

  • neil

    i dont know, not done business in china. But what impression i have, from visiting the place, meeting my girlfriends relations etc, is that the place is absolutely riddled with corruption and bribes are a part of everyday life. its seen as the norm to try and bribe your boss to get promoted, or to give ‘gifts’ to cultivate people in the government. yes, twofish, that counts as bribery in my book, i dont think there is a cultural nuance there that i have missed, and im sure it happens in a lot of countries and is not unique to china.. Im afraid that i find it very hard to believe that this does not extend to business., which seems to be implied in a lot of comments here, , unless my experience is the exception and not the rule.

  • http://www.chinaeconomicreview.com Nicholas M

    @Tianjin: “China does fairly well again”? Huh? In 78th place, together with Thailand? That’s good?”
    Yeah. Compare to other large developing countries in the lineup… that’s far better than Russia or Indonesia, both of which have higher PCGDPs than China, and India. I wonder where Brazil and Mexico are on that same scale… Mexico is #98- worse; Brazil is #69- a bit better. China seems to be benchmarking about where it should be… maybe slightly better.
    @Chris: I was using that as an illustration of the only dealing I’ve had with law enforcement in Shanghai, and how clean and procedural it was. No threats, no bribes… just a simple fine, as procedural as a parking ticket.
    @Aaron: Nobody here is saying there’s no corruption in China- and yes, we would be barking mad if we said that there wasn’t. What we are saying is that many businesspeople here haven’t had problems with it, and that it’s at a relatively low level, per capita, by developing world standards.
    Corruption in China, like corruption in America and Japan, seems to be more of a high-level affair than a low level one within the playing fields and jurisdictions that a typical expat businessman would operate. Low-level corruption seems to be more of a factor in provincial areas.

  • Jaggers

    First of all, with regards to establishment or set-up of the companies, it’s not “corruption” per se, but when we pick out which economic zone we set up a facility in, there are millions of empty promises from even emptier suits. I guess it’s not “corruption” per se. They are not there asking for bribes. In the set-up environment, however, we have had several “facilitators” pitch their services. “If you go the normal route, it will take you three months to get your feasability study approved. If you pay me, I’ll get it done next week!” It’s indirect corruption. They split their fee with local government official who then “expedites” the approvals.
    So I disagree somewhat – agree that there is significantly less overt corruption – it’s just now more subtlely done through agents.
    Once you move beyond the “set-up” phase, corruption in China is rampant. Every single contract or RFP is accompanied by a request to wire money to some account in Macau and the contract will be awarded. Of course we never do it. And we lose a lot of RFPs because we will not bribe the way local Chinese companies bribe. Collections and getting paid is the same story. Kickbacks are the name of the game.
    Corruption in China is obsequieous in almost every facet of business.

  • http://www.chinalawblog.com Dan

    @Bill Bergman,
    The flaw with all corruption rankings is that they are so dependent on self-reporting. That is why I like to review as many as possible and that is also why I think they are better viewed as approximations more than anything else.

  • http://www.chinalawblog.com Dan

    AC,
    I completely agree on their being variation within China. I think there are huge variations. Take something like IP enforcement, which is similar but easier to detect. Right now in Qingdao it is actually quite difficult to find places selling pirated DVDs and software and that is not the case in many other places (as I understand it). So yes, I am sure there are regional differences on corruption as well. Heck, there is in the U.S. too.

  • http://www.chinalawblog.com Dan

    @ Bill Rich,
    I think China’s Central Government has a pretty good handle on the extent of corruption throughout the country and I doubt they want that made public.

  • http://www.chinalawblog.com Dan

    Nicholas,
    Shanghai is, as you say, “hardly representative” and I would also venture to say that being a foreigner makes one hardly representative either. But that’s the point of my post. To point out how corruption when dealing with the government is not essential to functioning as a foreign company in China.

  • http://www.chinalawblog.com Dan

    @Tianjin Ren,
    I never said it was “good.” I said that China is in the high middle. But I will say that if you were to compare countries and equalize for per capita income, China would probably score even higher. Is China good? I don’t know. Is it not nearly as bad as some other countries? Yes, it is not. My firm deals extensively with one of the countries near the bottom of the list and I can tell you that it’s a whole different ball game there.

  • http://www.chinalawblog.com Dan

    @ Steve,
    Interesting that you should bring up IP because there is obviously a connection between IP enforcement and corruption and IP enforcement is a bit easier to monitor. I see IP enforcement slowly but surely improving in China.

  • http://www.chinalawblog.com Dan

    TwoFish,
    I agree with you that the courts are sometimes influenced by the party, but I also think that on the typical business case between a foreign company and a Chinese company, the Party doesn’t really care.

  • http://www.chinalawblog.com Dan

    @Kevin,
    Good to hear that and I would bet a large part of it is that your company is not out there looking to pay bribes. I am aware of some companies who view paying bribes almost as a badge of their worldliness and sophistication and, not so coincidentally, those are the companies that get hit up the most.

  • http://www.chinalawblog.com Dan

    Chris,
    You have summarized my point exactly. I am saying that “in terms of the legal side of setting up and operating a foreign enterprise, China is refreshingly clean of bribery.” I am not saying there is no corruption in China or that it could not stand improvement on that score.

  • http://www.chinalawblog.com Dan

    @Angela S.,
    Good to hear it, but not terribly surprised. If you are a foreign company not looking to pay bribes you can deal with the Chinese government on things like registrations and taxes without having to worry too much about being hit up for a bribe, particularly in the cities where foreign business typically clusters.

  • http://www.chinalawblog.com Dan

    @ TwoFish II
    Great example of someone essentially looking to pay a “bribe.” There are many Chinese government officials who for reasons of belief in the system or otherwise would not be caught dead doing anything untoward. Of course, there are definitely some who do not feel that way too.

  • http://www.chinalawblog.com Dan

    @ Aaron,
    You are barking mad for asserting that anyone has claimed there is no corruption in China. Nobody has claimed that and you should read the post and the comments next time before you go off like you did.

  • http://www.chinalawblog.com Dan

    @ Anon This Time,
    I don’t dispute what you are saying, both about China and the U.S. and it does drive me crazy how so many people think the U.S. is pretty much corruption free. I actually operate from the opposite assumption when it comes to our politicians. I just assume that they are acting in their own self interest and then when I learn that they may not be, I am pleasantly surprised.
    That is not the case with our federal judges however, who I do believe are pretty much above reproach.

  • http://www.chinalawblog.com Dan

    @ Eric,
    I am surprised China is not first on the list for FCPA claims not because I see China as the most corrupt country in the world, but simply because so many American companies are there or doing business with it.

  • http://www.chinalawblog.com Dan

    @ Twofish III,
    You are right that there is no one definition of corruption, which is just an additional reason to view a report like this as a mere approximation.

  • http://www.chinalawblog.com Dan

    @ Chris II,
    Exactly.

  • http://www.chinalawblog.com Dan

    Paul,
    Nobody is disputing that there are large number of Chinese government officials engaged in corruption. Just look at the large number of big black Audis all over China. The point though is that most foreign companies can function just fine in China without intentionally helping to fund a new A8.

  • http://www.chinalawblog.com Dan

    @ Richard,
    Go back and actually read my post. Please. I intentionally steered clear of addressing the issues of which you are speaking. I did that for a number of reasons. First off, my law firm virtually never gets involved in those sort of day to day operational matters so my knowledge in that area is based only on what clients tell me. Second, those sorts of things, I believe, vary widely within China.

  • http://www.chinalawblog.com Dan

    Neil,
    Your sort of experiences are not what I am addressing in this post. I don’t doubt that there is a lot of what you have described going on in China and it is not always easy for foreign companies to root that out of its own operations. But my post is focused on foreign company/government office interaction and in that arena, China is just not very corrupt at all.

  • neil

    Dan, yes, but I still just dont believe it. thats my point. I know that you have a lot of experience and i dont and im not trying to dispute what you are saying, but objectively the idea that china is not very corrupt at all is something I have trouble believing.
    For instance, I’ve observed a bit about how tax collection works on a municipal level, whereby the officials have a target set from the centre as to how much tax they need to collect. the officials then build up ‘relationships’ with all the businesses in the local area to ultimately persuade/coerce them in to agreeing to pay tax. The rules and laws etc are just a point of reference, for these discussions and, despite oestensibly earning a pitiful wage like 3000 yuan a month, the tax collectors have huge houses and are driving round in blacked out audis and feasting on giant banquets. So of course theres gifts and brown paper bags going around on an epic corrupt scale. Ive watched it happen and Im not even a businessman. And, I mean if you are a foreign company competing in this kind of environment, then the rules might be somewhat different and legal processes (such as company formation) might be free from corruption somewhat, but at the end of the day, if you want to compete on the same playing field as your local competitors, at some point, it seems to me that you are going to get dragged in to the same mud and eventually you will get eaten. If I was starting a business in china, id be factoring that in to my business plan.

  • Twofish

    neil: Dan, yes, but I still just dont believe it. thats my point. I know that you have a lot of experience and i dont and im not trying to dispute what you are saying, but objectively the idea that china is not very corrupt at all is something I have trouble believing.
    It depends on what you are comparing it to. If you compare China to Norway or Denmark, yes China is incredibly corrupt. However, for most people that do international business, people will compare China with other developing countries, and compared to Russia, Indonesia, Mexico, or even Thailand, China is amazingly non-corrupt.
    To point to your example of tax collection. “Black Audis” and “big houses” may not necessarily be a sign of corruption. It’s very common for government officials to get free houses and cars (with driver) and lavish food allowances from the government, and there are often local slush funds that are used to pay for a lot of perks.
    neil: And, I mean if you are a foreign company competing in this kind of environment, then the rules might be somewhat different and legal processes (such as company formation) might be free from corruption somewhat, but at the end of the day, if you want to compete on the same playing field as your local competitors, at some point, it seems to me that you are going to get dragged in to the same mud and eventually you will get eaten.
    Except that you won’t. Trying to be be clean in China will put you at a disadvantage, but it’s not going to put you out of the business. One thing that makes China different is that there are limits to how much the local officials can squeeze businesses.

  • Twofish

    Nicholas M: Corruption in China, like corruption in America and Japan, seems to be more of a high-level affair than a low level one within the playing fields and jurisdictions that a typical expat businessman would operate. Low-level corruption seems to be more of a factor in provincial areas.
    The problem with high-level corruption is that people at high levels can change the laws to make the payments “perfectly legal” which means you wonder what corruption really is. If you get paid a massive bonus for rubber stamping a bundle of sub-prime loans, is that corrupt or not? What I’ve seen is that the way that banking is done in China is not that much worse than the way that banking gets done in the US. But some people think that US banking is a pit of legal corruption.
    The criterion for corruption in the United States is “were any laws broken?” The trouble with that criterion is that if you are powerful enough, you can rewrite the laws.
    The other problem with talking corruption is that you get into a lot of principal-agent issues. If I go up to the owner of a business, and offer them a discount for choosing me as a supplier, that’s perfect fine. If I go up to the manager of the business, and offer them a discount for choosing me as a supplier, that’s a bribe, and it’s wrong. The problem is that sometimes it’s seriously unclear what is the role of the person you are doing business with in China.
    Richard: Anyone in manufacturing will tell you that nepotism, bribery, kickbacks, and fraud pretty much make industry function. Whether or not foreign partners or managers know about this is another story…
    My own belief is that if you have to have a series of payment that just make things work, and at the end of the day business gets done, then they can’t all be bad. If you have to pay someone off to get business done, and that payoff makes things more efficient and generates social wealth rather than less efficient, then it’s fine by me.

  • Twofish

    neil: its seen as the norm to try and bribe your boss to get promoted, or to give ‘gifts’ to cultivate people in the government. yes, twofish, that counts as bribery in my book, i dont think there is a cultural nuance there that i have missed, and im sure it happens in a lot of countries and is not unique to china..
    I think that there are a lot of cultural nuances. For one thing, gifts are generally bilateral and there is a “emotional feeling” that is attached with the gift. Just to give the example of the official that I mentioned earlier, my friend felt pretty compelled to give a gift to the official because he thought it would be extremely rude not to. It would be like leaving a restaurant in the US without tipping the waiter.

  • Twofish

    Also something that I have to make very clear about my story is that my friend had no evil intentions in giving the official a gift. The official had already been extremely helpful, and so my friend was just trying to be polite.
    What makes it somewhat culturally interesting to be in China is that people will invariably make a big show of refusing gifts, and you have to know someone really well to understand why they are really doing what they are doing. I knew my friend well enough to know that he really didn’t have any “evil intent” and he really was just interested in saying “thank you.”

  • Twofish

    Just to reinforce my point about official cars in China….
    http://www.thetruthaboutcars.com/2010/04/the-beginning-of-the-end-of-foreign-car-joint-ventures-in-china/
    The Chinese government spends US$15 *billion* on cars each year, and the brand of choice is Audi, and 20% of Audis total production in China goes to the government.
    Also, I’m looking for an article on how official housing works, but since the state owns all land, it can provide luxury apartments to state officials who can live rent free.
    So just because an official has a really nice house and a big car and driver with a low salary doesn’t mean that they are taking bribes.

  • Chris

    @Twofish: “Also, I’m looking for an article on how official housing works, but since the state owns all land, it can provide luxury apartments to state officials who can live rent free.”
    “So just because an official has a really nice house and a big car and driver with a low salary doesn’t mean that they are taking bribes. ”
    Most Govt employees are legally required to buy or rent their own housing. That would include the vast majority of ordinary officials up to mid-ranking officials at the Provincial level.
    A very small number of those for whom security / supervision may be a concern, might be provided with Govt housing in compounds for the tenure of their official post. The vast majority live in privately owned housing. For older officials, living in older housing, title to those apartments may have transferred at low prices in the late 90s. For new housing, the vast majority would have been purchased privately since then. A major issue is the large discounts (up to 90%) given to huge numbers of municipal officials by commercial developers seeking benefits — effective bribery.
    From my experience, the cost and value privately owned housing of most lower Govt officials is inconsistent with their official income. There are some impressive little mansions out there…

  • Richard

    @ Twofish: “My own belief is that if you have to have a series of payment that just make things work, and at the end of the day business gets done, then they can’t all be bad. If you have to pay someone off to get business done, and that payoff makes things more efficient and generates social wealth rather than less efficient, then it’s fine by me.”
    I don’t really see how whether or not something personally bothers you is an appropriate metric for gauging the quantity, nature, or ethics of corruption. Aside from that, these series of payments do not really make things work. In the short term, business gets done–you’re right. In the long term, this web of corruption leads to cut corners, poor quality, EHS problems, etc. For example, small manufacturers running unlicensed businesses throughout Guangdong and Fujian certainly do employ people and therefore may create some “social wealth” but they frequently do not pay taxes (just “fees” to whoever is in charge), do not conform to Chinese labor laws, often engage in counterfeiting, and many just make crappy products.
    @ Dan: A lot of those companies are part of multinational supply chains, so it’s not as though this is a “Chinese-only” problem. But I appreciate that your original post is essentially focused on legal processes as opposed to operational issues. Generally speaking, in terms of payments required to “lubricate” legal matters, I agree that China is much better than other comparatively developing countries, especially in the cities where most foreigners conduct business (as you rightfully pointed out–there is a lot of variance across the country). That being said, having dealt with law enforcement and administrative officials in some pretty obscure parts of the country, there is frequently an expectation of bribes or favors, lest your paperwork be lost in the shuffle. And there are a lot things done by local agents (including lawyers–sorry) and “trusted Chinese partners” on behalf of foreign companies that escape the oversight of the foreign firms.
    As a Chicago native, I’m not naive enough to think that the U.S. is immune from similar problems (the city that works!). But that’s really besides the point–we shouldn’t excuse corruption in China simply because America has its own problems with corruption.

  • Richard

    And just for added fun:
    “In Russia, the price of bribes rise as its corruption rating slides”
    http://www.csmonitor.com/World/Europe/2010/1027/In-Russia-the-price-of-bribes-rise-as-its-corruption-rating-slides

  • godfree

    Speaking of high-level corruption, which body is more corrupt: the US Congress or the The Central Committee of the Communist Party of China?

    • BuckJohnson

      Thats a real brain teaser right there.  If I had to take a guess and this is my opinion, it has to be the US congress.  At least the central committee if they catch a corrupt official will execute them or put them away for a very very long time.

  • http://WWW.TARPLEY.NET ERIC

    i suppose that having wall street elect your president and giving them a $600 billion bail out does not count as corruption. not to mention the corruption that goes on with us. military contractors. in regards to u.s. cops, it is widely known that u.s. cops will never snitch on other u.s. cops. thats a real honest system you got there.