Corruption and Anti-Corruption in Reform China

Corruption and Anti-corruption in reform China

Dr. Zengke He

Introduction

Corruption has become a major social and political issue in China since 1978when Chinese authorities began to implement the policy of "reform and opening".The public's outrages with the mounting corruption within the party organisationsand government institutions is an important reason for explaining that why thereare so many people participated in or supported the pro-democracy student demonstrationin 1989. After 1989 Tiananmen Square event， the new Chinese leaders have giventhe priority to the anti-corruption work on their agenda and strengthened the anti-corruptionefforts. But up to now， the corruption phenomenon is still very rife ， and presentlyis seen as the second greatest public concerns（behind unemployment ）。 The abilityor inability of "third generation" political leaders to successfully curb corruptionwill play a major role in their political survival. This article will focus on theanalysis of the extent， forms and characters of corruption in current China， itscauses and effects， and the anti-corruption efforts of the Chinese Communist Partyand its government. 2

The extent， forms and characteristics of corruption in current China

What is corruption？ The notion of corruption varies with time and places. Accordingto Chinese official terminology ， the core element of the definition of corruptionin current China is the notion of use of public power and public resources for privateinterests （'Yi Quan Mu Si' ）。 This is a very broad definition， which can includea series of phenomenon and behaviours and vary with time. Consequently， it canbe adapted to include new forms of corrupt practice. Corruption in current Chinais often links with negative phenomenon and unhealthy tendency within party andgovernment departments. As a result ， anti-corruption effort also includes fightagainst all of these phenomenon and behaviours.

This definition has three features. First ， the core element of corruptionis not 'abuse' or 'misuse' of public power via-a-via legal norms or social standardsfor private benefits but the very 'use' of public power for private benefits. Onthe one hand， this is a very strict standard for determining what behaviours canbe defined as corrupt since it can includes any behaviour utilising public powerfor private benefits. On the other hand ， given that legal norms and moral standardsmay change with time， the definition may take some risks to exaggerate the extentof corruption or arbitrarily label some practice as corrupt.

Another feature of this definition is the ambiguous of the term 'private interests'in contrast to "public interests" ， i.e. the interests of whole nation and partyPrivate benefits include not only personal gains， but also the interests of workunits ， departments and regions when they are given priority over public interests.

Third ， the definition leaves open the question of which the subject of corruptionis. It not only refers to individual public officials ， but also can includes therelatives of public officials and retired public officials， and can also refersto some public bodies and their leaders （as legal rather than natural persons）。

As mentioned above， in official terminology， corruption ， "negative phenomenon"and "unhealthy tendency" are linked together. Although government officials andthe public generally agree on some practices as "corrupt" ， there are fewer consensuseson other practices. Heidenheimer's three-category classifications system providesa useful framework for understanding both the Chinese categories and the areas ofconsensus and lack of consensus. Heidenheimer's framework includes three categories：（1 ）。 Class A or "black corruption"：The corrupt practices in this category，including graft ， bribe， fraud， embezzlement ， extortion， smuggling， tax evasion，etc.， Constitute an important part of "economic crimes". Because they are obviouslyillegal and the main purpose of those involved in these practice is to increasetheir personal wealth ， government officials and the public generally agree thatsuch practices are corrupt. （2 ）。 Class B or "grey corruption" ： The key characteristicsof this category， into which more and more practices are being categorised ， isleaders of public institutions using their institutional power to increase the oftheir institutions and improve the welfare of their staffs through various legal，semi-legal and illegal ways. Such practices includes public institutions makingprofits by engaging in business activities（such as public bank enter into the stockmarket， the bureau of environment protection selling environment protection facilitiesto their clients）， setting up satellite companies ， and imposing fines or collectingadministrative fees or charging the so-called 'service fee' and then putting theincome into their own coffers. Class B also includes such "unhealthy practices"as the extravagance and waste ， e.g. ， spending public money to support luxuriouswork conditions and/or life style by senior officials. Such extravagance and wasteis manifested in many aspects ： expensive entertainment， costly foreign cars forsenior officials， magnificent and tastefully furnished office buildings， domesticor foreign travel in the name of official business， etc. Such "unhealthy tendencies"and the associated corruption ， both significantly increasing the public's burden，have led to a significant public outcry. This has led Chinese authorities to attemptto stop these practices. However they have met strong resistance from these publicinstitutions which， in turn， justify their practices in terms of the purpose oftheir practice， the legitimacy of their institutional power and the work requirement.（3 ）。 Class C： or "white corruption"： Class C practices constitute a kind of'common practice' of social life. They include the nepotism and favouritism in thepersonnel recruitment and promotion ， bending the law in favour of relatives andfriends in law enforcement， preferential treatment in resource-allocations forrelatives and friends ， etc. They are characterised by preferential treatment byofficials of relatives， friends， fellow-villager etc. much of which is， in fact，a way of reciprocating previously given favours. Such practices have penetratedwidely into public life ， influencing the behaviour of government officials andordinary citizens as well ， contributing to the operation and existence of networksof personal ties throughout China. Creating and maintaining the networks of personalties to seek and give favourable treatment is accepted by most people ， includinggovernment officials， as a 'normal' practice when they involved in these practice.However ， such networks are condemned by those excluded from them although theywill not be hesitate to engage in such practice should they have an opportunityto do so. The late British China scholar Gordon White had also made a similar classification.3

Inasmuch as the Chinese authorities combine all the above categories togetherin their anti-corruption work ， in this paper I will treat them all as corruption.However by so doing ， the Chinese authorities have set a difficult goal for themselvessince the limited consensus on white corruption may increase the difficulty of attackingthese practices. On the other hand， the labelling of some common practice falleninto the grey area from the white area and some common（"white" ） as "corruption"may help to delegitimize them and/or push them into the "grey" category ， thuscontributing to anti-corruption and social and political progress.

The extent of corruption has increased dramatically and sharply since 1978 withthe situation becoming even worse after in the 1990s. This tendency is apparentfrom the data on perception of corruption in developing countries provided by TransparencyInternational and summarised in table 1.

The above table demonstrates a clear drop in the scores of corruption in Chinafrom until 1980 until 1995 reflecting the increase of corruption in China in thisperiod. The slight improvement is likely due to the strengthen of anti-corruptionefforts by the third generation political leadership and the deepening of market-orientedreform. But despite these slight improvements ， the public and its deputies arestill very dissatisfied with the widespread corruption and the inadequate effortsat fighting corruption. The vote of nearly forty per cent of the deputies in the1997 session of National People's Congress against General procuratorators ZhangSiqing's Annual work report is an indication of this dissatisfaction.

In the 1990's ， corruption has worsened and taken new characteristics withinthe above three categories：（1 ）。 Class A： corruption as a form of economiccrimes has increased with the following manifestations. First ， the number of large-scalecorruption cases increased sharply. The so-called "large-scale cases" refereed tothe huge amounts of money obtained by corrupt officials through graft ， bribes ，embezzlements ， smuggling and other illegal activities. In the early 1980's， "largescale cases" refer to amount over 10， 000 yuan ， but now the standard has beenraised to 100 ， 000 yuan ， while the especially big cases involving amount overone million yuan， have also increased continuously. . According to official statistics，large-scale cases over 10 ，000 yuan investigated by the procuratorates of variousprovinces from January to September 1993 accounted for 59.7 per cent of the totalcases investigated. Of these， large-scale graft and bribery cases involving overhalf a million yuan doubled and those and those involving more than a million yuantripled compared to the same period in 1992. For example， the largest 1993 graftcase involved grafted by a staff of public bank in Hai Kou city ， while the largest1993 bribe case involved a Guang Dong government official receiving 7 million yuanbribes. Second， the ratio of senior officials at and above the county level involvedin corrupt crimes also increased significantly. The grand corruption cases increasedobviously. According to official statistics ， 190 senior officials at or abovecounty level involved in corrupt crimes was sentenced to jail in 1988 ， while thefigure for the same group was 504 in 1993. The most famous such case is that ofthe former Mayor and Deputy-Mayor of Beijing whose corrupt acts had negative effectson the entire country. Third， the corruption crimes committed by the work unitsand their legal persons have also grown in numbers. Crimes committed by legal personssuch as bribes， smuggling， tax evasion， etc. ， has become an important partof economic crimes.4（2 ）。 Class B： as Wei Jianxing， head of Central Commissionfor Discipline Inspection （CCDI） pointed out， the unchecked spread of negativephenomenon such as the use of public power for personal gains below the thresholdsdefined for prosecution ， rampant unhealthy tendencies within governments， escalatingextravagance and waste and the moral degeneration of some Party members and officialsare all prominent manifestations of increased corruption in current period.5 Forexample ， in Xinmi city（a county level city in Henan） the total extra budgetaryincome from imposing on fines ， collecting administrative fees and charging 'servicefee' by various city government departments was greater than the city government'stotal 1997 budgetary income of 200 million yuan.（These departments turn over asmall promotion of the above extra-budgetary income to the city government whileretaining the majority as their own income）。（3 ）。 Class C： Networks of personalties with senior officials have become an important resource for accessing politicalpower and gaining economic wealth. Consequently ， investing in creating and maintainingsuch networks has become a common practice for many people inside and outside ofgovernment. Simultaneously， the children of the former senior officials and thepresent senior officials（the latter hand picked by the former） have utilised theirprivilege and advantages to access political power and economic wealth. The conspicuouspolitical power and economic wealth of the children of some senior officials，includingretired senior officials， became a specific focus of anti-corruption demonstrationof 1989.

Changes and continuity both characterise the forms in reform China. Some traditionalforms of corruption ， such as nepotism ， patron-client practice ， bend the lawfor the benefit of relatives or friends ， graft and embezzlement. Sales of governmentposts are still very widespread. But some traditional forms have incorporated newcontents. For example ， the networks of personal ties with senior officials havebeen commercialised as a way of obtaining personal gain. Many people invest theirmoney to create and maintain such networks in the expectation of rewards. At thesame time ， some modern forms of corruption has emerged and developed linked withthe modern economy and political system. Examples include commission， kickbacksin the procurement of government contracts and biding for public work or servicecontracts ， inside trading and manipulation in the stock market and real estatemarket， bribing voters and/or deputies at the village and township level ， etc.The most interesting thing is that new forms of corruption have emerged and developedand are sometimes replaced by even newer forms of corruption. Such practices aredifficult to classify as either modern or traditional forms of corruption. One newform of corruption is speculative and profiteering activity ， include smugglingby individuals public officials or work units as a whole. The object of such speculationand profiteering has varied with time through three waves moving from the consumergoods such as the colour TV and bikes in the early 1980's to the producer goodssuch as steel ， petrels in the mid-1980's and finally to the factors of productionsuch as stock ， land and credits in the early 1990's. Another new and very popularforms of corruption ， called "Gong Hui"， is a bribe to a public official by publicofficials for public benefits. In such cases， managers and staffs of state ownedenterprises bribe the relevant officials in marketing their products， gaining creditsand monopolies and avoiding regulations ， local government officials bribe theirhigher body in order to get preferential treatment such as favourable loans ， policies； pubic officials in one department bribe public officials in another departmentin order to get the resources controlled by the latter. In addition ， althoughthe patron-client relations are not new ， patron-client relations between seniorofficials and private entrepreneurs have taken on new forms. Senior officials providepolitical protection for their clients' private properties in the face of changingand uncertain policies and protection from extortion by corrupt junior officialsand organised crimes， while the entrepreneurs provide financial support for thesenior officials to enjoy a luxurious life. Although there have been many formsof corruption during the reform period， they all share a common purpose， namely，realising the personal enrichment of public officials through corrupt practice undertakenby the officials themselves or by their work units or even the whole department's.Getting rich first and fast has become the major motivation of various forms ofcorrupt.

The Causes of Corruption in reforming China

Why has China changed from a less corrupt country to one of the most corruptdeveloping countries in the only two decades？ Why did reform China undergo threewaves of economic crimes in the past twenty years ？ Will China face the fourthwave of economic crimes in the near future？ Is there any relationship between theevolution of reform the changing and the changing forms of corruption during thetransition period ？ I will try to answer these crucial questions in the discussionof the causes of corruption below.

Exploring the causes of corruption in reform China is a very difficult and complicatedtask because there are so many factors which contribute to the development and spreadof corruption and because the transition is still ongoing. Even so， there are stillsome common factors relevant to the growth of corruption.

1.The co-existence of dual economic systems during the whole transition periodprovides plenty of incentives and opportunities for corrupt practices.

The market-oriented economic reform of China since 1978 is a gradually advancingprocess that has followed its own path of evolution. With the goal of establishinga socialist market economy having been finally settled in 1992， the long term co-existenceof the planned and market economies will be an important feature of economic transitionwhich will contribute to the large-scale growth of corruption.

The economic reform has allowed three kinds of persons to become independentor relatively independent economic actors in control of their own interests. Ithas also created strong incentives for these three categories of economic actorsto participate in corrupt practice：（1 ）。 Actor A： This refers to the managersand staffs for marketing and purchasing work in non-state owned enterprises ， includingvillage and township enterprises， household and privately owned enterprises， andforeign or jointly owned enterprises. Before 1978 ， non-state owned enterprises（except the village and township enterprises ， which only accounted for a verysmall proportion in the total enterprises ） were basically non-existent. After1978， the new economic policy permitted and encouraged the development of variousnon-state owned enterprises ， as a consequence of which actor A began to emergein economic life. Actor A has strong incentives to engage in corrupt practices fora number of reasons. First， actor A has full autonomy to deal with the internalaffairs of their enterprises and can enjoy any profits s/he makes. Second ， actorA has unequal （lesser） status via-a-via state-owned enterprises in receiving legalprotection for property and getting resources allocated by state plan. Actor A alsohas fewer restrictions than counterparts in state-owned enterprises in enteringinto markets and competing with state-owned enterprises This combination of advantagesand disadvantages encourages or forces actor A to participate in corrupt practicein order to maintain and/or development of his/her enterprises. （2 ）。 Actor B： This refers to the managers of state-owned enterprises. The reform policy of'transferring power （to state-owned enterprises）and letting （them）profit'（"Fang Quan Rang Li" ） gave actor B more and more power to run his/her enterprisesand correspondingly reduced supervision within and outside of these enterprises.Actor B also has strong incentives to engage in corruption. First ， the appointmentand removal of such personnel are still controlled by the relevant government departments.Thus， it is very important to maintain good relations with various government departmentsthat have the power to regulate enterprises. Second ， actor B must compete withits counterpart in non-state-owned enterprises even when the latter use corruptand/or illegal methods in their business activities. Finally， despite similarlydifficult job responsibilities， the official income of actor B far lags behindthat of actor A.（3 ）。 Actor C： This refers to local government officials. Thedecentralisation aspect of reform has made local government officials become s importanteconomic actors in developing their regional economies. As such ， actor C alsohas strong incentives to engage in corrupt practice. First， the promotion of seniorofficial at local levels is based on their performance in advancing regional economicdevelopment. Which， in turns ， depends， to a large extent， on the degree towhich they can obtain （from these very promoting authorities ） preferential policies，favourable loans， higher financial allocations and lower quotas for turning overfunds. Second ， local government officials face heavy pressure and fierce competitionfrom the other regions in advancing economic development， pressuring them to useirregular ways to win the competition. Third， due to the incompleteness of themarket system ， local government officials must often play a brokering role betweenstate planing and the market. All of roles require a close relationship with businessmen in their own regions and provide an incentive to exchange bribes with other government officials.

The huge amount of rent produced by the co-existent of the planned and marketeconomies provided many opportunities for the actor A-C to realise their interests.As the market systems has been established and gradually begun to replace the plannedeconomy since 1978， three period are apparent：（1 ）。 The establishment of consumergoods market（market C） which began in the late 1970's and lasted until the mid-1980's；（2 ）。 The establishment of the producer goods market （market P） which beganfrom the mid-1980's and lasted until the early 1990's ；（3 ）。 The establishmentof factor-production market （market F） which began in the early 1990's and continuesto exist. Before each of these market systems was established ， a "dual price system"existed with very significant differentials between the planned （official） priceand the market（sometimes are the "black market" or "underground market"） priceof the same goods. For example， in 1987 the planned price of per ton steel was905 yuan while the market price was 1504 yuan ， the price difference of per tonsteel is 635 yuan. With a total steel production in 1987 of 43， 680，000 ton andnon-planned steel accounting for 55.3% of that total， the total price differentialwas 15.4 billion yuan. According to one expert's calculation， in 1987 the totalrent resulting from price differentials ， including the dual price system in consumerand producer goods， the difference between official and black market credit rates，the difference between official and black market exchange rates reached 200 billionyuan or 20% of nation income！6

The three waves of economic crimes occurred almost simultaneously with the establishmentof three market systems above. The first wave of economic crimes reached its peakin the early 1980's. During this period ， the Chinese government began to allowa market system to exist in parallel with the planned allocation of resource andthe concomitant planned price system while consume goods， particularly certainhigh quality goods， were still in short supply. Thus ， during this period ， themajor objectives of economic crimes was exploiting the price differentials in consumegoods while the major forms of economic crimes were speculation in and/or theirquotas to profit from the price differential， while smuggling of foreign consumegoods was also rampant. But during this first wave of economic crime， public officialsand public institutions had not yet engaged in large-scale speculative and smugglingactivities. Actor A （exclude the foreign investment enterprises and their managers）played a major role in promoting this wave of economic crimes ， while those publicofficials working in economic planing and management departments also became themajor beneficiaries of these crimes by receiving bribes from actor A. Thus bothwere part of the first social group to become rich quickly. The second wave of economiccrime reached its climax in the mid-1980s. Due to the increasing supply of consumegoods and the elimination of official price for most consume goods， the price differentialfor consumer goods narrowed while the gap between supply and demand for producergoods increased as economic growth became more rapid. Thus， the dual price systemin producer goods and quotas became the major objects of economic crimes in thisperiod. The subject of economic crimes also changed significantly. The childrenof the former and present senior officials， some junior officials and some publicinstitutions replaced the actor A as the major actor in speculation and smugglingproducer goods. Simultaneously， "unhealthy tendency" and running satellite companiesby public officials ， individually or through their work units ， was also rampant.Officials engaging in speculation and business（"Guan Dao" and "Guan Shang" ） becamethe newest new rich becoming one of the major objects of public indignation in 1989anti-corruption demonstration. With the establishment of producer goods market andthe cancellation of dual price system for these goods in the late 1980's， the secondwave of economic crimes gradually receded. The third wave of economic crime occurredaround 1993 and reached its peak in mid-1990s when China began to establish a marketin the factors of production， including a stock market ， futures market ， realestate market and a capital market while still lacking a set of effective regulationson such economic activities. The imperfect and incomplete market system and hugeprofits generated by the speculative activities attracted public institutions intothese markets seeking to profit by using the public powers and/or the public resourcesthey controlled. Public banks and their staffs occupied the most advantage position，as economic crimes in financial institutions became a focus of public concern ，although the forthcoming commercialisation of public banks should gradually reducesuch crimes. Compared with the early two waves， the size of the illicit gains isfar bigger， the proportion of senior officials involved higher and the number ofwork units higher as well. Class B and Class C types of corruption have also developedand spread on a wide scale. The present restructuring of state-owned enterpriseswill likely become a new focus of market-oriented reform， which means that mostof the still existing thirty thousand state-owned enterprises will become non-stateowned. Thus a question arises of whether a fourth wave of economic crimes will developaround the reorganisation of state assets.

2. The breakdown of the prior distribution of national income among differentsocial strata ， i.e. the relative reduction of officials income， drives governmentofficials and public institutions to seek extra income to supplement their own ortheir staff's relative low and fixed official salaries.

In the planned economy prior to1978 ， the income gap among different socialstrata was quite small and with all social strata a relatively equal state of poverty.The new economic policies ， which not only allowed but also encouraged people getrich first and fast undermined this structure. In the process of economic reform，the income of actor A grew rapidly， the income of the managers and workers in state-ownedenterprises increased rapidly while the income of Chinese employees work in foreignowned or joint-investment enterprises was maintained at a higher level from thebeginning. Compared with these groups ， public officials' income was relative lowand increased only slowly. According to Hu Heli ， the average salary of publicofficials has been lower than that of workers in state-owned enterprises since 1985.For example ， the average annual salary of public officials in 1987 was 1472 yuan，while workers in state-owned enterprises earned 1546 yuan ， excluding bonuses，allowance and other welfare payment.7 Compared with the incomes of managers or ownersof non-state-owned enterprises， the income gap become even bigger. Simultaneously，the high inflation rates in the 1980's and early 1990's further undermined publicofficials' income. The This redistribution of income distribution drove many publicofficials to illicitly seek additional income and many work units and public institutionsto illicitly seek extra income by utilising their institutional power and resourcesto improve their staff's welfare. When some public officials and institutions succeededin their corruption ， others followed suit ， facilitating the spread of variouscorrupt practices from one department to another department ， from junior to seniorofficials ， and from lower to higher authorities. When the 'grey income' （themoney and the other forms of income garnered through work units ） and the 'blackincome' （garnered from individual officials' corrupt practice） become an importantpart and source of income of public officials ， it became very difficult to rootout such corrupt practice driven by private interests.

3. The loopholes in and weakness of regulatory policies and institutions， certainpolicy failures ， and a lack of experience and technology in the anti-corruptionagencies tackling new forms of corruption all of these contribute to the growthof corruption.

Regulating economic activities in the new period of co-existence of the plannedand market economies is a totally new task and major challenge for the Chinese government.Legislation often lags behind changing economic situations and must be revised frequently，thus increasing the difficulty of law enforcement. The prior of utilising directadministrative control to restrain the autonomy of economic actors has become lesseffective ， while learning to skilfully use indirect macro-control means is a slowand long process. Until this transformation is complete ， the inevitable loopholesand weakness in economic regulation will encourage corruption. For example， contemporaryregulation prohibits all public institutions from engaging in business activitiesor establishing satellite companies ， but allows the trade unions of institutionsto engage in such activities， thus opening a door for such activities since allsuch institutions have their own trade unions.

Certain policy errors committed by the former top leaders and/or local governmentleaders to some extent encouraged the growth of corruption. First ， Zhao Ziyangdid not assign anti-corruption work the appropriate top priority on the politicalagenda， believing， along with his aides ， that 'the corruption is inevitablein the development of commodity economy' and 'anti-corruption effort may hamperthe reform and opening up policy and economic development'. Even to today ， manylocal government leaders shares these views ， thus negatively influencing anti-corruptioneffort in their areas. Second ， the prior leadership's "Chuang Shou Zi Jiu" policyallowed public institutions to make money to supplant their insufficient budgetaryincome and improve their staff's welfare. Consequently， public institutions beganto engage in business activities and set up satellite companies and use their institutionalpowers to impose fines and collect administrative fees， which they then utilisedfor their purpose. Such 'unhealthy tendency'（class B corruption） began to developand spread legally and on a large scale during the mid-1980s. Presently ， manylocal governments still follow similar policies. They reduce or even terminate financialallocations to their functionaries or subordinates demanding that they develop theirown sources of funding instead and sometimes even requiring them to contribute aproportion of this income to local government. Such policies drive government functionariesto use their power to collect money to supplement their department's inadequateincome and improve their own welfare. Third ， the prior leadership advocated acomfortable or luxurious life style ， which contrasted with CPC's tradition ofhard work and plain living. This emphasis on personal consumption helped to promotethe spread of the extravagance and waste phenomenon among government institutions.

As mentioned above， some new forms of corruption have arisen in the processof establishing the market economy. Anti-corruption agencies have never addressedsuch new forms of corruption such as insider trading， manipulation of stock marketand cross border corruption. In addition， dealing with technological is also anew challenge. Simultaneously ， limited funds， backward of technical means andequipment ， and insufficient personnel training further restrict the ability ofanti-corruption agencies.

4. The incompleteness of political reform and the weakness of the current politicalsystem undermine anti-corruption efforts which， in turn， promote the further proliferationof corruption.

The government's market-oriented reforms have made great progress. Politicalreform has also made some progress but lags far behind. In the face of rising corruption，the weakness of the political system has become increasingly evident.

First ， the lack of effective mechanisms of checks and balances makes it verydifficult to supervise senior officials. There are no political oppositions in China； the relationship between CPC and the existing democratic parties is a cooperativerelationship between the governing party and parties participating in government.As the ruling party ， the CPC is the core political leadership ， which means allelements of the state apparatus must accept its leadership. Within the party organisation，the main power is concentrated on the hands of the leadership. It is also very difficultto supervise government leaders since the National and local People's Congress andtheir respective standing committees can supervise government work at the same levelbut they can't remove those government leaders who abuse their power without theconsent of party leaders. Such a highly centralised leadership system makes it verydifficult for party or government organisations. to supervise senior officials.

Second， the lack of independence of existing anti-corruption agencies underminestheir anti-corruption efforts. The major anti-corruption agencies in China todayare ： the Central and local Commissions for Discipline Inspection， the Ministryof Supervision and its local branches ， the Supreme and local Procuratorates andthe Supreme and local Courts. All such agencies must accept the leadership of Politburoor the local party committee on issues including personnel appointment and significantpolitical decisions. Their funding also depends on allocation made by the financialdepartment of government. The lower level anti-corruption agencies must accept thedirection of their high-ups. Such policies seriously restrict the ability of theanti-corruption agencies to investigate and deal with corruption independently.Corrupt officials have often established networks of personal ties with senior officialsthat became 'protective umbrella' which are structured and reinforced by the leadershipsystem described above. In investigating， detecting， and trying cases of corruption，anti-corruption agencies often face heavy pressure from various angles； sometimesincluding direct and irregular from some senior officials. As a result， many importantcorrupt officials have not been punished in a timely way and others have escapedcompletely from the punishment.

Finally ， although the moving force in anti-corruption efforts has come mainlyfrom the top leadership ， the news media and the public also play a very limitedrole. Civil society was non-exist before 1978 and ， since then ， has developedonly gradually. At present， civil society is still very weak with its developmentdependent ， to a large extent， on the support and protection of various levelof government. . At the same time ， the public can not express its opinion throughgeneral or local elections. The news media can not expose corrupt or scandal withoutthe permission of the appropriate party organisations and their reports are usuallylimited before the end of official investigating and dealing with them. Under theseconditions， the success of anti-corruption efforts depends largely on the politicalwill and determination of the top leadership.

5. The reduction in the moral costs of corruption stimulates its further spread.

There are several factors ， which have contributed to the decrease in moralcosts of corruption ：

The first is ideological change. Since 1978 ， the official ideology and policyfocus has shifted from stressing class struggle to economic development ， withthe latter becoming the 'strategic task' of the party and government. The officialideology and policy encourage some people get rich first and fast ， reward thoseentrepreneurs and promote those local government officials who successfully advancethe economic development in their regions. Simultaneously ， many local governmentleaders take a tolerant attitude toward those persons contributing to economic developmentor making their enterprises profitable overlooking their corruption and/or personalenrichment and sometimes even protecting them from punishment. The overemphasison economic development combined with the neglect of the legal norms or moral standardsthat economic activity should followed are an ideological shortcoming which hasmany negative consequences. In line with this ideology， such entrepreneurs （alsocalled "able people"， that is "Neng Ren" ） are held up as positive examples andtreated very favourably in the media. Some local leaders attempt to justify suchillegal activities by their economic results. They insist that all practices whichare beneficial to economic development should be justified and tolerated， all decisionsmade collectively by party committees for advancing economic development or improvingtheir staff's welfare ， rather than for personal gains ， are allowable and justifiableeven if they violate the relevant laws or policies. Such views are quite prevalentat the local level， thus reducing the moral costs of corruption.

The second factor is the failure of moral education among public and governmentofficials. Following the Culture Revolution ， many people lost their faith in Marxist-Leninismand Mao Zedong Thought. They also abandoned their loyalty to the government switchinginstead to extreme egoism. Though political leaders have consistently stressed theimportance of moral education ， moral education has had little effect on governmentofficials. The most important reason for this failure is the significant gap betweenmoral education and reality. Political morality demands that public officials workhard and selflessly and live plainly. But the reality is that more and more peoplehave gotten rich first and quickly through various， often corrupt， means whilethe rich have been accorded widespread respect and high social status. Thus it becomesmore and more difficult for public officials to cope with rising expenses of dailylife within this structure and more and more difficult to resist the temptationof personal enrichment by using their official's power when they faced so many opportunitiesand so few risks. Further ， the imbalance in income distribution pressures workunit leaders to increase income and improve their staff's welfare. Facing this crucialreality ， political morality education become irrelevant to the daily life of manypublic officials and therefore has at best a very limited effect on the behaviourof these public officials.

The final factor is the lack of commercial morality in economic life. Duringthe transition period ， the old economic ethics has become increasingly irrelevantwhile new business ethics linked to the market are yet to be established. Such a'vacuum' of business ethics encourages business people to engage in corrupt transactionswith public officials. Thus the economic chaos of the transition period is exacerbatedby rewarding rent-seeking rather than profit-making activities.

6.Certain traditional and international factors also contribute to the growthof corruption.

Certain traditional factors have also contributed to the growth of corruption.One is the culture heritage of absolutist rule that lasted for 2， 000 years andonly ended at the beginning of this century. Under such rule， rulers treated thestate as their own private property and bureaucrats treated their power as theirswhile the idea of public trust and empower were non-existent. Such attitudes arestill very common among public officials. Under the absolutist rule ， the ruleof persons was dominant over the rule of law. Such practices still exist in currentChina as manifested in how the personal will and/or instruction of senior officialsat various levels can influence or overrule decisions made by the law enforcementagencies. Under absolutist rule ， the bureaucrat stratum was a dominant class basedon its control of both political power and most economic wealth ， which enjoyeda wide range of privilege and the highest social status. All other social classes，including businessmen and ordinary landowners ， depended on them and need theirprotection. With contemporary officials facing reduced economic status in an increasinglywealthy economy ， many government officials try to maintain their superior positionsby using their power for personal enrichment while the demands of the newly emergingbusiness stratum for political protection has provided significant opportunitiesfor senior officials to engage in corruption.

Another factor is that many of the social customs and practice of agriculturesociety are still very popular in contemporary China. China is still largely anagricultural society with nine hundred million people ， mostly peasants， livingin rural areas. A large proportion of public officials comes from peasant families.Consequently， they bring many traditional practices linked to corruption into publiclife. Particularist practice， i.e. ， people giving preferential treatment to thosewith whom they have close relations ， is still very common. Those violating thisprinciple are often socially condemned and/or estranged from relatives and friends.Consequently， the establishment and maintenance of the networks of personal tiesbecome an important means of favour seeking in public life. In addition ， the customof reciprocity， in which people are obligated to repay those who helped them lestthey suffer social ostracism， has rapidly osmoses from social life into the publiclife. Neither ordinary citizens nor government officials have made a clear distinctionbetween public life and social life regarding reciprocity. This thus provides arational for giving and receiving bribes.

The opening of China to the outside world since 1978 has contributed additionalfactors to the growth of corruption. One is the 'revolution of rising expectations'.The high consume life style that exists in many western countries has had a strong"demonstration effect" on both ordinary citizens and government officials. In orderto catch up to the high standard of living in such Western countries， making moneyand get rich has become a major goal of many public officials while the exchangingpower for money is the easiest way to achieve this goal. Second ， the increasinglyintegration of China's economy into the global economy has opened new opportunitiesfor public officials to participate in corruption. There are many such opportunitiesin dealing with foreign corporations， such as granting of licenses ， negotiatingforeign trade and investment projects ， procuring foreign products ， collectingcustoms and taxes etc. Finally， globalization has increased the difficulties ofdetecting and punishing corruption as corrupt officials engage in cross border formsof corruption ， transfer their illicit profits into off-shore banks and emigratebefore they are caught and punished.

Balancing the Costs and Benefits of Different Forms of corruption

During the transition period， certain some forms of corruption have beneficialeffects as well as the associated costs. Exploring the cost-benefit ratio of theseforms is critical to understanding both the mechanisms by which corruption developsand spreads and its overall effects.

1. Corruption and economic development.

Some forms of corruption may， to some extent ， promote the development ofnon-state owned enterprises and. local economic development.

During the early period of economic reform， the existence and development ofnon-state owned enterprises （exclude foreign corporations because they enjoy manypreferential policies ） depended ， to a large extent， on using corruption toavoid or undermine discriminatory policies and open up the channels for purchasingraw materials and/or marketing products. As noted above ， non-state owned enterprisesfaced a series of disadvantageous policies and restrictions regarding taxes ， credits，licenses， access to foreign currency and so on. At the same time ， given the lackof regular market channels for purchasing raw materials and selling products， suchfirms had to deal with the economic planning and management departments and to dealwith the state-owned enterprises. Corruption became a substitute for both the marketand planing ， opening a route for the non-state owned enterprises to survive anddevelop beside the overwhelming state-owned sector and the dominant planed economy.In the first wave of economic crimes， actor A was a major source of corruptionwhile actor B and public officials in economic planing and management developmentswere the passive recipients of corrupt transactions.

Local economic development depends to a large extent on the degree to whichlocal government can obtain preferential policies ， such as loans and financialallocations ， from the national government and its ministries. Corruption playsan important role here. As mentioned above， the promotion of local government officialsis linked to their performance in advancing local economic development. This drivesthem to compete for preferential policies and treatments. On the one hand ， China'seconomic reform followed a pattern of experimentation with a few selected area trynew policies after which the successful policies spread to other areas. Those areasselected for experimentation often obtain flexible and preferential policies， whichsuch preferential policies played an important role in advancing local economicdevelopment. The Special Economic Zones such as Shen Zhen and Zhu Hai are examplesof this. Such practices ， in turn， drove local government to local governmentto compete for the similar preferential treatment from the central government withcorruption playing an increasingly important role in wining this competition. Onthe other hand， owing to the planned economy ， local economic development alsodepends on the degree to which resources can be obtained from the central government.In order to obtain more resources ， various local governments competed fiercely，again frequently utilising corruption. "Seeking money from ministries"（"Pao BuQian Jin" ） has become an unwritten but successful measure for advancing localeconomic development， while the bribery of public officials by other public officialsfor public， rather than private interests（"Gong Hui"） is an open secret as ameans for seeking money and the other favours from central government. Such structuresand practices lead to the spread of corruption from local to higher levels.

The use of corrupt means to advance the development of non-state owned enterprisesand local economic development is a double-edge sword that also hampers economicdevelopment. First， both state-owned enterprises and non-stated owned enterprisesbecome victims of corruption， as they must continuously increase their spendingfor bribes etc. When actor A use corruption to deal with government officials and/oropen up markets ， actor B will find that s/he is at a disadvantage unless s/hedoes the same. Thus in order to compete ， both actor A and B must continuouslyincrease their spending on corrupt transactions ， thus increasing the costs andburdens of these enterprises. On the other hand ， the competition between actorA and B places relevant government officials in a position which encourage themto actively extort bribes and even increase their demands. This increases the uncertaintyof economic activities and the costs of enterprises. Second ， local governmentofficials also become victims of corruption in the long term. If only a few localgovernments use corruption to gain preferential treatments， they will be the benefactorsof such corrupt transactions. But if virtually all-local governments compete forpreferential treatments using illicit means ， all of them will eventually becomevictims of corruption for the same reason mentioned above. As corruption has spreadfrom south to north ， from coastal to inland areas ， bribes by local governmentalofficials have increased continuously from the 1980's to 1990's while the bargainingstrength of local governments in gaining autonomy was weakened as a result to theirfierce mutual competition.

At present， actor A， B and C have all become victims of corruption and arelocked into the path-dependence on corruption they created. But could they unilaterallywithdraw from corrupt practice？ As a result of the difficulty of collective act，it is unlikely that they will do so although they may become a supportive forcefor the latest anti-corruption campaign

2. Corruption and the Reform and Opening up Policy.

Corruption may help to eliminate certain outdated and/or rigid regulations，which maybe beneficial to the reform and opening up policy. During the transitionperiod， many laws and regulations may not only become increasing irrelevant asthe situation changes rapidly but even may restrain economic development. Facingsuch outdated and/or rigid regulations， 'running red lights' ， i.e. ， bribingthose responsible for inspection and/or implementing regulations and thus avoidingpunishment， has become another unwritten but successful practice for advancinglocal economic development. On the other hand ， 'running red lights' and the useof other such forms of corruption increases the policy initiative of local governmentin advancing economic development and facilitates bold experiments by local governments.

But such practices also have significant negative effects. First， as many officialdocuments demonstrate ， they weaken the authority of the central government andthe unity of law and policy implement. The practice of "Running red lights" encourageslocal officials to selectively implement the central government laws and policiesaccording to their own judgement based on their own region's interests. Successfulexamples of "running red lights" by local governments will stimulate others to follow.Second， it provides a rational and covers for local officials engaging in illegalpractices in the name of reform. A few local governments have taken a tolerate attitudetoward gambling ， smuggling， and prostitution as a result of their contributionto local financial revenue. Other local officials justify decisions made in theirofficial capacity but based on their personal interests in the name of promotingreform in their areas. All these practices not only undermine the order of economic，social and political life but also discredit the reputation of reform and openingup policy.

3. Corruption and Political Development.

Some forms of corruption may be beneficial in certain ways to advancing politicaldevelopment. First， the sales of public office may help to break the monopoly ofgovernment posts presently held by the present bureaucrats and their relatives andfriends and consolidated by nepotism and favouritism in recruitment and promotions.As such ， this process may undermine the nature of bureaucratic position as hereditaryproperty and help promote a transformation from a patriarchal bureaucracy to a modernbureaucracy. Second ， the close relationships between senior officials and businesspeople at variously level established through corrupt transaction provide some channelsfor participation in the political life. It is not a great leap from buying politicalprotection to buying political influence. In fact ， numerous businessmen have beenelected into the local People's Congress or local Political Consultative Conferenceas a consequence of corrupt transactions and/or their donations to local publicwelfare services. Finally ， buying votes may contribute to undermining the politicalmanipulation of election. Buying votes by bribing voters and/or deputies at thevillage and township level increases the chances of being elected for candidateswho otherwise will have little chance in the face of locally dominant politicalorganisations.

However ， these forms of corruption also extract a heavy price from politicaldevelopment. First， the sales of public offices merely represent the replacementof one form of unequal access to government office based on nepotism and favouritismwith another based on personal wealth As such ， this practice may cost many educatedand talented（but not wealthy ） persons the opportunity to hold government postsand thus harm the public interests by reducing the pool of skilled persons withaccess to these positions. In addition， the sales of public office only benefitthose officials who buy and sell them and who ， in order to make back their investmentin buying their posts ， frequently participate in a range of corrupt activitiesto increase their income thus even further increasing the public's financial burden.As such ， these personnel management practices have the potential to shake thefoundation of any regime. Second， the close relationships between businessmen andsenior officials and their joint use of corruption will make both groups objectsof public indignation. Those businesspeople closely associated with corrupt seniorofficials possibly also become targets of public protests against corrupted seniorofficials as recently occurred in Indonesia （where ethic Chinese businesspeoplebecame an object of public assault in the pubic protests against Suharto's rule ）。Third ， electoral bribery discredits electoral politics and provides a rationaland perhaps the best political weapon for political conservatives opposition tofree and competitive elections. The idea of castigating electoral politics as 'moneypolitics' ， which seems verified by the bribery carried out by some candidatesin rural experimental village and township level elections， has significant influencewithin officialdom.

4. Corruption and Social Modernisation.

The commercialisation of the networks of personal ties and patron-client relationsmay help transform China's particularistic practices to more universal one. Before1978， the networks of personal ties and patron-client relations were relativelyclosed and exclusive but also relatively free of the influence of money. Market-orientedreform has brought the money factor into this traditional practice. Such. Networksand relationships have become more open but also more costly. Individuals willingto engage in "friendship investment" will find it easier to enter into the patron-clientrelations and create personal ties with the relevant government officials thus potentiallyhelp to break the near monopoly enjoyed by the relatives of government officials.Concomitantly ， if favourable treatment can be bought， the ordinary citizens willhave more opportunities to get them through paying bribes. Such an increase in favourabletreatments presages a movement away from favouritism towards its opposite side，that is the equal treatment ， but it will be equal treatment before money.

But the commercialisation of these traditional practices also has its costs.First ， it forces people to spend a large amount of time ， money and energy tocreate and maintain such personal networks， thus placing a heavy burden on peopleand wasting considerable social resources. Second ， it undermines compliance withlaw and procedures. The favourable treatment people often seek from officials ，e.g.， bending or bypassing regulations ， usually violate normal procedural requirement.If personal networks are effective in this realm， the incentive to observe lawsand regulations will decline. Finally ， such practices are unfair to individualswho have no personal ties with officials and are unwilling to invest in creatingand maintaining such ties.

In short， although some forms of corruption may have certain benefits， onthe basis of the above discussion ， it is clear that their costs far outweigh whateverbenefits they may have.

The Overall Effects of Corruption

Given the above discussion， what ， then ， are the overall effects on corruptionon contemporary China ？

1. Corruption leads to political instability and a legitimacy crisis for theregime. .

Political legitimacy derives from public support while public support is baseson the government's ability to provide public goods and improve its citizen's lives.The authority and legitimacy of public officials depends on their using their powerproperly for the public good If officials instead use their power for personal endsat the expense of public interests， their authority and legitimacy will decline.If corruption spreads into the full organs and ranks of the government， the public'simage of the government will be damaged leading ， in turn， to a loss of publicsupport for government. In China， rising corruption has led to significant publicoutrage including functioning as an important factor in student demonstrations in1986 and as well as the better known demonstrations in 1989. Should China entera recessionary period while corrupt officials maintain a much higher（and more self-interested）life style， corruption will become a more sensitive and more explosive issue thatcould threaten the political stability.

2. Corruption may block the peace way of transition toward democracy.

Widespread corruption may lead to the formation of a stratum with a vested interestin maintaining the current political system and status quo from which they profit.Such a stratum would resist any democratic political and economic reform， whichwould threaten their power and interests. Such opposition could well block the possibilityof a peace transition to democracy.

3. Widespread corruption and inefficiency in public administration reinforceeach other to the public detriment.

Political corruption and maladministration feed on each other in numerous ways.First ， widespread corruption in personnel recruitment and promotion underminethe incentives for hard and honest work by public officials and thus lower the qualityof civil servants as a whole. If civil servants are recruited and promoted on thebasis of favouritism and/or bribes， not only will motivation be undermined ， butalso business-oriented persons will increasingly enter and dominate the governmentstructure. This will inevitably undermine the efficiency of public administrationsince such 'business bureaucrats' will focus on their efforts exclusively on personalgains rather than public service. Second， mismanagement of public administrationprovides opportunities for corruption ， while corrupt officials have a strong interestin maintaining such mismanagement in public administration. Overstaffing publicinstitutions and overlapping government functions ， excessive procedures and redtapes ， flexible regulations and countless loopholes in such regulations as wellas the weakness public scrutiny and public accountability ， all of them are themanifestation of mismanagement of China's public administration. Such mismanagementalso provides an excuse for officials to extort bribes from clients who they canthreaten with delays in services and/or selective implementing of regulations. Inorder to speed up the proceedings （or avoid disadvantage regulations or seekingfavours ）， the ordinary citizens and businessmen must pay bribes. As above， corruptofficials often have strong structural incentives and a vested interest in maintainingsuch maladministration which， in turn， increasing the difficulty of administrativereform.

4.Widespread corruption impedes economic development.

Although， as mentioned above ， some forms of corruption may have some benefitsfor economic development， in general corruption impedes economic development in at least the following ways.

First ， corruption hampers capital accumulation and productive investment.State assets are the major targets of a wide range of corrupt practice. Corruptofficials directly seize public assets through graft and embezzlement while alsousing public assets for their own benefits. Other assets are lost through the extravaganceand/or wasteful practice of officials. Corrupt officials also profit from 'kickbacks'and commissions in public procurement and contracting. Such widespread corruptionmeans results huge loss of public assets. On the one hand ， for example， in 1993China's procuratorates confiscated 4.38 billion yuan of the illicit income gainedthrough graft and bribes8 ， while on the other ， vast amounts of money investedin rent-seeking rather than productive activities also wasted vast amount of socialresources because it can not create any economic wealth. Finally， the illicit incomesof corrupt officials often found its way into foreign banks or were used to supporttheir luxurious life but were rarely reinvested in productive activities.

Second， corruption distorts market competition and leads to chaos in economiclife. Market competition rewards those entrepreneurs who can supply high qualitygoods and services at low costs and encourages enterprises to compete to improvetheir service and to develop new technologies while competition in rent-seekinginstead rewards successful bribes givers and encourages enterprises to compete togain preferential treatments from government. Widespread corruption also reducesresource allocation efficiency as corrupt officials allocate resources in responseto bribes rather than enterprises efficiency. Since it is profitable to escape governmentregulation， many businessmen attempt to bribe the relevant officials to looseneconomic regulation or not to implement relevant regulate policies. As a result ，economic crimes such as speculation and profiteering， smuggling， tax evasion，and commercial fraud became rampant from the 1980's on， seriously disturbing theorder of economic life.

Third ， corruption undermines the implementation of economic planning and developmentalpolicies. As a developing country ， through their development plans and policies，various levels of China's government play a major role in advancing economic development.However ， widespread corruption weakens the government's ability to promote economicdevelopment by distracting officials from such work. Corrupt officials have no structuralincentives to work hard to implement developmental plans and policies ， whereasthey do have a structural incentive ， namely ， personal monetary gain ， to selectivelyimplement such plans and policies.

Fourth， corruption negatively influences individuals economic behaviour. Asthe policies of "Get rich first" and "making money fever" became increasingly widespreadsince 1978， the issue of how to get rich first and fast has become a focus of publicconcern. Corrupt officials and swindlers got rich first by exchanging power formoney. They set bad examples regarding personal enrichment， which have been followedby more public officials and ordinary citizens. Widespread corruption allows peopleto prosper through corruption thus undermining the incentive for hard and honestwork. The prevalence of non-productive， illegal economic activities also reducenational income and changes national distribution of wealth in favour of the corrupt，further undermining the desired incentive systems

5. Corruption hinders normal upward social mobility and wastes human resources.

Corruption hinders normal upward social mobility and wastes human resourcesin numerous ways. First ， corrupt senior officials attempt to maintain their superiorpositions and to pass their on to chosen successors ， frequently children or otherrelatives who end up with unequal access to political power and economic wealth.At the same time， such officials work to consolidate their political positionsthrough patron-client relations as a result of which their clients get promotions，and/or protection and/or other favours as a result of their personal ties and loyaltyrather than ability thus undermining the upward social mobility. Second ， corruptpersonnel practices in government and state-owned enterprises have transformed competitionin terms of merit into of competition in terms of competition in terms of establishingnetworks of personal ties and patronage relationships through bribes and other practices.This kind of competition clearly has negative effects on personnel selection， allowingless qualified people into all levels of government while restricting access formany more talented（but less corruption ） individuals. In such a process ， thetime， money， and energy invested in creating and maintaining these networks wastevast amount of human resource. Third， such practices lead any qualified and talentedindividuals to see very limited opportunities for themselves in the state sectorleading to demoralisation and withdrawal from that sector. For similar reasons，many outstanding students and scholars stay abroad rather than come back returningwhen they finish their studies. All of the above practices contribute to a significantwaste and loss of human resources.

6. Corruption lowers the moral standards and cohesion of the entire societyand aggravates the disorderly state of society.

Public officials are elite social stratums. Their behaviour has an importantinfluence on other social strata. The growing corruption among public officialsproduces numerous grave negative influences on social morale and values ： First，it lowers the moral standards and cohesion of the whole society. Corrupt officialsuse their power to pursue their personal gains at the expense of public interest，thus setting a bad example for society and stimulating others to follow. The looseningof the restrains of public morality on people's behaviours leads to an increasein self-centred behaviour. When even public officials no long care about the publicgoals and interests ， and consequently other social strata become indifferent withthe future of the nation， society as whole begins to lose its cohesion. Second ，corruption furthers the disorderly state of society. Corruption proliferates wherethe restraint of law and discipline are lax. The growing corruption in China todayin turn enhances the weakness of law and discipline which manifested in the followingtwo ways. The first is that the growing corruption makes public officials and ordinarycitizens lose their faith in the justice and authority of law ， thus underminingtheir inclination to observe the law. Corruption also poses a direct challenge tothe justice and authority of laws and disciplinary practices if corrupt officialscan not be punished on time ， more and more officials will follow their examples.Meanwhile ， increasing corruption among law enforcement officials themselves hasfurther reduced the public's faith in the justice and disciplinary systems. Beyondthis is the fact that various illegal and even criminal activities have increasedsharply recently. As mentioned above， in China's three waves of economic crimes，each wave has been larger in scope and scale than the previous one. These threewaves of economic crimes have shaken the foundation of economic and social order.If these trends can not be checked effectively， its result will be very serious.

The Anti-corruption Efforts of Chinese Government

Since 1978， when the Chinese government began to implement the reforms ， ithas also strengthened its anti-corruption efforts. Simultaneously ， deepening economicreform， progressive political reform and extensive administrative reform have alsocontributed significantly to anti-corruption efforts.

1. The deepening of economic reform.

The rising wave corruption in contemporary China is ， to a large extent， by-productsof the dual economic systems. The dual price system and co-existence of resource-allocationby a market and a state plan is the major source of huge rents in the Chinese economy.With the reduction of the scope of official price system and in the resources allocatedby the state plan ， rent-seeking activities in some spheres rapidly decreased.The final establishment of a consume goods market and cancellation of the officialprice system for consumer goods in the mid-1980s greatly reduced the speculation，profiteering and smuggling in consumer goods. The establishment of a producer goodsmarket and the cancellation of the official price and/or subsidies for these goodsplayed a major role in reducing speculation and profiteering in producer goods inthe late 1980's. The establishment and subsequent strengthening of regulation ofthe stock and real estate markets in the mid-1990s had a vital role in reducingthe relevant economic crimes. The still in process commercialisation of public bankswill help to significantly reduce corrupt transactions in bank loans and credits.A major reason that many state-owned enterprises lose money is that this state assetsflow into the personal pockets of corrupt managers and government officials .Theforthcoming restructuring of state-owned enterprises will finally solve this problem.In short， speeding up the market-oriented reform and the restructuring of state-ownedenterprises play and will further play a critical role in reducing corruption andrelevant economic crimes.

The three waves of corruption and reform hold important lessons for decision-makersregarding economic reform ， namely that they should study and predict the likelyforms and characteristics of corruption that will accompany with new reform policiesand then take the necessary preventive measures rather than fighting against themonly after they have occurred. It seems clear that the end result of market-orientedreform will definitely and finally reduce corruption but the process of such reformmay stimulate the growth of corruption by crating new opportunities for engagingin corruption. At present the restructuring of the state-owned enterprises has becomethe focus of the latest economic reform. According to the newest reform plan， moststate-owned enterprises except those certain large enterprises will become non-stateowned enterprises through mergers ， bankruptcy ， joint-stock co-operative system，or being leased or sold off. If this bold reform plan achieve its objective ， corruptionaround state-owned enterprises will significantly decrease. However the past experiencesuggests that the reform of state-owned enterprises will itself create new opportunitiesfor corruption around state assets. Therefore ， it will be essential to implementpre-emptive measures against the corresponding new forms of corruption Another importantlesson concerns the need to learn to regulate the emerging market economy and copewith new forms of corruption links with the modern market economy. When the Chinesegovernment began to establish the market via economic reform， it continued to dealwith the new problems arising in the market economy using old regulatory methodscarried over from the planned economy. The very limited effectiveness of such regulatorymeasures and the lack of appropriate new measures left considerable room for corruption.Therefore ， learning to regulate the emerging market economy properly and to copewith new forms of corruption links with it is necessary to the ant-corruption work.The easiest and fastest route make lie in accepting international practices forthe regulation of market economies and coping with the corresponding forms of corruption.

2. Progressive Political Reform toward Democracy.

Under the reforms ， China has made some progress towards democratisation9：First ， China has established and developed a new leadership system， characterisedby collective leadership and the division of duties and responsibilities withinparty committees instead of one concentrating power in the hands of the first secretariesof party committee. Strengthening collective leadership is an important institutionalconstraint within the party organisations on the abuse of power by party leaders.Second， China has established and improved the relevant institutions responsiblefor democratic supervision. National and local People's Congress playing an increasinglyimportant role in supervising the work of government， Procuratorates and courts.For example ， as a result of his inability in rectification of various companiesand his misconduct in receiving gifts and attending luxurious banquets， the formerVice-Governor of Hunan province was criticised by deputies and lost his post whenthe new province government was elected. Meanwhile， the People's Political ConsultativeConferences at various levels have become an important channel for expressing publicoutrage on increasing corruption and providing policy suggestions. The democraticparties have become an important force in participating in government and discussingpolitical affairs in recent years. Finally， the relatively free and competitiveelections that occurred at the village level in some regions are an important signof progress in China's political life. Since entering into 1990's ， more and morevillages have begun to follow the democratic practices created in other more advancedregions. Nonetheless， these steps are still quite inadequate and must be pushedfurther forward.

3. Extensive Administrative Reform.

China's market-oriented economic reform has been accompanied by the extensiveadministrative reform with the major goal of reducing the numbers of governmentdepartments and personnel and the transforming many government functions. With theestablishment of the market ， many government departments have lost their powerto allocate resources and have had to change their functions while other departmentswere merger or abolished. With the relaxation of the controls on state-owned enterprises，many government departments have lost their power to directly control the relevantstate firms and have had to find new functions. Although the administrative reformimplemented in the past two decades has made progress in achieving its goal ， italso has its limits. Consequently ， to further reduce the numbers of governmentdepartments and personnel and to transform government functions ， the Chinese governmentdecided to implement the new wave of administrative reform on a large scale. Chinesegovernment has reduce the forty existing Ministries of State Council into 29 Ministries，and plan to cut off 4 million civil servants， or half of the existing total， withinthree years began from 1998.10 If this new wave of administrative reform can furthertransform the functions of government ， separate government departments from state-ownedenterprises and reduce the heavy financial burden due to Overstaffing ， it willsignificantly contribute to combating corruption.

4.Re-Establishment and Improvement of Various Anti-Corruption Agencies and Institutions.11

Since 1978， the Chinese authorities have re-established various anti-corruptionwork agencies ， which were paralysed during the Culture Revolution （1966-1976 ）。At the end of 1978， the Central and local Commissions for Discipline Inspectionof CPC， whose major function is to supervise party members and leaders in variouspolitical organisations on the basis of the party's disciplinary regulation ， werere-established. The Supreme People's Procuratorate and local Procuratorates ， whosemajor task is to supervise law-enforcement and investigate and prosecute economiccrime ， were re-established in 1978. . The Ministry of Supervision and its localbranches， whose major task is to supervise government officials and punish thosewho violate administrative discipline ， was re-established in 1987. The Anti-CorruptionWork Bureau was established at the beginning of 1990's under the command of theProcuratorates to serve as the major anti-corruption agency. In order to straightenthe anti-corruption organs and enhance their independence in law and disciplineenforcement ， the Chinese government has taken several measures to improve theleadership system of these agencies. The Central Commission for Discipline Inspectionand its local branches and the Ministry of Supervision and its local branches weremerged into one body， and began to joint work in 1992. The government also workedstrengthens vertical leadership within the system of anti-corruption agencies ，although such leaders must still simultaneously accept the party committee's leadershipat the same level. Finally， the central and local Commissions for Discipline Inspectionof CPC has began to play a co-ordinator role in anti-corruption work among variousanti-corruption agencies.

Other important institutional reforms that have helped to curb corruption havebeen implemented within the past two decades. These include （1 ）。 Increasingthe transparency of the public decision making process. Beginning in the late 1980's，some local governments and departments began to the experiment with making the proceduresand results of handle official business decisions public so that citizens couldsupervise the government's work. Since the beginning of 1990's， such practiceshave spread to more and more local governments and departments. （2 ）。 Additionalmechanism for internal control of institutional power ， such as teamwork ， overlapof duties ， reduction of the power of individual officials etc. have been implemented.（3 ）。 The so-called avoidance（of relatives） and transfer rule for senior officialsat various levels have been implemented. The avoidance rule has three aspects ：First ， avoidance of such conflicts in holding official posts， namely ， seniorofficials must avoid having their spouses ， children or relatives hold importantposts in their own work units. Second ， avoidance of such conflicts in officialbusiness， namely ， senior officials are not allowed to participate in officialbusiness or exercise influence on such activities if they involve their own or theirkin's interest. Finally ， the avoidance of such conflicts in regional assignments，namely， officials local to a specific county are not allowed to hold senior officialpests in that county. The rule of transfer requires that government officials betransferred regularly from one region to another or from one department to anotherin order to break whatever personal networks may have developed. This avoidanceand transfer practice is inherited form the traditional Chinese imperial practice.（4 ）。 According to recent regulations， all senior officials at the county leveland above must report their income from all sources every half-year. Although thisshould be an effective measure for detecting corruption ， its effectiveness hasbeen quite to the present in large part by the backwardness of banking and tax systemsin contemporary China ， the lack of special organs to verify such income registrationand the failure to make such registration a legal requirement rather than one backedup only by party and administrative disciplinary regulations. （5 ）。 Reportingcentres have been established and the reporting system improved ： The report centreswithin the Procuratorates and the Supervision Ministry and its local branches wereestablished in 1988. Citizens can report any evidence of economic crimes by phone，fax ， letter ， or orally to such centres. Date， citizens have provided a vastamount of such evidence to these centres. For example ， from April to June 1988，the Ministry of Supervision's hotline received 1，250 calls. Elsewhere， the reportcentres attached to the Shanghai Procuratorate received 15，000 reports in one year.Of these， 11 ，035 provided relevant information about graft ， bribes and othersuch acts .12 The report system was recently improved through additional measuresto protect and reward those citizens who reported evidence of corruption and informingthem of the progress and results of the relevant investigations and trials.

5.Anti-Corruption Campaigns.

Since 1978， the Chinese government has launched four anti-corruption campaigns.The first one ， which began in 1982， targeted economic crimes with significantsuccess. 136，024 cases of economic crime were investigated ， of which 44，000were wound up with 26 ，000 person's convicted and 44 ，000 persons surrenderingthemselves to the police.13The second anti-corruption campaign， which began inlate 1983 and lasted until early 1987 ， concentrated on consolidating party organisations.During this movement， a large number of party members who had violated party disciplineor engaged in corrupt activities were punished， including 35 ，616 senior officialsat the county level and above. The third anti-corruption campaign began in 1988and reached at its peak in the late 1989. A huge number of corrupt officials werepunished or surrendered themselves to the anti-corruption agencies. According toofficial statistics ， 116，763 cases of graft， bribery and other relevant crimeswere accepted and heard by the Procuratorates in 1989 ， of which 58，726 caseswere investigated and prosecuted， 20 ，794 criminals were arrested ， and 482.86million yuan were recovered ， 36 ，171 officials surrendered themselves to theanti-corruption agencies from August 15 1989 to October 31， 1989. 14 The fourthanti-corruption campaign began in the late 1993 and has lasted to the present. Thiscampaign has had three focus： addressing the issue of self-regulation of seniorofficials ； Strengthening the investigation and prosecution of large-size corruptcases and forcefully curbing unhealthy tendencies within government departments.The newest anti-corruption campaign has had some positive effects as indicated bythe slight improvement of the perceived corruption degree in China after 1995 byTransparency International（TI）。 But the situation facing anti-corruption agenciesis still very serious and there is no reason for optimistic.

These four anti-corruption campaigns not only focused on cracking down on whatwere clearly Class A forms of corruption but also initiated some measures to combatthe other Class B and C corruption. These measures include：（1 ）。 Regulationson prohibiting public officials and their institutions from engaging in businessactivities and running satellite companies. The separation of public institutionsand their satellite companies become a central focus of the third anti-corruptioncampaign with considerable success. According to official statistics， by July 6，1990， 11 ， 934 companies run by party and government institutions （or 85.8% ofthe total ） had been closed while the remainder was separated from the originalpublic institutions. 49 ，292 government officials， including retired officialswho hold posts in enterprises resigned from these posts.15（2 ）。 Implementationof budget management on the extra- budget income of various departments from imposingfines and collecting administrative fees. This task has become a focal point ofthe fourth anti-corruption campaign. According to Wei Jianxing， head of CentralCommittee for Discipline Inspection ， the separation of government departments'income from their expenditure had been implemented which was regarded as an importantstep in curbing unhealthy tendency within government departments.16 （3 ）。 Regulationsfor restricting extravagance and waste within government organs Such regulationsinclude reducing the number of administrative meetings and files； limiting spendingon banquets ， cars and office furniture； prohibition of foreign and domestic tourismusing public money； prohibition of luxurious entertainment and so on. The fightagainst extravagance and waste has become another field of battle since 1997.

6. Moral education.

Moral education constitutes an important element of these four anti-corruptioncampaigns the second and the fourth anti-corruption campaign particularly attachedgreat importance to the moral education. The second anti-corruption campaign wasalso a moral education movement aimed at consolidating and strengthening party organisations.Since the third generation of political leaders have paid great attention to themoral education as a part of their anti-corruption efforts， moral education playedan important part in their anti-corruption efforts. The methods for moral educationinclude （1 ）。 The whole party， especially senior leaders， were asked to regularlystudy political theory， particular Deng Xiaoping's theory 'Building socialism withChinese Characteristics'. Party organisations at various levels were required toeducate their members with communist ideals ， morality and faith.（2 ）。 Partymembers ， especially the senior leaders， were asked to review their behaviouragainst various anti-corruption rules and to criticise the misconduct of the otherparty members in party organisation conference. （3 ）。 Government officials whowere honest and clean （most of whom are party members） were cited as models andall public officials were asked to follow their examples. （4 ）。 Corrupt officialswere punished under the appropriate law ， party or administrative disciplinaryregulation and their behaviour condemned by social opinion. However ， just as mentionedabove ， there are limits to moral education. Since senior officials and the ordinaryparty members are actually not equal within party organisations ， the wrongdoingsof senior officials are not easily be criticised or checked by other party members.Moreover， because of the lack of checks and balance of power ， the lack of transparencyin much of the behaviours of senior leaders ， the limits of self-regulation， itis very difficult for senior officials to set examples， particularly when theyare involved in corruption or are universally believed be so. This， in turn， underminesthe effectiveness of moral education. Another limit is that the behaviours of modelofficials are often too perfect to be followed by the other officials. At the oppositeextreme ， the model officials publicised by the authorities are unrealistic， satisfiedwith low salaries and a simple life ， they work hard ， renounce their family livesand handle official business impartially without any fear of offending their relativesand friends. Such perfect models are hard accepting or are modelled ， thus furtherundermining moral education.

Conclusion

The situation regarding corruption has deteriorated since 1978 when China beganits transition to a market economy. Corruption has manifested its own particularforms and patterns during this transition period. The three waves of corruptioncrimes to date have had grave consequences for political， economic and social lifeand pose a great threat to the survival of the regime. The Chinese authorities haveclearly understood the seriousness of both corruption and its effects ， and consequentlyhave strengthened their anti-corruption efforts. Although this effort has had somesuccess ， it has become very clear that the current anti-corruption effort is quiteinadequate in combating corruption， in large part due to the limits of currentpolitical system. Further political reform and movement towards democracy is essentialif China is to control corruption effectively.

1 I would like to express my heartily thanks to Prof. Richard Levy who helpme to improve and polish my paper. I would also like to express my appreciationto Prof. Paul Heywood who gave me a good comment and encouraged me to revise itfurther.

2. See He Zengke， A Political Cancer ： A Study on the Corruption Problem ofthe Developing Countries（Beijing ： Central Compilation & Translation Press， 1995）； Wang Huning， Anti-corruption： China's Experiment ，（Hai Kou ： San Huan Press，1990）； Liang Guoqing（Chief-editor）， The Practical Encyclopaedia of Anti-corruptionin China and Foreign Countries（Beijing ： Xin Hua Press， 1994 ）。

3. Gordon White ， "Corruption and the Transition from Socialism in China"，in Michael Levi and David Nelken（Eds.） The Corruption of Politics and the Politicsof Corruption （Oxford： Blackwell Publishers Ltd.， 1996 ）。

4. Zhang Siqing ， "Punish Graft， bribery and other Economic Crimes firmly"，Procuratorate Daily of China， 3rd Nov. 1993.

5. Wei Jianxing ， "Adopt to the New Situation， Anti-corruption in depth ，Serve for Implementing Comprehensively the Fundamental lines of CPC"， in CCDI（Eds.） Fight against Corruption firmly（Beijing ： Fang Zheng Publishers， 1993）， p.19.

6 Hu Heli ， "Three Strategies of Anti-corruption"， Comparative Economic andSocial System ， 1989 ， No.3 ， p.20.

7. Ibid.， p.22.

8 Han Zhubin， "Report on the Work of Supreme People's Procuratorate of PRC"，People's Daily， 21 March ， 1999.

9. He Zengke， "Democratization under Reforming China ： Progress ， Problemsand Prospects"（English Version ， forthcoming）。

10. Li Peng ， "Report on the Work of Government" ， China Daily， April 16 ，1998 and Zhu Rongji ， "Report on the Work of Government" ， People's PublishingHouse ， March. 1999

11. Liang Guoqing （chief-editor）， Encyclopaedia of Anti-corruption in Chinaand Foreign Countries ， 1994 ， pp.391-417.

12. Wang Huning ， Anti-corruption： China's Experiment ， p.194.

13. Liang Guoqing ， p.24.

14. Ibid. ， pp.663-664.

15. Ibid. ， p.32.

16. Wei ： "Fines Not Sources of Income for Units"， China Daily， May 22 ，1998.

此是制度学人“竹森工作论文。2000”系列之四，为制度学人研究成果正式发表前的征求意见稿，欢迎评论、指正，作者将不胜感谢，并及时作出回应，地址：[e-mail].作者保留一切权利；若有转载、发表事宜，请及时联系。

http://www.wiapp.org/acpapers/a62.html