Corruption is an age-old issue in the Chinese economy. There is rapid growth in the economy and governmental sectors in the country and these changes come with direct or indirect effects on the problem of corruption in the country. It is the second largest economy in the world, and therefore China is vulnerable to increased cases of fraud. However, the issue and definition of corruption in China may differ from that of other nations, and this means that the causes of corruption in the country may be different from those of other places. In China, corruption may be embezzlement, neglect of duty, and violation of administrative and social norms, bribery, nepotism, profiteering, and misappropriation. Each form of corruption follows a different trend and the causes may be similar or different.
It is also considered t be either economic or non-economic. As Weng and Ko clearly state Some types of corruption peculiar to China, such as illegitimate feasting, feudal rites (cadres staging lavish, traditional-style weddings and funerals), and illegal imprisonment and torture, are also considered as non-economic corruption (Ko 720). Currently, there is up to twenty percent of all fraud cases deemed to be non-economic while the eighty percent is economic. As mentioned before corruption the issue has been part of China for many decades, and it still is eating up the countrys economy. Therefore its trends differ through the decades because of various issues.
Therefore there are various trends in the causes of corruption in China during different times up to the current years. Before the late 1990s, corruption was rampant in the country, and evidence indicates that the causes of the issue included public systems that were underdeveloped, marketization, and the inadequate institutionalization of the anticorruption laws and institutions in the country.
Before, China was a socialist system, but as time went by the nation became a market system created the opportunity to engage in all forms of corruption. When the country was going through the transition from a socialist type of system to a market system, the income of those individuals in the private sector was significantly high, but the reverse was present in those persons who were in the public sector. Therefore there was a significant margin between the two working groups and those in the public sector felt disadvantage. It eventually drove them into using the power they had in the public sector for their benefit. Civil servants had control over a significant amount of resources including their authority to approve businesses, control over capital and land. The opportunities they had, gave them the opportunity to engage in corruption-related activities.
Fiscal decentralization was also another cause of corruption before the late 1990s. It mainly took place at the local governments level where to improve growth and ensure that it was locally initiated and led, the central government decided to adopt the fiscal system of sharing. The system gave the local government power to collect taxes and overlook their expenditure, and the local government had a contract with the central government to remit a certain amount to them. It, therefore, resulted in the local government enjoying a given level of fiscal autonomy. During the year 1993, the local governments accounted for between seventy-one to seventy-eight percent of the total expenditures and revenues in total. The mentioned degree of fiscal decentralization was even higher than that of the US at this time. It, therefore, meant that local governments would collect large amounts of funds that were extra-budgetary without the supervision or control of the central government. The significant levels of fiscal decentralization without any form of control or management in China became fertile ground for the misappropriation and embezzlement of public revenue. During this time, especially before the tax reforms that took place in 1994, the central government lacked sufficient information and systems that would aid them in monitoring the revenue and expenditure of local governments.
There was also the issue of the control over state-owned enterprises (SOEs), the planned economy and their legacies which were some causes of the cases of corruption that were present during this time. There was a dual price system in place between the 1980s and 1992. The system led to the development of a gap between government fixed prices. The difference, in turn, gave cadres the power to use their discretion for their private gain. Evidence indicates that those who were in charge of the state-owned enterprises exploited the differentials in price and shortages in supply and used it as the main way of acquiring wealth. Additionally, there remained strong ties between officials in public offices and the state-owned enterprises. The central government was willing to expand the power of the various state-owned enterprises through the delegation of authority or profit sharing thus increasing their autonomy. However, local governments were hesitant about giving up their authority over the SOEs they owned considering that they were significant sources of revenue and also an essential tool for development for the governments at the local levels. The local cadres faced evaluation through the various economic events that took place in their areas. Considering that the SOEs were a significant addition to their development plan, they had the incentive to retain control of the enterprise and thus there was an increased risk of them engaging in corruption.
There was also the issue of the civil service systems which were underdeveloped. During this time, the civil service system in the country was an ineffective, undisciplined and arbitrary way of doing things as the era of reform was starting. In the course of this period, there existed no distinction between individuals who were civil servants and those who were considered political servants. The system where the power went to people considering their ability and prowess and which would have significantly reduced cases of nepotism while increasing professionalism was not in place in the Chinese government. Power in the civil service was for the few individuals who were considered to be first-in-command. Important decisions including the use of financial resources or the promotion of public servants rested in the hands of these persons who had no supervision. There were cases where cadres would hold top positions in state-owned enterprises, in the Party and also in the civil service at a given point leaving an immense amount of power to specific individuals. Therefore the concentration of authority on particular individuals meant that there was deterrence of advancement of a professional civil service while there was an increase in the room for corruption.
Another reason for increased cases of corruption before the late 1990s was the lack of well established and defined laws institutions that would control fraud. The important bodies had not set the possible sentences that would accompany the different types of corruption even by the year 1979. There was no precise definition especially by the Chinese central government of what bodies were primarily involved in addressing the various cases of corruption. Therefore there was majorly the use of political campaigns and not institutionalized efforts in looking at fraud, which was not so helpful in dealing with the problem. It meant that there was leeway for people to engage in corruption and no serious action would occur against them. As Ko and Weng state In this context, political and ad hoc anti-corruption campaigns, rather than institutionalization efforts, were frequently used (Ko 722).
Evidence also indicates that the rates of corruption continued to increase in the 1990s. There was a shift in fraud from rank-and-file to officials who held higher offices in both the local and central governments. It is, therefore, an indication that the numerous cases of corruption gave individuals the autonomy to engage in the vice and they faced no significant consequences due to lack of laws and reforms that addressed the issue. The above were some of the identified causes of corruption in the late 1990s. It, however, does not mean that fraud stopped with the 1990s but the problem proceeded has become more complicated with the shift on various issues that surround the economy of China including issues like technology which bring a different outlook on corruption in China.
The causes of corruption in China currently and in recent years are a reflection of those that were in existence in the late 1990s. It is therefore as a result of similar causes, but they are influenced by other outside factors as mentioned earlier. There remain loopholes in the countrys system especially in the institutions and laws that deal with corruption which provides people especially government officials the opportunity to engage in the vice. Research shows that the function of the Chinese government in the market is currently different from how it was before. The state-owned enterprises had uncontrolled autonomy over major decisions in the countrys economy. The government also had total control over guiding and deciding prices in the market, and it also had full control over the banking system. Therefore the power the state agencies held and their control of the principle aspects of chinas economy were some of the leading causes of fraud in the country. The nations economic growth has however altered the situation especially its association with WTO and the market competition that has intensified. The world trade organization introduced the issue of global standards to the Chinese economy especially its businesspeople and policy makers. As a result, various changes have taken place in the Chinese institutions to reflect the expectations of the organization.
There is also progress in the administrative and institutional setting for policy in anti-corruption. Evidence shows that old rules against corruption which were also collapsed never got replaced with new regulations which provided the opportunity for corruption to continue. The Chinese criminal law of 1979 only provided three classifications of fraud which included bribery, embezzlement, and the neglect of duty. The law did not, however, specify the punishment for each type of corruption according to its severity. However, the Chinese criminal law of 1997 classifies seven different forms of fraud and the severity of the consequences for each type and especially considering the various amounts of money involved in the corruption case. Different regulations governing fraud were in place, and by the year 2007, there were more than five hundred anti-bribery policies that would put to use in procurement of the government and other resources that are for the benefit of the people of China.
There are also major improvements in the civil service system where there is a significant reduction in the government body of China. While focusing on the streamlining of bureaucracy government reforms have reduced the number of ministries from forty to twenty-nine. Those industries that were managed by ministries became non-existent which meant that state-owned enterprises became private entities resulting in the rise of managers that were professional. Previously the power to employ and promote civil servants may have been in the hands of a single individual who had control and autonomy in the government system. However, the appointment of officers has changed to the meritocratic where individuals get power by their ability. There is also a civil service exams system which the government applies when identifying persons who are qualified to join the public service. There are also various budgeting reforms put in place which help monitor...
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