Studies / Reports: December 2008 Archives

By Centro de Medios Independientes Valparaiso (Chile)
December 13, 2008

Is China about to collapse due to hidden crises and corruption? Is global financial crisis impacting China? Is a runaway government corruption destroying Chinese economy and peace? What is really behind Chinese finance, politics, trade, politics and society? Has China's ongoing reform altered the nation's political-economic landscape as far as government corruption is concerned? What is the next if this corruption goes deeper? Get the most powerful reports on Chinese politics, government amid global financial meltdown.

China's coming collapse: corruption, finance, trade, outsourcing, politics, leadership, government, law, and society

Has China's ongoing reform altered the nation's political-economic landscape as far as government corruption is concerned? What is the next if this corruption goes deeper?

A compelling new report says that runaway corruption in China poses a lethal threat to the nation's economic development and "undermines the legitimacy of the ruling Chinese Communist Party."

Evidence from official audits, press articles and law enforcement data, the report says, indicates that "corruption in China is both pervasive and costly."

Bribery, kickbacks, theft and fraud, particularly by government officials, are said to be rampant.

Pei Minxin (裴敏欣) wrote the report issued last month by the Carnegie Endowment of International Peace, based in Washington. Pei is a political scientist educated at the Shanghai International Studies University. He earned his PhD at Harvard and his work has been widely published in the US.

The report asserts that corruption in China "has spillover effects beyond its borders" that hurt US, Japanese and other foreign investors.

"Illicit behavior by local officials could expose Western firms to potentially vast environmental, human rights and financial liabilities," the report says.

Public statements by Chinese President Hu Jintao (胡錦濤), Premier Wen Jiabao (溫家寶) and other senior Chinese officials suggest that China's leaders are well aware of the widespread problem but have been unwilling to curb it.

The report says: "The odds of an average corrupt official going to jail are at most 3 out of 100, making corruption a high-return, low-risk activity."

If Hu comes down too hard on corruption, he risks losing support of the delegates at the recently held party Congress who elected him. Those delegates are drawn largely from party officials at the local and provincial level.

Pei is not alone in assessing corruption in China. George Zhibin Gu ( 顾志斌), an investment banker who was educated at Nanjing University and earned a doctorate at the University of Michigan, has suggested that corruption may destroy China's economy, which has been growing at 8 percent to 10 percent a year. In the West, a 3 percent growth rate is respectable.

Much more systematic analysis and information is contained in Gu's two new books: 1. China and the new world order: how entrepreneurship, globalization, borderless business are reshaping China and the world; 2. Chin's global reach: markets, multinationals, globlization. Gu is based in Guangdong, China. His two books contain field investigations and a number of interviews with Chinese officials, business managers, farmers, scholars and researchers. There are surprising findings throughout the work.

Moreover, China's Xinhua news agency frequently details specific instances of corruption. Last week, the Chinese government was reported to have banned fire department officials from receiving sexual favors from companies seeking their protection.

Scrutinized through a wide-angle lens, corruption is just at the forefront of the internal ills that jeopardize China's economic and political strength. Unemployment and under-employment, in which a worker has only one or two days of work a week, may be over 25 percent. Paradoxically, China has begun to experience shortages of the skilled labor needed for its expanding industries. Economic progress has been uneven, with coastal cities leaving the rural interior far behind.

"Corruption in China is concentrated in the sectors with extensive state involvement," the Pei report says.

That includes construction of dams, roads and electrical grids. The sales of land or granting user rights are susceptible, as are financial services and heavily regulated industries.

"The absence of a competitive political process and a free press in China makes these high risk sectors even more susceptible to fraud, theft, kickbacks and bribery," the report says.

Pei cites a study done last year asserting that about half of those engaged in corruption were involved in infrastructure projects or land transactions.

Even so, the report says: "Beijing punishes only a very small proportion of party members or government officials tainted by corruption."

US, Japanese and other foreign investors may be put at a competitive disadvantage by rivals who engage in illegal practices to win business in China, the report says.

"Corruption puts Western firms' intellectual property rights particularly at risk because unscrupulous local officials routinely protect Chinese counterfeiters in exchange for bribes," it says.

While the report doesn't say so, US firms that pay bribes may violate the US Foreign Corruption Practices Act of 1977 that forbids kickbacks and bribery abroad, no matter what the customs of other nations.

The report also says: "Corruption in China affects other countries through the spread of cross-border crimes such as drug trafficking, human smuggling and money laundering."

But what is really behind China's deadly corruption? Pei is short on this deeper issue, but George Zhibin Gu in his books pinpoints on the root-causes: "unlimited bureaucratic power, which is based on cults and terror, is the root-cause of this ongoing China's corruption. And as long as this bureaucratic power remains in place, corruption can hardly be contained in any practical way."

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By Andrew Jacobs | THE NEW YORK TIMES
09 December 2008

Local officials in Shandong Province have apparently found a cost-effective way to deal with gadflies, whistle-blowers and all manner of muckraking citizens who dare to challenge the authorities: dispatch them to the local psychiatric hospital.

In an investigative report published Monday by a state-owned newspaper, public security officials in the city of Xintai in Shandong Province were said to have been institutionalizing residents who persist in their personal campaigns to expose corruption or the unfair seizure of their property. Some people said they were committed for up to two years, and several of those interviewed said they were forcibly medicated.

The article, in The Beijing News, said most inmates were released after they agreed to give up their causes.

Sun Fawu, 57, a farmer seeking compensation for land spoiled by a coal-mining operation, said he was seized by local authorities on his way to petition the central government in Beijing and taken to the Xintai Mental Health Center in October.

During a 20-day stay, he said, he was lashed to a bed, forced to take pills and given injections that made him numb and woozy. According to the paper, when he told the doctor he was a petitioner, not mentally ill, the doctor said: "I don't care if you're sick or not. As long as you are sent by the township government, I'll treat you as a mental patient."

In an interview with the newspaper, the hospital's director, Wu Yuzhu, acknowledged that some of the 18 patients brought there by the police in recent years were not deranged, but he said that he had no choice but to take them in. "The hospital also had its misgivings," he said.

Xintai officials do not see any shame in the tactic, and they boasted that hospitalizing people they characterized as troublemakers saved money that would have been spent chasing them to Beijing. There is another reason to stop petitioners who seek redress from higher levels of government: they can prove embarrassing to local officials, especially if they make it to Beijing.

The Xintai government Web site noted that provincial authorities had recently referred to Xintai as "an advanced city in building a safe Shandong." They said that from January to May this year, the number of petitioners who went over the heads of local authorities was 274, a 4 percent drop from the same period in 2007. Although China is not known for the kind of systematic abuse of psychiatry that occurred in the Soviet Union, human rights advocates say forced institutionalizations are not uncommon in smaller cities. Robin Munro, the research director of China Labor Bulletin, a rights organization in Hong Kong, said such "an kang" wards -- Chinese for peace and health -- were a convenient and effective means of dealing with pesky dissidents.

"Once a detainee has been officially diagnosed as dangerously mentally ill, they're immediately taken out of the criminal justice system and they lose all legal rights," said Mr. Munro, who has researched China's practice of psychiatric detention.

In recent years practitioners of Falun Gong, the banned spiritual movement, have complained of what they call coerced hospitalizations. One of China's best-known dissidents, Wang Wanxing, spent 13 years in a police-run psychiatric institution under conditions he later described as abusive.

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By Ben Blanchard - REUTERS - via UNCENSORED Yahoo! News
December 08, 2008

Milk, toothpaste, cough syrup, pet food, eels, blood thinner, car parts, pork, eggs, honey, chicken, dumplings, cooking oil and rice -- if you can fake it or taint it, you can almost guarantee it's happened in China.

A string of product safety scandals, including contaminated infant formula that is believed to have killed six babies and sickened thousands of others, have rocked the faith of shoppers, making them wary of buying products made in China despite the often cheaper price tag.

"I was physically disgusted when I saw it on the TV," said Sally Villegas, a mother of two in Australia, referring to the melamine - tainted infant formula scandal that came to light in September.

"If I'm shopping and I pick up a product made in China, yes I would put it back."

The melamine scandal was the latest in a string of recent high-profile safety problems that included lead paint on toy cars and contaminated Chinese-made blood thinner heparin which was blamed for fatalities in the United States and Germany and prompted a global recall early this year.

After each scandal, Beijing seemed to have the same response: launching a crackdown, destroying tainted goods on television, jailing a few officials and saying they "pay great attention" to the problem.

Trouble is, for all the government's efforts and exhortations, the scandals keep happening, and will likely keep on happening, due to lax rule enforcement, fragmented industries, widespread poverty and the sheer size of China, analysts say.

"I'm sure that there will be more. It's a near certainty. Not only in the fields that we've seen already, but in other ones," said Duncan Innes-Ker, a China analyst at the Economist Intelligence Unit in Beijing.

"China faces a lot of problems because it is developing into a big but very poor economy, and obviously you can't have Western-style safety mechanisms in an economy where half the population doesn't earn much more than a couple of dollars a day," he added.

CHINESE PRODUCTS SHUNNED

Jin Biao, vice president of Inner Mongolia Yili Industrial Group, one of China's largest dairy producers, admitted the melamine problem had dented the country's already badly tattered reputation overseas.

"The contamination was our management problem. We must first resolve it without trying to pass the blame on to the farmers, or to society, or the country," he told Reuters.

Yili was named as one of 22 companies found to have produced drinking milk contaminated with melamine, though after thorough inspections China now insists the problem has been effectively removed from the dairy industry.

Melamine, a chemical used to make plastics, was added to infant formula to cheat quality control tests on protein levels. The scandal led to bans around the world on food containing Chinese dairy products.

The United States last month issued an import alert for Chinese-made food products, calling for foods to be stopped at the border unless importers can certify that they are either free of dairy goods or free of melamine.

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By John Pomfret | The Washington Post | Newsweek
December 01, 2008

So the global economy is in meltdown, Europe and China are both facing the prospect of a seriously ugly downturn. They'd scheduled a summit for this week. You'd think both sides would want to participate. Not China.

China canceled it. The reason? Because several European leaders -- including French President Nicolas Sarkozy -- have recently met with the Dalai Lama. Whoa! Now there's a solid reason if I ever saw one. You meet with Buddhist spiritual leader, we blow off key meeting on future of the world.

There is still something of the petulant 3-year-old here, brazenly pursuing something that is decidedly not in her interests. It illustrates the fact that China's foreign policy, its strategy and its world view are anything but mature.

First, it's not like China doesn't need friends right now. It's economy is in crisis. More than half of all of China's toy manufacturers are belly up. The Federation of Hong Kong Industries says that one quarter of its members' 70,000 plants in China have closed or will soon close. After annual double-digit growth for the past decade, China's economy is only expected to grow by about 9 percent this year, if that. Next year could be a lot worse. Over the weekend President Hu Jintao told a gathering of Communist Party members that the global crisis could undermine the country's economy and threaten the party's capacity to rule China.

Europe is China's largest market. But the Europeans are restless. European businesses want to know why they sell more stuff to Switzerland than to China. Cancel a summit and these questions will only grow louder.

Second, it's not like a meeting between Sarkozy and the Dalai Lama is going to amount to much for the Tibetan cause anyway. It's not going to result in the withdrawal of Chinese troops from the Tibetan plateau or independence for Tibet, right? And it certainly won't resuscitate the moribund talks that representatives of the Dalai Lama have been holding with China for several years now. Those talks are practically dead.

So why did Hu really blow off Sarko?

The stated Chinese reason in this case bears scrutiny because of its brazen honesty. According to wire service reports, Qin Gang, a spokesman at the China's foreign ministry, acknowledged to reporters that France was being held to a higher standard than, say, the United States, whose leaders routinely huddle with the Dalai Lama and barely suffer a slap on the wrist.

"France keeps saying that China is a strategic partner. Then it should do more than other countries, mean what it says and set a high standard for its behavior," Qin said.
"We hope France will make efforts to honor its commitments and not do things that harm the feelings of the Chinese people or undermine the foundation for the two countries' cooperation."

Chinese tea-leaf readers have focused on another reason: They've wheeled out the old bogeyman of Chinese political calculus, claiming that unidentified "hard-liners" were behind the cancellation. That's rich.

The reality is that China just screwed this one up.

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