China's Crony Capitalism: The Dynamics of Regime Decay

A close-up Chinese 100-yuan note. Flickr/David Dennis

An excerpt from Minxin Pei's new book.

Independent academic research also confirms that a very large portion of corruption cases falls into the category of commercial transactions that involve interactions between officials and private businessmen. According to one study that examined 2,802 corruption cases reported from 2000 to 2009 in Jiancha Ribao (Prosecutorial Daily), a publication of the Supreme People’s Procuratorate, 1,583 (56 percent) of them fell into four areas: government procurement and construction contracts (731); land, real estate, and urban planning (307); finance, investment, loans, allocations, and payment of funds (298); administration of commerce, enterprise management, and restructuring of enterprise ownership (247). Another study of 142 party chiefs, mayors, heads of municipal people’s congresses, and chairmen of municipal people’s political consultative conferences who were prosecuted for corruption between 1983 and 2012 shows that 115 of them were involved in illegal activities in sectors such as approvals of land transfers, real estate development, loans for enterprises, tax reductions, stock market listings, restructuring of SOEs, construction contracts, and approvals of mining rights. Research on corruption in the real estate sector in China also indicates that the immense profitability generated by rent-seeking, unclear property rights, and segmented regulatory authority in this sector attracts collusion between officials and developers.

Key Findings

A summary of the key characteristics of the fifty cases that have been exposed in the media since the early 1990s provides useful clues about the collusion between officials and private businessmen. In terms of the seniority of the officials involved, seven chief perpetrators were provincial-level officials, twenty-five occupied prefecture-level positions, fourteen were county-level officials, and four held subcounty positions. Compared with the cases of maiguan maiguan we saw earlier, the chief perpetrators included in the sample cases in this chapter are more senior (60 percent of the officials in this sample held prefecture- or provincial-level positions, compared with 40 percent of the officials in Chapter 3). The nature of the main corrupt activities—commercial bribery—and the higher ranks of the chief perpetrators likely account for the larger amounts of total corruption income generated by officials who collude with businessmen than officials who sell government offices (even though income from maiguan made up less than one-half of their total corruption income in most cases). As for geographic representation, the chief perpetrators were from twenty-one provinces, an indicator that collusion between officials and businessmen is a national phenomenon.

In terms of total corruption income, the median total corruption income gained by the chief perpetrators in these cases is 9.5 million yuan, almost 50 percent higher than that reaped by the chief perpetrators in collusion among SOE executives whose corrupt activities were detailed in another sample of fifty cases reported in the media since the early 1990s. The mean corruption income of officials selling offices is 3.8 million yuan, about 40 percent of the corruption income gained by those colluding with businessmen. The median number of officials involved or implicated in the fifty cases here is eleven, the same as for the cases of colluding SOE executives but much lower than the median number of positions sold (twenty-seven) by officials in the fifty cases in Chapter 3. The smaller number of individuals involved or implicated in collusion with businessmen again likely reflects the higher status and greater power held by the chief perpetrators represented here. More senior officials can simply order their subordinates to grant favors to private businessmen, instead of directly recruiting them into the collusive ring.