Can China’s new government end corruption?

by Thorsten Pattberg

Special To The Japan Times

Li Keqiang, the new premier of China, vowed to “tackle corruption” and “clear government,” which includes — mind you — most schools, hospitals, banks, universities, companies, public transport, the courts and the police. In unison, Li also wants to “double the average income,” and now is the time, I think, to elaborate on the fact that, technically, China has no concept of “full salary” (some call it living wage) in the sense it developed in the West alongside the idea of human rights.

Just like in Europe in the feudal days, the typical Chinese public servant today drags himself around with little or no money, and thus stays close to his master. In the past that was the emperor, now it is the party.

Corruption isn’t just political, it’s now personal: It is the people who feel exploited, disrespected, not valued, not paid enough, and who feel truly frustrated, hopeless and sorry for their families, so they go out and take what they can. The Chinese do not trust each other anymore.

Teachers, students, office clerks, officers, professors, even governors, no one gets more than 30 to 40 percent of the living wage they would need to pursue their actual duty full-time, letting alone caring for themselves, or raising a family. The rest, they have to “earn” by other means, often by hidden perks or through abusing their power; and if one thing can be said about the Chinese elites after the Cultural Revolution is that they are survivors. Let us first talk about the concept of fapiao (invoice/receipt).

In a typical Chinese environment where everyone lacks money but the mother lode is rich, the only way to get the money out of her register is by handing in a fapiao for exchange — an invoice for cash reimbursement. Experienced senior cadres will present fapiao for their business trips, stationary, electronics, watches, public transport, karaoke, dating, gifts and, most important, always lavish and excessive food for their business partners and friends.

That’s why there are so many unnecessary conference centers, high-end hotels, KTVs (karaoke bars), and restaurants that are offensively costly (even for international standard) and outright unaffordable (if it were to be paid from one’s own pocket). The same is true for the vehicle fleets and housing. A private 70-sq.- meter flat in Beijing costs at least 10,000 yuan per month. But the wage of a senior judge or professor is just 7,000 yuan per month before tax; so he often depends on free housing from the government. Needless to say, those flats are highly competitive, and only guanxi (connections) are known to speed up the process.

Most governmental institutions have built their own adjoined hotels, karaoke bars, massage parlors, and restaurants serving crab dinner, so that fapiao can be issued to the local bosses; a perfect symbiosis. They recently sacked an official in Zhejiang Province who brought in 832,200 yuan of fapiao; 20 times that of his actual “salary.”

Foreigners who wish to invest in China should first learn about the salary situation of the Chinese host, that the Chinese are paid poorly and that they must be corrupt for a living. Thus the Chinese official will have to cash into the foreign investment for his private expenses in order to survive, and this isn’t a metaphor. Even if he cannot put his hands on the foreign investment, or receive gifts or bribery, he will explore all means of Chinese hospitality, conferences, shark fin lunch, and foot massages, thus will indulge the high-flyer life of the moment, all on his organization’s or the government’s bill. Naturally, the Chinese host will want to bring his friends into this, and lengthen the negotiations.

Foreign businessmen often assume that China is low-budget, only to pay through the nose — every time. That’s because they compare average salaries in China — barely $500 a month. Had they studied the culture, however, they would have realized that those figures are not “full salary,” and that the foreign visitor, indirectly through the hospitality, is another source of income.

Everyone who worked in China has (often embarrassing) experience with corrupt officials, who earn less than they deserve, and much less than they feel they deserve; and thus transform into sly entrepreneurs.

How else could they afford cars, homes, furniture, luxury goods, Harvard education for their kids (you have no idea), or traveling abroad? Asking for salary is considered bad sport, and it is still a tradition in Chinese elite universities, for example, that doctors and post doctors live without meaningful income well into their forties (and intermarry) — a modern version of the imperial eunuchs: They live on allowance for campus food and subsidized on-campus lodgings.

Some Chinese commentators, and most foreign companies that operate in China, will argue that, according to the law of supply, there are simply too many Chinese on the market, making their labor cheap. Often, you don’t have to pay them wages at all; covering their minimum living existence is quite suffice; like the contracted migrant workers who sleep on bunk beds and shower only once a week.

To this I reply that we would still need to have some universal concept of “living wages,” just like we need to have a “concept of human rights,” because otherwise, simply put, China will never learn to respect human dignity, and may one day even decide that foreigners (the other 80 percent of the world) can be seen as “plenty and cheap” too. Already, we have Westerners lined up in China who are paid extremely low wages, yet who are often morally unprepared to triple or quadruple their income the way the Chinese do.

Foreigners should not work underpaid just “because the Chinese do,” and foreign CEOs certainly shouldn’t pay tribute and risk their good reputation for the dubious practice of being invited by some almighty party officials to a full-blown state dinner banquet, knowing that the official would not and could not pay for such acts of debauchery if it were to come out his own pockets.

Still others tell me that it has to do with Confucian values; that a humble wage was emblematic of the gentleman (junzi) who would find other ways to make the job “pay” anyway because the culture was inclined toward nepotism, entitlement, and taking advantage of officialdom.

Li wants to curb all of it: “reduce the number of people on the payroll; stop excessive official overseas travels,” he said, and “no construction of government halls and buildings, less hospitality and fewer purchases of fleets of cars.”

What is China going to do with all that excess savings on money? Here’s an idea: Pay out a “full salary” so that the people will get an incentive at least to imagine a world without corruption.

Thorsten Pattberg is a research fellow at the Institute for Advanced Humanistic Studies (IAHS), Peking University.

  • Mores the point; does the Chinese sincerely want to reduce corruption, or do they simply want to appear to do so, or retain the only franchise on the practice. After all, is it only a concern because it threatens the stability of their leadership.

  • “To this I reply that we would still need to have some universal concept of “living wages,” just like we need to have a “concept of human rights…”
    This isn’t going to happen just because Westerns see the need for it. Change will only come from inside China when the people decide they want change. Chinese people will only get higher wages, less corruption, and human rights when they demand it and fight for it themselves.

  • Mr2010Singh

    Low salaries in China is also the reason why domestic consumption is so low. Also, I hear most Chinese have no hobbies. With no spare money to spent, individualism is inhibited.

    • Alice Xia

      Quite offensive. Everyone has interests, but if you’re required by the system to spend all three years in high school preparing for the one exam that might allow you to leave a poor area and be exposed to better opportunities of all sorts, then you simply don’t have time to develop any budding interests into a hobby. Hobbies are a luxury that require maintenance and dedication, it’s not purely a matter of “want”, just as Chinese people without hobbies aren’t simply a matter of “have not”.

  • Mr2010Singh

    There was a similar story in India from the tax billing office recently when only 40,000 our of 1,2 billion Indians declared that their income had exceed $100,000 annually. The number should be a hundred times this high; but those well-earners just don’t come forward. Why? Because their official “salary” is always kept artificial low to escape taxation.

  • Low salary is absolutely not a major reseason for corruption, even not one of real driving forces for it. Why? 1) There is probably a positive correlation between the salary level and corruption conduct, which means people with higher salary might have more chances to conduct corruption!!! 2) There is no solid evidences to suggest a direct connection between life standard improvement and corruption. Corruption comes from the defecit insititutional arrangements, I think it is also true in China. Based on the experiences in countries with less corruption,a well established supervision system and a well functioned punishment mechanism would be critical to reduce the corruption.

  • Alice Xia

    I think this piece falls short on attempting to dig into why all these trends exist–exist, as in there are deep-seated political roots; not occur, as if there are clear causal relationships. I wish you could give a reaction to the alleged common perspective that all this has to do with Confucian values, which seems like a convenient excuse nowadays to justify what we disagree with or have trouble understanding in China. I personally think Confucian values were overturned in 1978 and since then, haven’t had a significant foothold in anything other than in personal relationships. Not sure why people are so eager to label corruption as some type of desirable good by the government just because it hasn’t been cleaned up quickly enough. Zhou Enlai was spared during the Cultural Revolution because he outwardly supported Mao’s policies, but he ended up saving lives by way of securing his own, and kept his Western-educated suave intellectualism quiet. So would it be fair to conclude that Zhou Enlai truly believed in Mao’s leftist movements?

    Making corruption personal, like focusing on stories about “表哥” (not in this piece, but there are related insinuations), or holding the premier to his exact words, etc. is a fundamentally Western way to think about a common phenomenon (http://cpi.transparency.org/cpi2012/results/ ) placed within an uncommon (actually, singularly unique) political system, and more importantly, it doesn’t help those who don’t live in China to better understand it.