Friday Puzzler

Friday Puzzler: Chinese Corruption and the Paper Trail Left Behind

Wen Jaibao. Photo by Remy Steinegger and the World Economic Forum, via Wikimedia.

By Barbara F. Walter

Last Friday, David Barboza of the New York Times published what is likely to be a Pulitzer-Prize winning article about corruption at the highest level of the Chinese government. Barboza showed that close relatives of Prime Minister Wen Jaibao had amassed billions of dollars in “hidden riches” — the result of gaining large stakes in Chinese companies. The evidence presented by Barboza is likely to be especially damning for Wen because he has long presented himself as a champion of the poor, and a Populist beyond reproach.

For me, what was surprising about the article was not that high-ranking government officials in China were corrupt, which has long been rumored. What was surprising was that all of this evidence was publicly available from government entities themselves. Wen had been careful to hide his direct involvement in the corruption, but he had not been careful enough to expunge the very records that implicated his closest family members in the depravity.

So today’s puzzler is this: Why would China’s elite, who stand to lose significantly if evidence of deep corruption surfaces, be so careless as to not eliminate the paper trail?

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  • I have two thoughts to offer. First, I would (tentatively) suggest that China’s elite doesn’t have so much to lose due to evidence of corruption. Although corruption is a major issue in China, the CCP is not so weak as to be overthrown by some news of high-level corruption. Even with the advent of microblogging services like weibo, the CCP still doesn’t face any serious organized challenge. Local riots and “not in my back yard” protests are very different from the organization required to provide a serious challenge to the CCP.

    Secondly, since this story is in an American newspaper the people reading this news are mostly Americans, plus a small percentage of tech-savy Chinese intellectuals (many of whom already are dissatisfied with the government). This new story does not exist for most Chinese people. No major news providers in China will make this story available. The CCP has made more efforts on the soft power front over the past several years, but the domestic audience is still it’s primary audience, so if non-Chinese are reading anti-China news, it is a very low priority for the politicians in China.

  • I wrote a blog post last week that provides one plausible answer to this puzzler (see link below). To get rich, China’s elites need foreign capital. To get foreign capital, they need to play by certain rules, and among those rules are the transparency requirements that produced these paper trails. In the long run, these rules will probably help bring them down, but in the meantime, they and their families and associates will have gotten wealthy, and they will probably keep that wealth even after the CCP loses its monopoly on power (just ask the Russians).

    http://dartthrowingchimp.wordpress.com/2012/10/26/what-a-china-corruption-story-says-about-the-perils-of-authoritarian-corruption-in-the-modern-global-economy/

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