Corruption in China, Some Historical Context 1

ImageIs corruption particularly rampant in China? Some experts seem to think so. Since the beginning of this year, the Chinese government has been undertaking an aggressive anti-corruption campaign that some believe is so effective that it is actually slowing economic growth in the country—particularly in such industries as food, beverage and hospitality.

As anybody who has done business in China – or anywhere else in the world — knows, the risk of bribery is endemic to commercial transactions. But how do modern levels of corruption in China compare to levels of corruption in United States at a period in time when per capita income in each of the countries was relatively equivalent? A recent academic paper provides an interesting perspective on the historical context of corruption in China as compared to the United States. The excerpt reads:

“This paper compares corruption in China over the past 15 years with corruption in the U.S. between 1870 and 1930, periods that are roughly comparable in terms of real income per capita…The comparison indicates that corruption in the U.S. in the early 1870s — when it’s real income per capita was about $2,800 (in 2005 dollars) — was 7 to 9 times higher than China’s corruption level in 1996, the corresponding year in terms of income per capita. By the time the U.S. reached $7,500 in 1928 — approximately equivalent to China’s real income per capita in 2009 — corruption was similar in both countries. The findings imply that, while corruption in China is an issue that merits attention, it is not at alarmingly high levels, compared to the U.S. historical experience. The paper further argues that the corruption and development experiences of both the U.S. and China appear to be consistent with the “life-cycle” theory of corruption — rising at the early stages of development, and declining after modernization has taken place. Hence, as China continues its development process, corruption will likely decline.” (Emphasis added)

Any predictions that corruption is on the decline is welcome news to TRACE!

One comment

  1. The article is interesting and the methodology ingenious. The basic point that corruption declines as prosperity increases is probably true. Still, it is VERY difficult to generalize about corruption in China because it is impossible to obtain accurate information. Surely using U.S. newspapers as a source for information, as does the article, is unlikely to yield a true picture. China’s media is totally controlled and discussion of important information about the Chinese economy or business ethics is likely to be seen as prohibited by China’s State Secrets Law. The current Chinese government does seem serious about anti-corruption efforts, although it is still early days. There have been prior, similar efforts that did not produce much. There is also a great deal of domestic corruption within China, which does not get much attention. Chinese companies and Chinese employees of foreign-owned enterprises left on their own approach interaction with the Chinese government very differently from their foreign counterparts, with a lot of “automatic” corruption on the domestic side.

    Corruption in China is a complicated issue, where even the basic data is difficult to obtain and evaluate. While I join TRACE in celebrating any reduction in corruption, I would urge caution in reaching conclusions about China, which is a very unique place. It is my personal opinion that China is a more corrupt place than it was 20 years ago, notwithstanding improvements in economic development.

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