Cablegate: Guangzhou Government Corruption - Hard to See, Even Harder

DE RUEHGZ #0173/01 0860745
R 260745Z MAR 08





E.O. 12958: N/A

Reftel A: Guangzhou 0158

1. (SBU) SUMMARY: A team of China researchers estimates that
corruption has cost the Chinese economy about RMB 3 billion (USD 420
million) each year between 1980 to 2002, and private sector contacts
say the problem is "absolutely endemic" in Guangzhou. There have
been some high-profile convictions of government officials for
corruption, and local officials tout new measures designed to
address the problem, including an innovative program that solicits
public comment on the performance of government officials. However,
the attitude of many scholars toward corruption-- rationalizing and
excusing it--indicates that the situation is not likely to improve
any time soon. END SUMMARY.


2. (SBU) Reliable data on corruption in China is extremely hard to
come by, according to Ni Xing, professor at Sun-Yat Sen University
and author of three books and over 60 articles on the subject. Like
other scholars, Ni gets his statistics from various outlets, which
include official sources--such as the yearly work reports issued by
the People's Supreme Court and the CCP Disciplinary Committee--and
unofficial ones, particularly the media. Ni's research team
estimates, based on figures released by the government, that between
1980 and 2002 corruption cost the Chinese economy about RMB 3
billion per year. But Ni also commented that most government
statistics are both unreliable and out of date. He said fewer than
10 percent of corrupt officials are caught or punished. He told us
he personally believes the actual incidence of corruption--and its
cost to society--is far higher than what is officially reported.

3. (SBU) In addition to raising the cost of conducting private
business in China, corruption contributes to widespread fiscal
mismanagement. A private sector contact told us the corruption in
Guangzhou government agencies is "absolutely endemic," commenting
that "if you don't pay, nothing happens." This includes everything
from getting needed licenses and approvals to government inspections
of equipment or facilities. One foreign company that needed to have
its factory inspected every month paid a government inspector, whose
salary was RMB 1,500 (USD 214) per month, a "gift" of RMB 4,000 each
time he visited. Eventually, the price of the gift rose to RMB
17,000 per month. Foreign businessmen in China talk about having to
give lavish gifts--including a new car, in one case--to government
contacts at Chinese New Year. The local businessman described a road
project that should have cost RMB 3 million (USD 428,000) eventually
going to tender at RMB 20 million (USD 2.85 million), and a waste
treatment plant that should have cost RMB 60 million eventually
costing RMB 250 million. On one project near Guangzhou, this source
said, a contractor dug up a brand-new road and repaved it at a cost
of RMB 20 million to 30 million. This was because his "guanxi," or
relationships, were in the government bureau in charge of roadways,
and they had money left in their budget. Meanwhile, several nearby
roads went unpaved. This source estimated that the extra cost of
doing business in China as a result of corruption added 0.5 percent
to 1 percent to the country's inflation rate.

Who's Getting Caught?

4. (SBU) However, not everyone gets away with it. Last year, the
former director of the Guangzhou Center for Disease Control and
Prevention was sentenced to life in prison for taking RMB 11 million
(USD 1.6 million) in bribes. In a recent high-profile case, two
directors of the Guangzhou Government Procurement Center were
charged with taking bribes and abusing power. One, Li Chunlu, was
sentenced to seven years in prison. The other, Zhang Yiquan, went to
trial on March 5, 2008. And in early 2008, the general manager of a
state-owned company in Liuzhou, Guangxi confessed to taking bribes
and implicated 95 other people, most of whom were director or
director-general rank. All these officials were caught up in an
effort on the part of south China government officials to deal with
corruption concerns; in 2007, the Guangdong Disciplinary Commission
filed a total of 3,981 corruption-related cases, according to a
recent national government report. Of these, 22 involved officials
at director-general rank, and 214 involved officials at director
rank. Some 210 cases involved more than RMB 1 million (USD 143,000).
The report indicated that 3,760 cases were "properly handled" and
then closed, and 3,921 people were punished "according to the law
and party discipline." The announcement gave no details about the
punishment or sentences. Comment: The question remains, however,
just how committed local officials are to sustaining the
anti-corruption drive. Good beginnings are often just that in China,

GUANGZHOU 00000173 002 OF 003

with focus and sustained effort flagging until another high-profile
initiative is launched. End comment.

What's the Government Doing About It?

5. (SBU) Qin Tonghai, vice director of the Guangdong CCP
Disciplinary Commission, told us the provincial government is
working actively to fight corruption. It created a uniform salary
scale and payment system for all provincial, municipal, and county
officials. It implemented budget oversight systems for 21
municipalities, connecting them to their local finance bureaus for
supervision. It introduced public bidding for construction projects:
in 2007, there were 8,838 public bids on a total of RMB 1 billion
(about USD 143 million) in infrastructure projects, he said. The
commission also began interviewing government leaders at least once
a year to remind them of the anti-corruption regulations. In 2007,
more than 90,000 government officials in Guangdong were interviewed
by the commission.

"American Idol" Meets Accountability

6. (SBU) In an innovative system aimed at holding officials more
accountable to the public, the government of Huizhou, Guangdong,
invited the public to comment on the performance of government
officials. Starting in 2002, the three officials with the greatest
number of negative comments were required to have special interviews
with the disciplinary commission. Any official who appeared on the
complaints list for two years in a row would lose his job. This
system has now been expanded to Zhuhai, Zhanjiang, and Chaozhou, Qin
said. He proudly noted that Transparency International's 2007
Corruption Perception Index rated China at 3.5 (10 is the least
corrupt), an improvement from the country's 1995 rating of 2.16. Qin
claimed China has made the greatest progress of any country in the
world in fighting corruption. He cited a 2007 survey conducted by
the National Statistics Bureau in which 85.4 percent of respondents
in Guangdong province said they were satisfied with the government's
anti-corruption efforts, an increase of 8.8 percentage points from

7. (SBU) Guangzhou's municipal government is also actively promoting
government transparency (ref. A) in order to reduce corruption. Dr.
Peng Peng of the government-funded think tank Guangzhou Academy of
Social Science said the Guangzhou local government set up an
official website in 2005 ( that makes
government documents and information available online. It also
created an "electronic mailbox" where citizens can get email alerts
from the government and started a telephone hotline that directs
citizens to different government bureaus. The hotline phone number
(12345) is easy to remember, and connects callers to a local
official who can assist them. Guangzhou officials are very proud of
this service; they have rounded up local leaders and district heads
to take shifts answering the phone. Experts and officials told us
that these efforts to increase transparency and make government more
accountable are aimed at reducing the instances of official

Making Excuses

8. (SBU) Despite the government's outwardly tough stance against
corruption, south China officials and academics spend a lot of time
making excuses for it. Professor Ni told us many academics are
coming to believe that China cannot avoid corruption at this period
in its history. From imperial times through China's socialist
planned economy to the present day, paying off officials has often
been the only way to get anything done, our sources said. As
traditional and modern ideas converge in today's China, ambiguity
over values--and shifting ideas of right and wrong--leave room for
corruption to take place. Ni argued that, in many cases, corrupt
officials are not committing premeditated crimes, but taking
advantage of incompetence or lack of oversight. Peng agreed, saying
that because many government officials have limited management
experience and little or no capacity to track funds, money can get
easily get "lost" or misappropriated. As China's officials become
more professional and accountability systems improve, this type of
"opportunistic" corruption should decrease, according to Peng.

9. (SBU) Further rationalizing, Peng said the CCP Disciplinary
Committee is in a delicate position. On one hand, the committee
needs to show the public that its anti-corruption campaign is

GUANGZHOU 00000173 003 OF 003

working, preferably by catching and convicting corrupt officials. On
the other hand, he said, the committee risks offending leaders--and
stirring public anger to the point of political instability--if it
exposes too much corruption in the system. Peng explained that while
Americans might see convictions resulting from the committee's work
as signs of its effectiveness, Chinese see politicians convicted of
corruption and think the whole system is rotten. Seeing wrongdoers
get punished only makes them lose faith in the system, he said.

10. (SBU) Some south China academics put a positive spin on
corruption, saying that most Chinese are used to this way of doing
things and see it as a necessary evil in their quest for economic
development. Peng said many Chinese think of it as an either-or
choice: honest officials and desperately poor people (as under Mao
Zedong), or corrupt officials in a system where everyone is getting
richer. There's no question which one Chinese would choose, he said.
Ni said that some economists even believe corruption is good for
China's economy, because without it things would not get done. He
told us many experts consider corruption to be like a cancerous
tumor--it's bad, but at least you know it's there. If you remove it,
something worse could take its place. Comment: Congenoff chose not
to point out that a cancerous tumor will very often kill you if you
don't get rid of it. The apologist attitudes of south China
academics toward corruption often reflect complacency and
resignation, and indicate the situation is highly unlikely to
improve much in the near future. End comment.

© Scoop Media

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