Coal capital now hit by anti-graft drive - Ian Johnson

Ian Johnson

Coal used to be literally gold in China, but those days are over. Formal coal capital Lüliang has now been the center of president Xi Jinping´s anti-corruption drive, writes journalist Ian Johnson in the New York Times. A case study on disrupting the Party establishment.

Ian Johnson:

Now, Lüliang is at the center of one of the most sweeping political and economic purges in recent Chinese history. As President Xi Jinping’s campaign against corruption enters its second year, the Communist Party authorities have made an example of this district of 3.7 million, taking down much of its political and business elite in a flurry of headline-grabbing arrests.

Seven of the 13 party bosses who run Shanxi Province, where Lüliang is located, have been stripped of power or thrown in jail, and party propaganda outlets have trumpeted the crackdown in the region as proof that Mr. Xi is serious about rooting out corruption.

On Friday, state news media reported a new wave of arrests, with nine more Lüliang officials detained. The reports say the arrests are part of a new emphasis on cleaning up local governments, where officials have extensive powers and few restraints.

Among those who have been held up for national humiliation here are Xing Libin, a coal baron who reportedly spent $11 million on his daughter’s wedding, and Zhang Zhongsheng, a local apparatchik accused of using illegal gains to build hilltop mansions. Interviews in Lüliang and in state news reports put the two men at the center of an incestuous network of entrepreneurs and party officials who bought and sold government posts to maintain control of the area’s lucrative coal mines and to finance lavish lifestyles.

More in the New York Times.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Managing risks remains a key talent to survive in China. Are you looking for risk management experts at the China Speakers Bureau? Check out this latest list.  

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How bribes enrage China's patients - Zhang Lijia

+Lijia Zhang 

Violence used by patients against doctors has hit the headlines a few times. Author Zhang Lijia can understand from her own experience how the culture of bribes drives patients to desperation, she tells in KTEP.

KTEP:

As a teenager in the 1980s, Lijia Zhang worked in a missile factory where the state provided all health care. The system was incredibly wasteful. Zhang, who wrote about her experiences in the memoir Socialism Is Great, recalls medicine was so plentiful, workers used to throw pills at each other for fun. 

China shifted from a command economy to a more market-oriented one and turned hospitals into profit-driven ventures. A few years ago, Zhang says, an anesthesiologist shook her family down for bribes over surgery for a cousin, who was dying of leukemia. 

"He demanded about $3,300," Zhang recalls. "My cousin's family was poor. We all had to chip in money. The reason we paid the money is we thought the operation was very dangerous. We thought if we didn't pay, it may jeopardize the health of my cousin." 

After paying bribes, if a surgery goes badly, many patients are understandably enraged.

More in KTEP.

Zhang Lijia is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers' request form.

China Weekly Hangout

Is president Xi Jinping going to win the fight against corruption? +Chao Pan, +Steve Barru and +Harm Kiezebrink discussed at the +China Weekly Hangout on October 31 how the drive against corruption and political survival mix with each other. Moderation by +Fons Tuinstra of the China Speakers Bureau.


On Monday 11 November shadow banking expert Sara Hsu will be discussing the latest developments in the +China Weekly Hangout and give her view in an upcoming hangout on what we can expect in the months to come, and hopefully has already some idea of what the Third Plenum will lead to. Broadcasting time will be 5pm CET, 11am EST and (unfortunately) midnight at Beijing time (but you can watch the session also later). Questions will be asked by +Fons Tuinstra of the China Speakers Bureau. There will be no other guests in the hangout - unless you have some very good arguments. But questions can be asked during the event, from our event page here. 

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Corruption: everybody is guilty - Zhang Lijia

+Lijia Zhang 

One of the reasons corruption in China is hard to eradicate is because everybody is guilty. Author Zhang Lijia describes for CNN how her family ended up bribing corrupt officials in Nanjing.

Zhang Lijia:

Chinese public opinion surveys identify corruption as the most hated social problem, yet everyone is also guilty of it. 

Last year, when my father fell seriously ill, we took him to a decent hospital close by but were told the beds were fully occupied. As always, we turned to our guanxi — our network of connections — for help. 

Fortunately, a relative, a not so senior but well-connected official, managed to secure a private room at the hospital, which is reserved for ranking leaders. In return, the relative agreed to get the son of the hospital director into the most desirable school in Nanjing. 

I became aware the weight of guanxi shortly after I was thrust into adulthood: At 16 I was dragged out of the school to work at a military rocket factory. 

Two months later, when Spring Festival came, my mother requested that I visit my boss’ home with gifts she had prepared. Naive and embarrassed, I refused. Mother angrily predicted: "You’ll never go far in life if you don’t know how to la guanxi!" The verb la means to pull or to develop. Sure enough, I never got any promotion during my decade-long stint at the factory even though I acquired a degree in mechanical engineering.... 

And politically, China produces its top leaders more or less based on patron-client ties rather than meritocracy. Both President Xi [Jinping] and [jailed politician] Bo [Xilai] are "princelings" — the children of senior leaders, the most powerful and influential group in China. Nepotism, a form of corruption, has feudal roots. 

In fact, I believe the whole corrupt practice of guanxi is rooted in China’s long tradition of renzhi.

The full story is at Zhang Lijia's website.

Zhang Lijia is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

China Weekly Hangout

How successful can president Xi Jinping be in rooting out corruption, the +China Weekly Hangout is going to ask on Thursday 31 October. How committed is the Xi/Li team to real change? You can read our announcement here, or register for the event here. 

The +China Weekly Hangout discussed in May China's changing labor force with +Dee Lee (Inno), of the NGO Inno in Guangzhou, running a workers' hotline, mainly funded by big brands who want to keep an eye on working conditions. Economist Heleen Mees, in New York, +Sam Xu and +Fons Tuinstra, of the China Speakers Bureau, ask him questions.

Useful corruption - Zhang Lijia

Zhang Lijia

Officially corruption is not done, also in China. But a bit of corruption can be very useful, explains author Zhang Lijia on her weblog. For example, when you have to catch the train to Nanjing on 9 a.m. and you do not have the right ticket.

It was now 8.40 am. The gate to the 9 am train wasn’t open yet. Tailing behind the woman, we came to a side entrance. She told people guarding the entrance that I was on her tour. They just opened the gate without even checking my ticket. The granny obviously knew her way around as she chatted with people along the way. On the top of the stairs that led down to the platform, she pointed at the train and said: “That’s your train. You go. Now, 30 yuan.” As simple as this? “No, please take me to the train as you promised,” I pleaded. Granny eyed at me up and down. “What do you do, reading books in foreign language?” she pointed at a novel in English I was holding, Amitav, Gosh’s Glass Palace. I had to take it out of my small back pack because it was bursting with presents I had just bought for my family. “I am a writer,” I said. “Writer! Wow, my daughter loves literature,” a smile blossomed on her winkled face. “Come on then. I am wasting so much time here. I could have signed up more people on my tours but you are a writer,” she talked garrulously. 

We got on the train where the attendants were getting things ready. Granny told one of them to keep an eye out for me. The girl suggested that I go to carriage 4 – the dinning car to wait – since the train was full. In the dining carriage, I found two tall round tables but no seats. In a few minutes, passengers burst onto the train and occupied their rightful positions; uniformed staff briskly walked past the dining area. I avoided eye contacts with them – I still wasn’t sure what would become of me. I anxiously waited for the departure of the train. Only then would I feel safe. I was very glad to receive a phone call from a French friend. We chatted and laughed until the train started to move. Then I let out a sigh of relief. To justify my presence, I bought a cup of tea. A sweet young girl serving behind the counter smiled brightly at me: “Are you a Chinese? Your English sounds so good!” I confirmed that I am Chinese, from Nanjing. I nursed my tea, leaning against a rail by the window. There were a few others hanging out at the dining car. I wondered what their stories were. The girl kindly informed me that there was still one free seat among the seats that allocated to the dinning passengers, right behind the dinning carriage. I nodded gratefully. Just as I picked up my bag, my coat and shawl, a man in a fine suit dashed out. By the time I reached the seats, I found the man in suit sitting among the diners, his head leaning against the seat, eyes closed. 

I returned to the dining car. No big deal, I told myself, as long as I could stay on the train, I could handle standing for an hour. But the sweet girl was determined to help me. She went out and returned with the news that one of diners said I could take his seat in carriage 7. Off I went, with a seat and an almost legitimate status on the train. With my own ticket, I passed the ticket checkout point at Nanjing station without a hiccup. The granny scheme worked! I guess that’s the thing with corruption in China: everyone hates it and everyone is also willing to be part of it.

More at her weblog.

More on Zhang Lijia and China's moral crisis on Storify.

Zhang Lijia is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch, or fill in our speakers' request form.  

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Corruption stifles genuine entrepreneurship - Victor Shih

Victor Shih

Political scientist Victor Shih looks in The Financial Times into the trial of government officials after the Shanghai fire, costing 58 lives last November. “A disturbing pattern of corruption, which is endangering the lives of millions around China.”

According to details released by the Chinese media, the Jing’an government invited bids for a project to insulate a teachers’ dormitory. Not surprisingly, a company wholly owned by the Jing’an District Government, the Jing’an Construction Company, “won” the bid, but then gave the Rmb30m project to its wholly owned subsidiary Jiayi Company, which had little experience in this kind of project.

After paying government officials bribes to obtain this contract, Jiayi proceeded to farm out various aspects of this project to sub-contractors who paid Jiayi management the highest bribes.

In some cases, the work was further sub-contracted to foremen, who also had to pay sub-contractors bribes. At every level, guanxi and the amount of bribes determined who received the contract, not quality, safety or track record. In the end, a welder, hired precisely because he was inexperienced and therefore cheap, accidentally dropped his torch, which set off the fire.

 His conclusions:

At minimum, two major reform needs to be carried out to reverse the corruption. First, the state economy continues to be sprawling and continues to enjoy soft-budget loans from the banks. This creates ample opportunities for connected insiders to set up dummy companies to take advantage of government contracts. Because senior managers of SOEs are not remunerated according to profit (and profit not tied to capability), they are only weakly incentivised to maximise profit but strongly incentivised to take advantage of rent-seeking opportunities, which allow them to privatise state wealth.

If large SOEs, including state banks, were genuinely privatised, owners of firms would be more interested in generating profit and even building the reputation for their own firms, instead of taking advantage of rent-seeking opportunities.

Of course, China’s weak regulatory environment is also to be blamed. With more transparent public oversight, a free media, and accountable officials, the tragedy in Shanghai could also have been avoided.

 More in The Financial Times

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Corruption and executions in Suzhou - Bill Dodson

Bill Dodson

Suzhou resident Bill Dodson talks about the executing of his corrupt vice-mayor to Paul French of the Ethical Corporation in a podcast. Local debts are becoming a liability and local officials paying with their lives. A look behind China's corrupt economy.

Two high profile executions of the former mayor of Hangzhou and a vice-mayor of Suzhou triggers off speculations on what might behind those high-level capital punishments at a local level. Bill Dodson expects that the attention for the problem of local debts - some of the earlier ones after the first global crisis started - are due very soon.

"It is a signal to local officials," Bill Dodson says. Also, the upcoming change in government in 2012 triggers off internal struggles where communist officials have to rally behind certain issues and leaders, well ahead of the transition.

You can listen to the podcast at the Ethical Corporation

Both Bill Dodson and Paul French are speaker on the China Speakers Bureau. Do you need them at your meeting or conference? Do get in touch. 

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Why yelling in China does not work - Shaun Rein

Shaun Rein by Fantake via Flickr

Shaun Rein explains what he has learned about doing business in China, and how US companies like Google could learn from it. Publicly yelling mostly does not work, he argues in Forbes, describing his first approach with a corruption case a decade ago.

Yelling often doesn't accomplish much in Asia. Even if you're right, it's often better to work patiently. Chinese say you should be like water--you can move fast like a river but also slow as a trickle, depending on the situation.
Take Google's ( GOOG - news - people ) battle with China. Google shouldn't have been so strident and public in demanding that the government end censorship. Everyone wants a freer Internet, but you've got to do what actually leads to improvement...
True reform ultimately needs to come from trusted Chinese showing that rules can be revised without negative effect. Change can't come from foreigners, or from Chinese funded by foreigners. Westerners can and should play key roles in reform, but by offering advice, not arrogant threats, and by presenting examples outside of the system. And always remember that reform is not an easy process. For every two steps forward there is usually one step back.

More in Forbes.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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What China can learn from the events in Egypt - Shaun Rein

Shaun Rein by Fantake via Flickr

The situation in China has very little in common with Egypt, says Shain Rein in CNBC, but China's leadership can learn a few lessons from the country's turmoil. When trouble will occur, it will come from the students, not the middle class.

While it seems unlikely a revolt could happen anytime soon – most Chinese still firmly support the direction the government is taking the country – the reality is that university graduates could pose a problem in the coming decades if they feel their future options are being limited by corruption or a weak educational system that does not train them properly for the global job market.

What China can take from Egypt’s situation is that it needs to stamp out corruption quicker than it is now. Even when government officials are not corrupt, many assume they are...

Second, while corruption in Egypt is a problem, it is nothing new. It has been an issue since Mubarak rose to power. What is new now is the depths of the financial crisis facing Egypt which is leaving limited employment options for the middle class. That has further stoked Egyptians’ anger at what they see as privilege and corruption among the elites.

To ensure enough good jobs, China needs to reform its education system to prepare its students for a global business world that is fast moving, not just how to take standardized tests.

More in CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Please pay Chinese doctors more - Shaun Rein

Shaun Rein by Fantake via Flickr

One of the root causes for corruption in China is that government officials, doctors and others get a very low pay. Shaun Rein describes in Forbes why the idea of ending up in a Chinese hospital sometimes keeps him awake at night:

Why is there so much corruption in China's health care system? Part of the problem is that doctors make so little. A brain surgeon named Dr. Xie at a famous hospital complained to me that he officially made only $400 a month, which is less than many factory workers now get. Doctors can't make money legally, he lamented. Some 95% of hospitals are state-owned, and the government caps consultations at $2 to $3 even for the country's most famous doctors, so that even peasants can afford to see the best ones.

Patients keep on paying their doctors bribes, so they can get the best possible help. While in the industry, salaries are going up, in hospitals and in government wage developments do not keep up with those developments and inflation. Keeping the costs low for patients, is one of the reason hospitals cannot pay a decent salary. Shaun Rein gives the examples of the San Francisco police department and the Singapore government, where decent salaries halt corruption and improve the quality of the services. Shaun Rein:

There was shock last year when one official's diary detailing his sexual escapades hit the Internet. People were shocked not that he had taken bribes to pay for weekly visits to hookers but that those bribes had totaled only $10,000 over many years. They thought the amount would be much greater.

More arguments in Forbes.

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Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Is Chen Liangyu going to be executed?

Chen Liangyu when still in office

"He is going to be executed for corruption," said a former colleague I met yesterday for lunch when the issue of Shanghai's former party secretary Chen Liangyu came up. "Of course, they have enough proof he is corrupt himself, not only his family. I heard the first stories already eight years ago."

More than setting up yet another hapless bureaucracy to fight corruption, this upcoming court case is going to set the agenda of the fight against corruption. But whether the system will literally kill its own children? I'm sure he will get (and deserve) a heavy punishment, but I think the death penalty will be a step to far. What do you think?

The details of Chen Liangyu's case

The financial magazine Caijing explains the finer details of the wrongdoings of Chen Liangyu, Shanghai's former party secretary. The bigger political picture gets a bit lost here, but by actually including Chen's parents in the story - although they only add emotion, no facts - makes clear that we are going to see quite a lot of his very special court case.

In an apartment in the Luwan district of Shanghai, an old couple has saved a well-worn newspaper dated July 27, 2007. The headline reads, “China's Central Commission for Discipline Inspection Answers Reporters on Chen Liangyu’s Serious Violation of Principles.”
“We know nothing more than what was printed in the paper,” said the husband, Chen Genghua, an 86-year-old retired engineer,as his wife, Li Mouzhen, bears a look of sadness and distress.
The person mentioned in the headline is Shanghai’s disgraced former party secretary, who has been embroiled in a multi-billion yuan pension fund scandal. Chen is also the eldest of the couple’s three sons.

A way to clean up the banking sector

Victor Shih detects a path Chinese authorities are following to clean up the banking sector:

I am beginning to detect a pattern where middle level and senior regulators and officials get to rotate to a commercial bank, where they enjoy a few years of high salary. Then, they can either choose to stay or return to poverty. If this can reduce corruption, I think that would be a pretty good system.

Rounding up more unusual suspects

Du Xiangcheng

The anti-corruption fight caught a few unusual suspects. Du Xiangcheng, himself a anti-corruption fighter in Hunan province, was caught with a Russian prostitute. Of course, many - especially those with an internet connection - expect here foul play.

Zhou Liangluo, party secretary of the Haidian district in Beijing, got also entangled in corruption accusations. It seems major cleaning up time before the new political season starts after the summer.