Private-sector corruption with Chinese characteristics
2014-08-13 12:44阅读：
Financial Times, 13 August, 2014, by Joe Zhang,
Warren Buffett would have picked the lucrative
markets the government has chosen
In the past year and a half, China has arrested thousands of public
officials, to much applause at home and abroad. The highest-profile
cases concern high-ranking Communist party officials such as Zhou
Yongkang, the former security chief. But when business executives
have been the target, the anti-corruption campaign takes on a more
insidious tinge. While private-sector wrongdoing has been
energetically exposed, investigators often prefer to let sleeping
dogs lie when state-backed businesses are involved.
Widespread corruption is usually blamed on the cronies of officials
rather than the flawed governance that opens up the opportunity for
the crime. These people, not themselves on the government payroll,
have stolen huge sums from the state with the connivance of its
employees. This serves only to reinforce the stereotyp
e, a commonplace in China, that all merchants are crooks.
There is no doubt that some private business people have
committed serious crimes. But that is not the end of the story. A
deeper malaise is at work.
In the two and a half decades after Deng Xiaoping became Communist
party’s de facto chief in 1978, much of the state sector was
privatised. That trend has been almost totally reversed in the past
decade. Each year since 2005, for example, state-controlled oil and
financial institutions (mainly the banks) have accounted for
between three-fifths and four-fifths of all the profits made by
companies listed on the Chinese stock market. Government tax
revenue has increased from about 12 per cent of gross domestic
product 1996 to 23 per cent in 2013, reversing steep earlier
declines.
Even Xu Shanda, a retired vice-minister at the tax bureau, argued:
“China’s government revenue as a percentage of GDP, at 44 per cent
in the first half of 2014, was too high.” This figure is based on a
wider definition that includes state fund incomes, social security
proceeds and capital gains from state enterprises, as well as tax
revenue. It has risen sharply, from 31 per cent three years ago,
according to Mr Xu.
Many state-controlled businesses are quoted in the stock markets,
leaving the government with a residual stake as small as 30 per
cent or 40 per cent. But there is no doubt who is boss or where the
companies’ allegiance lies. Most young Chinese people entering the
labour market choose to work for the state-owned enterprises. The
queues at recruitment events are long and depressing.
What is wrong with China’s private sector? Most privately held
businesses are still too small, too inexperienced and too fragile
to succeed. Many are opportunistic concerns that trade for a few
months or years and then shut down. They must contend with public
hostility and a legal system that offers scant assurance that they
will be able to enforce their rights. Driven by greed as well as
discrimination, many private business people are forced to find
illegal shortcuts, even if this jeopardises the future of their
business – or their lives.
There is still systematic discrimination against the private sector
by the government and the public. City officials fear, for example,
that awarding a public contract to a private concern over a
state-owned competitor might damage their careers. The same happens
at the lending banks, where executives who make bad loans face the
sack – unless the borrower has political connections. When
private-sector businesses go bust, they do not go quietly. Hapless
entrepreneurs are showered with opprobrium on social media and in
state-owned outlets – a reputational hazard which the public sector
is immune.
Companies owned by the state dominate every market where there are
profits to be made: from telecoms to tobacco, from insurance to
infrastructure. The state has liberalised some sectors – retail,
services, agriculture and low-end manufacturing – but these are
fiercely competitive sectors with tight margins. If Warren Buffett
had been allowed to invest freely in China, the billionaire
American investor would have bought into the lucrative markets that
the government has chosen.
What limited evidence there is suggests the financial performance
of companies in the private sector is inferior even to those in the
inefficient state sector. The picture is still worse when you take
into account the thousands of private-sector companies that go
bankrupt or close voluntarily each year. This hostility towards
private enterprise has insidious effects.
Many investors perceive state-controlled companies as less risky
propositions. That is understandable: during the past two decades,
instances of fraud and operational risk have hurt private-sector
businesses badly.
The inevitable consequence will be a bigger state sector. That may
be what the Chinese public wants. But, if China is to stamp out
corruption in business, it is not the place to start.
The writer is author of ‘Party Man, Company
Man: Is China’s State Capitalism Doomed?’
