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R 260745Z MAR 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6994
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 03 GUANGZHOU 000173 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/CM 
STATE PASS USTR CHINA OFFICE 
 
E.O. 12958: N/A 
TAGS: PGOV SOCI ECON EFIN EIND EINT CH
SUBJECT: GUANGZHOU GOVERNMENT CORRUPTION - HARD TO SEE, EVEN HARDER 
TO STOP 
 
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. 
 
----------------------------------- 
OFFICIAL CORRUPTION: HOW BAD IS IT? 
----------------------------------- 
 
¶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statistics are both unreliable and out of date.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 
¶2006. 
 
¶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 (http://www.gd.gov.cn/) 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 
corruption. 
 
--------------- 
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.