Was Huang Guangyu’s case a warning?

In China, it is generally assumed that there is a political element to any high profile cases.

Questions:

1. How important is the problem of corruption on the business and political level for the society in China? Does the current leadership fight with this problem effectively?

2. I know it is hard to comment on the particular case of Huang Guangyu but some people say it was the warning, others he was sentenced because he was too naive to build the strong political alliances. What is your opinion?

Answers:

Andrew Wedeman, Associate Professor,  Department of Political Science, Director Asian Studies Program, University of Nebraska-Lincoln

1. Commercial bribery is a significant problem in China and elsewhere. In looking at corruption, it is important to remember that in any bribery case there are by definition two parties: officials who accept bribes and others who pay bribes. Although we might want to think that private interests, including business interests, only pay bribes under duress, in reality private parties may be paying bribes because they believe that they will be able to purchase favors that will increase their profits. In Huang Guangyu case, prosecutors charged that he paid bribes to cover up illegal financial transactions, including the diversion of capital to Hong Kong where he was presumably “round tripping” it — funnelling it through shell companies and then return it to China in the form of “foreign investment” — and evading taxes. The extent of commercial corruption is, of course, as difficult to gauge as the extent of official corruption. But is only looks that the official statistics on bribery, the imbalance between the prosecution of officials for accepting bribes and prosecutions of others for paying bribes is quite striking. A reading of the data suggests, in fact, that bribe payers are often not prosecuted. In recent years, there has been a growing awareness that to fight corruption you have to attack no only the “supply side” (officials willing to provide favors in return of bribes) and the “demand side” (private interests willing to pay bribes to obtain favors). The number of cases involving the prosecution of “corrupt businessmen” have, in fact been rising and there has been a string of prescutions of what some have called “red capitalists” in the past five or so years. This year, of course, we had the Rio Tinto case in which officials of that company were accused of accepting bribes from Chinese steel makers. As the efficiency of these prosecutions, it is hard to say. Impressionist data suggests that these prosecutions have not yet had a major impact on the extent of business corruption, but it is very hard to tell. Once corruption has become widespread, it takes time to alter the social norms that deem corruption a “normal” part of doing business and it is unlikely that the Huang case in and of itself will necessarily cause a dramatic change.

2. In China, it is generally assumed that cases are not selected at random and that there is a political element to any high profile cases. Whether Huang was singled out, I cannot say. Nor can I say whether he was particularly naive or foolish in his efforts. I would, however, agree that case is designed to serve as a warning to businessmen and to signal that no matter how rich you might be, the government will not hesitate to prosecute wrong doing. One has to keep in mind that China has opted to conduct a relative high visibility war against corruption and that the regime intentionally publicizes cases like this to show the public that it is fighting corruption. In this sense, I would agree that Huang was made an example and that his prosecution was designed to both warn businessmen that they face a real risk of prosecution for paying bribes and to the public to reassure them that the government is not going to be held hostage by powerful economic interests.

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