Corruption on the Run…….?

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So Chi Yaoyun, a deputy director general of the Communist Party’s Discipline Inspection Commission, says corruption is declining. Taking reporters on a tour of the Commission’s new building in Beijing, the official who is one of those charged with keeping Party members in line and graft-free, apparently admitted there was a problem but said the Party was dealing with it firmly. I’m not sure what he based his cheery estimate on, but it certainly goes against anecdotal evidence. And the only statistical evidence I know of –about 30,000 arrests for corruption a year– point to no change. Actually, corruption is probably the biggest challenge to both China’s Communist rulers staying in power and the continued astonishing growth of the country’s economy, two things which are inextricably linked. I was talking last night to a senior international economist in town for meetings with top Chinese practitioners of the dismal science and he said one of them went to pains to stress how worried he was personally about the corruption problem, particularly the prevalence of children of top leaders among the new business elite. I wonder whether anyone has done the Green GDP style calculations for the cost of corruption to the economy. Between the environmental destruction (calculated to cost 10-12 pc of GDP a year) and the corruption tax, China’s economy is probably actually contracting but these are bills that won’t have to be paid for a while.

Anyway, my economist friend (and I am being discrete here, not coy) said that despite all the rhetoric about the rural urban income gap (3-4 times, depending on who you believe), he said he thought it was the urban income gap that was the real danger to China. “Not even rich societies like America have managed to avoid having a large underclass of urban poor and China will be no exception. But if the gap gets too big and you have these young guys driving around in their Ferraris flaunting it in front of the permanently under- or unemployed urban poor, it could be very dangerous for social stability.” One more thing for President Hu Jintao to worry about, poor fellow. It’s a wonder he can sleep at night.

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