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Henry Thornton - SMERSH: A discussion of economic, social and political issues Corruption in China Date 01/01/2010
Member rating 4/5
Puritanical approach misses the point.
By Graeme Mills Email / Print

The ‘west’ has evolved fairly open and relatively corrupt free institutions; law, government, bureaucracy, business. Government’s raise their money through taxes, fees and charges. That money is redistributed to pay for the institutions, bureaucracy and the business of government. A significant proportion of the rest is used to achieve essentially socialist aims, ie: social justice.

High taxes are needed to keep the whole edifice corrupt free and achieve the socialist aims.

It’s a good system and one we in the west understand.

We see other systems, which demand money for services rendered, particularly government or bureaucracy, as corrupt. We laud our system as open and transparent.

China evolved its institutions over millennia. Its bureaucracy is based on Confucian principles. Also, the other great feature is that not much money is spent by the government on paying officials. Rather, the officials charged directly for their services. Hence, over millennia, entrance to an official post via the examination system was a way of advancing yourself and your family.

Entrance to an official post also required that other great Chinese institution, ren ji guan xi. In the west we call it networking, or the old school boy network. However, it is much more subtle than that and must be understood if you want to (successfully) do business in China.

Taxes in China are very low by western standards. One of the key skills for a successful account in China is to have excellent ren ji guan xi with the relevant officials in the tax department.

There is a direct relationship between taxes and how much a government official is paid, in any society.

High taxes and high pay for government officials mean they do not have to find revenue from other services. Low taxes and low pay to government officials mean that other services generally attract a …. non official fee.

In China it is best to think of these, non official fees, as a direct form of taxation. It is very efficient really, as you only have to pay for the service you want.

It has worked for millennia in China. It is different to the west, but it works and like all things that work, probably doesn’t need fixing.

As China increasingly engages with the west then it will undoubtedly evolve to meet the demands of doing business with these wai guo ren (foreigners). Well, at least become better at the P.R. However it is fanciful to think that a system that has evolved over millennia can be speedily or completely changed. To paraphrase Deng Xiaoping, China will do business the western way – with Chinese characteristics.

This note is stimulated by the following article.


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