The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World (12 page)

Chapter 6

UNDERSTANDING CORRUPTION IN CHINA

WHAT CHINA’S UNDERGROUND SEX TRADE SHOWS ABOUT ITS GOVERNMENT

I was showing my good friend Jack, who was visiting China from the United States, around Shanghai. I hadn’t seen Jack in over a decade, since our boarding school days at St. Paul’s School in New Hampshire, and it was great seeing him again. Jack is one of those incredibly brilliant people whose talent causes your jaw to drop. He started a hedge fund, runs marathons, and speaks five different languages.

As we walked down the street, he kept blurting out, “There’s one, and another one!” I looked over at Jack, who was pointing at the beauty salons with their pink-neon-lit interiors. Inside each one sat dozens of middle-aged, bloated women wearing cheap makeup. The necklines of their tight shirts plunged low, exposing their propped-up cleavage and giving them the appearance of overstuffed, raw sausages.

“I can’t believe there are so many brothels!” Jack continued, his brow wrinkling. “How can prostitution be so open?” he asked as he pointed at the elementary school less than 20 yards away on the corner. He found it especially odd because he had read in the news that the Chinese government was holding a morality campaign to crack down on prostitution and pornography. “Wasn’t there that college professor in Nanjing that just got busted for organizing orgies online?” He was baffled that there could be such blatant flouting of the law in what he assumed would be a tightly controlled authoritarian state.

With his observation, Jack touched on an issue that goes far beyond the realm of prostitution and deeper into contemporary Chinese society: the divide between the central and local government, and how laws are enforced. It is common for Westerners to think of the China’s government as a large, monolithic authoritarian entity. But in reality there are many different parts.

Aside from the central government, there are provincial, county, municipal, and district governments. While technically they are under the central government’s authority, they are given leeway in implementing and interpreting national policies. They are all pulling in different directions. Different regions—and different ministries within the government—often have competing and, in some cases, diametrically opposed interests. One needs to analyze different parts of the government through a more nuanced lens to understand how the End of Cheap China increasingly will force the bureaucracy to change.

Despite the central government’s attempt to eradicate prostitution—a process aided by the proliferation of better job opportunities, which is lowering the beauty quotient of the average prostitute—finding a hooker, albeit an ugly one, is not difficult in any city in China. All one needs to do is look for pink lights or a salon whose occupants are all just waiting around. Their easy availability confuses many visitors like Jack, who only get their information about the structure and policies of the Chinese government from foreign media sources.

It is true that the central government is always cracking down on prostitution. Every time I pick up a copy of one of the state-run newspapers, I see headlines like:

GOVERNMENT EMBARKS ON ONE-HUNDRED-DAY CRACKDOWN ON PROSTITUTION

Or:

GOVERNMENT SENDS HOOKERS FOR RETRAINING

In some cities it has become popular for authorities to publicly shame prostitutes as part of their punishment, and there are often pictures in the news of large groups of women in correctional uniforms being paraded through town. The government bans pornographic publications entirely, and is generally strict about any sexual content in television programs. Plans to open a Playboy Club in Shanghai were quashed by local authorities for fear of it being too risqué, and television shows like the popular singing competition Super Girl were banned. On the other hand, Jack and I passed over a dozen brothels in under an hour in China’s most cosmopolitan city, and in smaller-tier cities business deals are commonly cemented at karaoke clubs and saunas swarming with prostitutes, with hardly any interruption by local authorities. How could this be?

The answer is pretty simple: Sometimes corrupt local officials ignore central-government directives. President Hu Jintao has said official corruption is a pervasive problem that the central government must tackle. The state-owned newspapers
China Daily
and
Global Times
reported that 4,000 corrupt officials have smuggled $50 billion in state funds out of the country over the last 30 years. Hu has made cracking down on corruption a major tenet of his administration. Under Hu, anticorruption police arrested Communist Party of China Shanghai Committee Secretary Chen Liangyu and sentenced him to 18 years in prison, on charges of financial fraud, abuse of power, and accepting bribes. The former vice mayors of bustling coastal cities Hangzhou and Suzhou were executed for taking millions in bribes. Despite attempts by the central government to eradicate corruption, it remains a serious problem—especially at the local level—that constantly undermines the Beijing authorities.

Local official corruption is a large reason why the food sector has been disrupted by poor quality despite the best intentions of the central government. Local officials are paid poorly, many earning only a few hundred dollars a month—less than the workers stapling furniture together in Laura Furniture’s factories. They are not even allowed to travel abroad when they reach a certain rank, unless they are on officially sanctioned tours. Even powerful ministry heads make less than $2,000 a month. By comparison, most U.S. Cabinet secretaries make around $200,000 a year (or over $16,000 a month), and the average salary in the U.S. Department of Energy is over $5,000 a month.

Furthermore, the government restricts officials above a certain rank from transitioning into the private sector after they retire, so there are few avenues for local officials to make personal money aside from two sources: bribes, and relying on their children to earn for them. Retirement housing and food allowances for officials are contingent upon their continued support for the Communist Party, which makes their allegiance much easier to secure. The Party’s control over housing benefits is a canny strategy aimed at discouraging divisive factions from emerging—it’s hard to make trouble without an independent supply of cash and food. It is even rumored that all-powerful former Prime Ministers Li Peng and Zhu Rongji have been prevented from publishing memoirs. These restrictions and contingencies show the importance the Party places on ensuring harmony and limiting the power of one individual to disturb society.

Rules that limit officials’ job hopping from the public to the private sector also ensure that decisions are in the country’s best interests rather than for their personal future financial gains. Recall American officials such as former Secretary of the Treasury Robert Rubin or Vice President Dick Cheney, who ended up managing or lobbying for the industries or companies like Citigroup and Halliburton that they previously oversaw during their time in government. Sometimes I wonder if the decisions they made in office would have been different if they were barred from entering the private sector afterward.

Although these measures are designed to rein in corruption and ensure more objectivity among local officials, the result is that financial prospects for local officials are less impressive than for their Western counterparts or Chinese in the private sector. As in every country, some greedy local officials turn to corruption to enjoy a better life. They protect brothels out of simple greed, or to provide the best for their families, while they are still in office and have influence.

Many local officials also have no interest in getting promoted in the party hierarchy. They mainly care about how much leeway their direct supervisor grants them, rather than what the central government wants. As long as they don’t threaten the primacy of the Party and thus threaten stability, they are given some flexibility in implementing state directives.

Corrupt officials protect illegal operations such as brothels as long as they do not cause spillover effects that harm their district, such as violence, forced prostitution, or drug use. They know that these will cause local citizens to protest, and that the central government will step in when that happens, so they seek to control them. Moreover, due to the large numbers of urban migrant workers, who are kept away from loved ones and family for months at a time, local officials understand that pragmatism must sometimes prevail over ideology or morality. They often turn a blind eye to prostitution so that male migrant workers are satisfied. One municipal official I spoke to saw it in practical terms, and summed the situation up this way: “Better they go to prostitutes than vent in other ways, like rape or causing social disorder.”

For ordinary Chinese people, vices like drugs and violence are intolerable due to the immediate impact on their everyday lives, but often they will tolerate prostitution as long as it is kept behind closed doors and distant. Here we see the divide in thinking between levels of government: Local officials and people confront prostitution pragmatically, whereas the central government upholds a more morality-based approach.

On the other hand, restrictions on televised portrayals of sex and and campaigns against Internet pornography are run by ministries that report directly to the central government in Beijing. Unlike corrupt local officials, who expect to remain in their current positions, those who report to the higher administration in Beijing enforce national directives to the letter, because they aspire to rise within the Party hierarchy. This is why you end up with professors in Nanjing being arrested for arranging sex parties (under “licentiousness” statutes), while hookers ply their trade in pink-lit barber shops in front of policemen patrolling the streets. The orgy-organizing professor was arrested because he was using the Internet to arrange his trysts. This made it impossible for him to bribe someone for protection, because the ministries overseeing the Internet report directly to leaders in Beijing.

The conflict between official policies on prostitution and pornography versus their actual implementation at the local level symbolizes the many divergent interests between regional and central governments. Despite the central government’s power to set national directives, it is not quite the monolithic and totalitarian state that many Westerners imagine. My friend Jack discovered this complexity via the pink brothels glittering along the roadside. Many foreigners never understand this complicated dichotomy, but ordinary Chinese people walk along these streets and live within this system. Their understanding of this duality explains why they often direct their anger at local governments, accusing them of corruption, while remaining generally supportive of the central government, which they trust to have the interests of the general public in mind.

When high-level officials are found guilty of corruption, they often receive serious punishments that help mollify some of the anger. Zheng Xiaoyu, the former director of the State Food and Drug Association, was executed for corruption in 2007. The former railway minister, Liu Zhijun, has been arrested for allegedly stealing over $100 million. He is being blamed for cutting corners on safety, which may have helped cause the July 24, 2011, train crash that killed 39 people and injured hundreds. He most likely will face a similar fate to Zheng’s.

In China, competing interests, local and regional officials, and various government ministries are often given room to diverge from the central administration. This is actually a healthy situation, since it forces the central government to listen to other voices that are closer to the common people and to form a consensus among different orders in society to develop a unified strategy going forward.

One of the biggest problems facing China today is forced land appropriations and the eviction of peasants, done to allow real estate developers to build more housing units or so the government can launch new infrastructure projects like high-speed railways or subway systems. Many unsavory local officials, bribed by real estate developers, use corrupt local police and thugs to drive peasants out of their homes to build new projects. Because local governments often raise the bulk of their tax revenue from land sales, or their officials benefit from family relationships, some of them push for real estate development at all costs. They often do not adequately compensate those that need to be relocated. The more courageous citizens fight back against this injustice. In some instances, thugs are sent to beat and maim holdouts, and riots spill out into the general population.

Fueled by bubbling anger at endemic local corruption, these riots soon turn into massive conflagrations. Thousands of people quickly congregate and start causing bedlam. Protesters generally are not trying to overthrow the entire political system, but just attempting to stop what they see as thievery and brutish behavior on the part of local officials.

Western analysts often wrongly blame the central government for these battles, or assume that rioting means that local populations want to overthrow the government, similar to what happened in Egypt and Tunisia during the Arab Spring. International news media often gloss over the distinction between local and central governments or miss it entirely, so many times mass protests against corrupt local authorities in small, county-level cities get framed in the headlines as demonstrations against “Beijing” or “the Chinese government” that threaten their very legitimacy.

However, the central government does not condone these practices. The state-run
China Daily
, for instance, quoted research results from the Centre for Research on Social Contradictions that showed the biggest cause for unrest and mass protest in 2010 was forced evictions. They point to unfair local officials as the cause for nearly 180,000 instances of mass protest in that year. Prime Minister Wen Jiabao has also issued edicts preventing local police from participating in forced evictions and demolitions. Central authorities have also banned the use of violence and coercion to force people to move, and have pushed for giving evicted homeowners the right to appeal.