China's Hidden Economy Of Graft Undermines State Behind China's complicated economy exists a vast underground economy of corruption and bribery. A recent case in which an anti-corruption official was convicted of taking bribes -- and now awaits execution -- shows how endemic and open a secret the problem is.

China's Hidden Economy Of Graft Undermines State

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In south China, a local Communist Party official is awaiting execution -convicted of exactly the kind of corruption he was supposed to fight. He wasn't a very high-ranking watchdog, but the amount of money he embezzled and the difficulty of prosecuting him have attracted attention in China.


This kind of scandal has been repeated in other cities across that country in recent years. NPR's Anthony Kuhn reported yesterday on how Chinese officials use private, unofficial jails to enforce a set of hidden rules and to prevent protest. Today's report looks at the hidden rules that hold sway in Chinese officialdom.

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Unidentified Man: (Singing in foreign language)

ANTHONY KUHN: A Buddhist monk sings in his temple in the hills above Chenzhou city in Hunan province. Some 900 years ago, the great poet Su Dongpo was exiled here. At that time, it was a wild and remote land. Today, it's a bustling coal-mining town on the railroad between Beijing and Hong Kong.

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KUHN: In September 2006, Chenzhou residents set off fireworks to celebrate the detention of corruption watchdog Zeng Jinchun, along with the mayor and many other municipal officials.

Zeng's job gave him the power to detain Communist Party members for investigation. He used this power to extort money and punish anyone who gave him trouble.

That's what happened to Hu Songcai, the head of a county construction bureau. Zeng ordered Hu to give a construction project to a certain work crew foreman, but Hu refused, saying the job had to be put to a public bid. Hu says Zeng had him detained for 100 days.

Mr. HU SONGCAI (Construction Manager): (Through translator) The officials who investigated my case said, you didn't go over and pay your respects to our boss. Now you've ended up in a sorry state. This time, we're going to take your job and your money.

KUHN: Many Chenzhou merchants decided it was best to purchase a bronze plaque from Zeng Jinchun and hang it outside their business. The plaque said that the merchant was protected by the anti-corruption authorities. Businessman Li Minzhu says he was detained three times for failing to buy a plaque, or in other words, for failing to pay Zeng protection money.

Mr. LI MINZHU: (Through translator) The average payment for protection money was around $60,000. But it depended on the size of your business. If you made a lot of money, you might pay more. If you made less, you might pay less.

KUHN: Zeng also made money from selling official positions. Huang Yuanxun is a local farmer who led efforts to expose Zeng.

Mr. HUANG YUANXUN (Farmer): (Through translator) In my hometown, a county assemblyman's position goes for more than $22,000. A city assemblyman's position goes for $44,000. These prices are well-known to residents. They're an open secret.

KUHN: Huang says businessmen buy official positions to protect their businesses, and then they engage in corruption to recoup the cost of the position.

Luo Changping is a Beijing-based reporter and author of a recent book about the Chenzhou corruption scandal. He interviewed Zeng Jinchun three times and wrote some critical reports about him. Luo describes Zeng as a heavy-set, raspy-voiced man whose office door, unlike those of his colleagues, was always open.

Mr. LUO CHANGPING (Reporter, Author): (Through translator) Zeng Jinchun wasn't afraid of talking about anything with you. He had no scruples. One reason for this was his straightforward character. Another may have been his confidence in his own power. He felt he had the protection of higher-ups, so he didn't fear most reporters or other watchdogs.

KUHN: One of the hidden rules of Chinese officialdom is that many officials have to use the bribes they take to, in turn, bribe officials above them for protection. That kind of corruption is usually dealt with secretly within the Communist Party. It's seldom mentioned in court.

Prosecutors accused Zeng only of taking bribes, not giving them. But journalist Luo is certain that Zeng bought off anti-corruption officials at the provincial and national levels, and this helped Zeng to fend off three investigations for graft.

Mr. LUO: (Through translator) This is a rule everyone knows. Officials, especially high-ranking ones, are basically not held accountable for paying bribes. This is because China's judiciary is not independent enough.

KUHN: In the end, China's highest leader issued instructions for Zeng's arrest, much as Chinese emperors before him issued instructions. He took a classified report on Zeng and scribbled a note in the margins. Huang Yuanxun saw the note, which he said read as follows...

Mr. HUANG: (Through translator) To Comrade Wu Guanzheng: Put more effort into investigating corruption in Chenzhou. Signed, Hu Jintao, July 19th, 2006.

KUHN: Wu Guanzheng was China's top anti-corruption official at the time. The note didn't explicitly say to arrest Zeng, but its meaning was clear enough to officials. Here again is journalist Luo Changping.

Mr. LUO: (Through translator) The fact that it took the highest official in the land to bring about the investigation of a local official means that the party lacks even the most basic elements of oversight. The downfall of such an official contain many elements of chance. It wasn't necessarily a sure thing.

KUHN: During his 11 years in power, Zeng and his family reportedly amassed $48 million worth of bribes and other illegal wealth. That's about a tenth of the Chenzhou government's fiscal revenues in 2006. Many locals believe Zeng's stash was even bigger.

Zeng reminds many locals of He Shen, after a famously corrupt 18th-century Manchu official. Authorities searching He Shen's home after his arrest are said to have found a fortune equal to 10 times the imperial treasury's annual revenues. That would have made him one of the world's wealthiest men at the time.

Beijing-based journalist Wu Si is the author of the book "Hidden Rules." Wu argues that China's hidden rules create a vast underground economy of corruption.

Mr. WU SI (Journalist, Author, "Hidden Rules"): (Through translator) To use a metaphor, money flowing legitimately into the state treasury looks like tributaries entering the Yangtze River and then flowing into the sea. But then we discover another sea next to it that's 10 times bigger, but with no visible river flowing into it.

KUHN: Wu says that all this money, flowing from individual citizens into the pockets of a powerful few, has helped to undermine some seemingly invincible dynasties during China's long history.

Mr. WU: (Through translator) If you look at the official rules of China's empires, you'd think they could last for ages, or be permanent. How could they collapse? But they collapsed just about every 200 years. It had a lot to do with these underground channels of plundered wealth.

KUHN: Wu says it's hard enough describing China's known rules and its visible economy. Perceiving its hidden rules and its invisible economy, he says, is a much harder task.

Anthony Kuhn, NPR News, Beijing.

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