Lure Of China's Gray Economy Reaches Rich And Poor The proceeds from corruption, and legal and ethical gray areas, are a daily fact of life in China. The practice of gray income, which shows no sign of abating, may make political reforms more difficult.


From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.

In much of the world it's called the underground economy. It's made up of things like business gifts, bribes and tax evasion. In China it's called gray income and that money accounts for perhaps 12 percent of the China's economy, as much as a trillion dollars annually.

NPR's Anthony Kuhn introduces us to some people who earn gray income in China.


WANG HAICHUAN: (Foreign language spoken)

ANTHONY KUHN, BYLINE: Migrant laborer Wang Haichuan's cell phone rings. It's a customer. He walks out of the dark corridors of the former air raid shelter where he lives with other migrant workers.

HAICHUAN: (Foreign language spoken)


KUHN: At a large supermarket, Wang is a gift card off a woman who wants to unload it for cash. He charges her 10 percent for his trouble. In China, gift cards are often given as small bribes or as bonuses that companies give their employees. Wang says he needs the income from these cards to supplement his low-paying job at a gas station.

HAICHUAN: (Through Translator) I know there's risk in this work, but I've got to do it. The way I see it, I'm not stealing or robbing, so I don't feel like I'm breaking the law.

KUHN: Wang is playing a big part in a much larger gray economy. The study on gray income was done by Wang Xiaolu, the deputy director of a nongovernmental organization called the National Economic Research Institute.

WANG XIAOLU: (Through Translator) I define gray income as income whose origin is not clear or whose legality cannot be confirmed.

KUHN: His study found that the wealthier Chinese people are the more gray income they earn as a proportion of the total. While rich people take the lion's share of this money, Wang says the trend is creeping into China's middle-class. And he says that could make the middle-class less independent, and less enthusiastic about political reform.

XIAOLU: (Through Translator) Those people with power have vested interests. They get benefits from this power, so they may oppose and obstruct further reforms.

KUHN: Here's another example: A journalist in Southern China, who asked that we only use his last name, Zhang. It's a common practice for journalists to receive small cash payments for attending press conferences. Zhang says he takes in about $175 a month doing that, about a third as much as his regular pay.

ZHANG: (Through Translator) My attitude towards gray income is that I oppose it but I don't refuse it. I oppose it because when I take someone's money, it puts pressure on me. I think: Can I write an article for the people that paid me? Can I fulfill their expectations?

KUHN: Zhang says he doesn't refuse the payments because this is how the system works. And he doesn't think he can change it all by himself.

ZHANG: (Through Translator) Realistically speaking, I've got to make a living. Secondly, if you want to work in this circle and everyone else is taking the payments but you don't, then it will be hard to get into this business.

KUHN: Farther up the food chain is a Beijing-based investigative reporter named Pang Jiaoming. A few years ago, Pang reported on local officials who bribed anti-graft investigators to look the other way. Pang says those same officials then offered him a million yuan, or $165,000, not to publish his story.

PANG JIAOMING: (Foreign language spoken)

KUHN: What did you think when they offered you that payment, I asked him.

JIAOMING: (Foreign language spoken) I thought, I've got to publish this news. Spending this kind of money is not enough to buy me. Even a bigger sum couldn't make me violate my journalistic ethics

KUHN: Pang adds that if a bribe is not enough to make journalists do what they're told, the threat of punishment can be even more persuasive.

But Beijing-based magazine editor Wu Si says the phenomenon of gray income does not necessarily increase the government's control over society. After all, he says, corruption eats away at institutions such as the press and the judiciary, and that can affect rulers' credibility.

WU SI: (Through Translator) In the end, people will ask: What kind of contemporary morals are these? Who's presiding over all this? Well, we know who is presiding. At this point, all this anger is directed at them. People say they're no good and have to be replaced.

KUHN: In the end, Wu says, gray income is just a fact of daily life in China. Teachers take it to admit kids to schools. Doctors take it to operate on patients. Officials take it to award contracts. Whether or not to take it, Wu says, is an ethical dilemma that everyone has to grapple with.

SI: (Through Translator) The thing you're being asked to do, how do you feel about it, and the moral conflict it involves? How serious is it? How intolerable is it? It's a very concrete sort of weighing of options that each individual must make.

KUHN: Wu notes that the phenomenon of gray income has been around throughout China's history. He says historical records show that contemporaries of Confucius complained about the problem of gray income 2,500 years ago.

Anthony Kuhn, NPR News, Beijing.

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