Corruption in China

Introduction

This focus of this week’s lecture is on corruption and development. I have focused this seminar paper on the chapters from Minxin Pei’s China’s Trapped Transition: The Limits of Developmental Autocracy. I have also briefly touched on David Kang’s Bad Loans to Good Friends: Money Politics and the Developmental State in South Korea.

Synthesis of the Main Thesis

Pei’s main thesis is that market reforms have transformed China into a decentralized predatory state, with rising government deficits serving as one of the main consequences of such a state. By decentralized, Pei is referring to the transfer of control rights from national authorities to their provincial and local counterparts. These control rights can be further broken down into fiscal and administrative rights. Collectively, these rights include items such as wages, benefits, and allocation of capital.1 This has led to the creation of a decentralized predatory state. The term predatory refers to the rent-seeking behavior that the local governments are increasingly engaged in. Pei also attempts to analytically critique the reason for China’s mounting government deficits. He cites a combination of lagging political reforms, entrenchment of rent-seeking groups, and a decentralization of state predation.2 These reasons are of particular importance to facilitate our understanding of the nature of corruption on

1 2

Pei, p. 139 Pei, p. 167

Jamie Rodrigues

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09/26/2010

development. His thesis also states that without reform in these areas, the current economic growth that China enjoys is unlikely to continue. Pei argues that the immense foreign investment China enjoys, which serves as a proxy for international confidence in the central government’s policies, reduce the incentive for the government to enact effective reforms.3

Discussion of Evidence

Using cases of corruption as a proxy for actual corruption, Pei argues that decentralization of fiscal and...