The international community is fully cognizant of the seriousness of government corruption in China. China remains one of the few countries that continue to employ strict control of media and the Internet, and the organization Transparency International has still not been able to obtain permission to open an office in the country. As a consequence, it should not surprise us that the international community lacks a clear picture of the actual extent and nature of corruption and its negative influence on the country’s future development. 
 
    This paper will attempt to clarify and address the following problems:
 
    1.The relationship between political corruption and the social system;
    2.The areas where there is a high occurrence of corruption and its forms;
    3.The  unfavorable influence of corruption on social development;
    4.The methods employed by the Chinese government to strengthen social control. 
 
    The paper concludes that, under the current social system, the government is incapable of finding a solution to a problem that it has itself created. As a Chinese saying puts it, even the sharpest blade cannot be used on itself! The government's measures against corruption in China are comparable to a surgeon performing an operation on himself. Serious corruption has devastated the very foundations of Chinese society and enveloped the country in a state of crisis—a volcanic landscape dotted with underground fires—and on the brink of erupting. 
 
    In response, a number of academics have put their faith in the government’s capacity to maintain stability through its “fire brigade” approach to the problem. This includes increasingly widespread and violent political oppression, a reliance on informers and espionage, and tight control of the country’s media and the Internet. Important too has been the Party’s recent willingness to open a narrow door to power and authority to China's economic and intellectual elites, allowing them to share in society’s wealth. 
 
    The author’s opinion is that while this unstinting willingness to throw money around in order to survive will lengthen the ruling life of the Chinese Communist Party (CCP), it will fall short of overcoming the corruption crisis. 
 
    1. The Special Characteristics of Phases of Corruption in China 
 
    Early in 1999, the author wrote an essay expounding the argument that from the mid-90s onwards, China had entered a stage of systemic corruption. Beginning with the [economic] reforms, governmental corruption has gone through the following stages of evolution: From 1980 until the early 1990s, corruption was chiefly limited to the venal behavior of individuals. Yan Jianhong, General Manager of the Guizhou China International Trust and Investment Corporation (CITIC), Gao Senxiang, President of the Shenzhen Branch of CITIC Industrial Bank and Wang Jianye, head of the Planning Department of the Shenzhen Planning Bureau are typical examples. 
 
    From 1995 onwards, corruption developed from individual acts into an organized pattern of behavior. Organized corruption includes: 1. Corrupt behavior by leading figures and subordinates in social organizations—including government departments—becoming the norm within the organization; 2. Exchange of power for money or other liquid assets by members of an institution; 3 Use, by relatively low-level government organizations and enterprises, of public resources at their disposal in order to bribe higher officials. These bribes are aimed at obtaining increased levels of public finance, favorable policies or more opportunities in general. 
 
    The case of Deng Bin in Wuxi of Jiangsu province displayed the typical characteristics of "organized corruption". Another prime illustration of such activity was the notorious Zhanjiang smuggling case, which led to the "collapse" of the Party Secretariat, Mayor and leading officials from, among others, the departments of Finance and Customs, as well as the exposure of smuggling operations organized by military authorities. 
 
    Beginning in 1998, the organized corruption described above began the transition to systemic corruption. Evidence of this transition can be seen from the following: Firstly, corruption has permeated into the political system itself and was now dominant throughout the government apparatus. The departments of Industry and Commerce, Customs and Excise, Finance, Land, Education and Public Health have been particularly prone to systemic corruption over the years. Secondly, corruption has become a system of resource allocation in itself. Society's political, economic and cultural resources are thus a principal target. Each case of the sale of official posts and titles represents an example of systemic corruption.[1] Thirdly, the campaign against corruption has itself—on one level—become a tool for obtaining gain or prosecuting a political struggle. For example, part of the political and economic life of the city of Rui’an in the Wenzhou area of Zhejiang fell under the control of a local village gangster after he used the corrupt behavior of the officials as a lever to gain influence over official appointments.[2] 
 
    In recent years, the Organization Department of the CCP’s Central Committee has even used information on the private affairs of its cadres—matters that they would rather keep quiet—to control their behavior. The so-called “struggle against corruption” has been stained by its use as a weapon to attack political rivals. For example, the purging of Zhu Xiaohua and Wang Xuebing from Zhu Rongji’s team of officials was allegedly on the grounds of corruption, but this was, in fact, simply a case of using the campaign against corruption to purge them from office.[3] 
 
    Because corruption has seeped into the daily life of the majority of government departments, officials who try to maintain an honest approach to their work are often squeezed out by others, who are fearful that such honesty will block their own route to riches. In what is surely testament to how low public values and social consciousness in China have sunk, it is now the case that all officials are taking kickbacks.  This is how 'things gets done' and the size of the kickback is the measure of “success.” At times, government departments have actually been known to strike deals with criminals in order to protect higher-level officials and avoid exposure of their corruption. The case concerning the business activities of the Huachen Group’s Managing Director, Yang Rong, in August 2002 is a good example.[4] 
 
    The reliance on what amounts to blackmail to restrain the behavior of officials and the use of the campaign against corruption to liquidate political rivals, has now become the glue that unites political elites together. In these circumstances, regulations against corruption will not act as deterrents. Instead, they will encourage political elites to guard against any divisions in their ranks and adopt various new measures to prevent the emergence of a strong and influential opposition faction. In recent years, universal recognition of corruption and widespread exchange of power for money has reduced previously audible appeals from China’s political elite for political reform to a muffled whisper. Friction within the political system has diminished. On the issue of corruption, all the established political power holders are in agreement: the upholding of the current political system and status quo is in the interests of those who have already acquired riches. 
 
    In fact, “corruption with Chinese characteristics” is almost identical to the forms of corruption in Latin America and South Asia. Although there are differences between China’s political system and those of the nations of these two continents, the supremacy of power over law is common to all these systems. In China, those who have become rich through corruption and have power and wealth at their disposal are situated at the very top of the social hierarchy. Because the source of their wealth is unclear, the vast majority of ordinary people are highly suspicious of the legitimacy of their prosperity, and, from a moral perspective, hold such people in low esteem. In 1997 and the first half of 1998, a number of social and political commentators welcomed Jiang Zemin’s “Theory of the Three Represents”, and the “July 1 Speech" recommending “the entry of private entrepreneurs into Party.” The so-called theory is employed as an attempt to justify the current social order in China and to open up an institutionalized route for the integration of China’s political and economic elites. 
 
    2. Causes of Systemic Corruption in China 
 
    The point is that corruption in present-day China is not a transitional phenomenon, nor is it the product of capitalism as Chinese official media proclaims. The structure of political power in Chinese society determines the inseparable relationship between corruption and the country’s social system itself. Relying on anti-corruption measures and posturing from the CCP government will yield no real results on institutionalized corruption. To begin with, the CCP formulates the Constitution and all laws, as well as industrial and commercial regulations. The latter are especially important as they ensure that the powerful interest groups within each sector are also those that take part in the government and Party's legislative process. In the process of formulating laws, a clear systemic bias emerges. It becomes even more pronounced as the CCP government simultaneously performs the three roles of formulating, implementing and monitoring all laws. Apart from the CCP, there is no other existing power that can perform any monitoring of the government. And unsupervised power is the breeding ground of corruption. Secondly, the CCP is not simply the allocator of resources in China, it is also the chief beneficiary of this allocation.  Such a system gives pole position to government officials, who are able to use their posts to get the first bite of society’s cake. Thirdly, in the “market economy with Chinese characteristics”, the CCP government not only fixes the rules, it takes part in the competition and acts as referee as well. 
 
    A great deal of attention has been focused on the two most important changes to the Chinese economic system since 1978, namely the dissolution of the command economy and the expansion of the non-state sector. Faced with this transformation, many researchers have employed the "planned economy or free market economy” either/or formula to arrive—with alarming alacrity—at the reductionist conclusion that the market already occupies the dominant position in the Chinese economic system. Such a simplistic conclusion misses a key point. That is, following the dissolution of the command economy in China, the system that filled the vacuum wasn’t necessarily a market economy. To be sure, there is no doubting the disintegration of the command economy, but this has not led to a reduction of interference in economic life by the government or monopolistic state institutions. It has simply rendered it a random, as opposed to, systemized intervention. It is not the market that dominates the economic process in China. Rather, there exists a “twin-track system”, which relies on the interplay of more or less equal measures of market forces and random government intervention. This is not the same as the classical market systems we see in Western Europe, and is also different from the market systems that have evolved in the non-socialist countries of East Asia. It is instead a hybrid that blocks the efficient allocation of resources, and provides an increasingly fertile breeding ground for corruption. 
 
    Political expedience dictates that the government restricts its definition of reform to a “reform of the planned command economy and adjustment to the ideology that rejected private economic activity.” Over the course of time, academic custom and practice has led even respected scholars to accept the government's limited definition of reform, and allow its propaganda to permeate into their thinking. In other words, intellectuals "accept" that the formation of a market economy in China is thus reduced to the turning of various ideological and macro-economic levers. The ideological room required for a market economy to operate is duly provided; controls over prices, production, the money supply, and labor are removed, to a greater or lesser degree. More decision-making power is permitted to devolve from the center to local governments. But in fact a socialist system is not simply a matter of "a command economy plus ideology." A mature socialist system gives rise to and nurtures its own social structures and institutionalized norms and culture. It is simply not possible for China's lame duck reforms—which have excluded any political progress or reform—to "disappear" these socialist social structures and their cultural appendages. Far from it in fact. They have clung tenaciously to their own existence while ensuring their familiar "traces" have remained well-hidden throughout the economic transformation. The result is an economic system that acknowledges the original power structures, and accepts the market—as a method of exchange—being grafting on to existing political and social foundations. 
 
    The two foundations of the former planned economy that have remained in place despite the disappearance of its form are:
 
    1.The huge Party-state machinery and monopolistic state organizations that constitute its organizational pillars, running from the center down to local village government, that have not yet been disbanded. Some of these have merged while others have just changed their names. The power of these organizations to involve themselves at any time in daily economic activity has in no way diminished, let alone been cancelled out. 
 
    2.The high political and social status still enjoyed by China’s ten million CCP cadres and the twenty million staff members employed by monopolistic state institutions. While the environment in which these powerful groups exist has undergone tremendous changes, their capacity to act in their own interest is even greater than it was in the pre-reform era. The changes include, firstly, the significant weakening of the top-down disciplinary restraints that were a feature of the former, highly centralized system. This weakening has allowed organizations and individuals within them much more room to manoeuvre. Secondly, the goals and objectives of individuals and organizations have changed. In the past, the goals were to work hard at ensuring that orders from above were fully implemented, in order to secure and expand an organization's power and gain personal promotion in the process. Since the reforms, these aims have modified into striving to establish "income opportunities" for an organization, which in turn transforms the goals of individuals, from seeking promotion and status, to the exclusive pursuit of money, legal or illegal. 
 
    The disintegration of the planned economy resulted in the government treasury no longer being able to hold on to total control of the country's resources. With the decline in the dimensions of public finance, the higher authorities have been left unable to fully finance the normal activities of the lower levels of their organizations and state institutions. They are thus incapable of meeting the continual demands for better wages and benefits issuing from the people who staff these institutions. 
 
    In this context, the behavior of institutions and the cadres who staff them has naturally undergone considerable modification. While they are no longer the docile tools of central government, simply carrying out orders of the latter, they are certainly not civil servants subject to the checks and balances of genuine civil society. Moreover, they are no more disposed to abandon their social-political status than they are to accept a drop in their economic standing. Hence, on the one hand they represent the government by carrying out public duties and, on the other, make use of the power this gives them to obtain personal economic gain. Familiarity with the "job" has rendered them highly adept at identifying and seizing opportunities for advancement. From a moral perspective, their motives could best be described as driven by a determination to make use of the power at their disposal before it reaches a "sell-by date". To put it crudely, "get it—and spend it—while you can." 
 
    The widespread administrative interference in economic activity by the government or its monopolistic institutions has also manifested itself in the trend of commercialization of state administration organs and public services that emerged during the nineties. Because the organs of state administration were originally dependent solely on public finance for their existence, they could not avoid falling into a state of "semi-starvation". In order to ensure their membership of Deng's vanguard class of nouveau riche, the overwhelming majority of public or government officers spend their time in office meticulously calculating how to make the best use of their power for the greatest possible personal gain. This process has produced a unique systematized culture: the capitalization of political power and corporatization of government behavior. The results manifest themselves in a myriad of ever present "wealth creation" activities. This was originally regarded as an inevitable makeshift and stop-gap phenomenon, but the term "wealth creation" has since become a specialist term that appears regularly in official documents. 
 
    The most common concrete expression of this scenario is the exchange of the power and opportunities possessed by state institutions for direct or indirect economic gain. Administrative institutions and departments brazenly use their power to apportion or allocate wealth by various means: "compensated reports" in the news media, short-term "training courses" in educational institutions and universities, the concoction of various pretexts to sell educational diplomas, the sale of places in primary and middle schools, the enrolment of "high-price students," the sale of publication permits by publishing houses and hospitals forcing the recipients of publicly-funded medical services to buy expensive and unnecessary medication when they are being treated for illness. The authority to check tax evasion and smuggling, broadcast and publish news, bestow academic qualifications, publish materials etc. which in the past had no connection with commercial activity, have become the essential tools of "wealth creation". "Market exchanges" have expanded into government organizations and public services, and the parameters of this so-called "market economics" are far wider than those in any of the developed countries, greatly enlarging the space available for "rent seeking" as state institutions, organizations and work units continuously seek and create opportunities to interfere in social and economic life in search of financial gain. This interference has become increasingly lawless and random—a direct result of the lame duck reform process. 
 
    With public finances under increasing pressure and no corresponding reduction in the size or budgets of state organizations and institutions, this kind of activity can, in the short term, reduce financial burdens on the government and simultaneously increase the income of the officers of these institutions and government departments, while bringing a measure of stability and continuity. It is for this reason that the central government has largely turned a blind eye to "rent seeking" and has at no point seriously attempted to curtail it. Yet the social consequences are real enough. The current situation not only brings chaos to society's economic activity. It also profoundly weakens moral standards and even corrodes the fabric of society itself. When work units indulge in this kind of activity it is, more often than not, explained away in terms of "revitalizing 'income-creation' economics". In contrast, if an individual officer is caught out and convicted of using a public office for private gain, his or her activities are invariably labelled as "corruption."[5] 
 
    For example, when institutions of higher education auction off diplomas and academic places, it is deemed to be "income-creation" and receives the endorsement of staff and teachers alike. If, on the other hand, an individual teacher is discovered to be selling marks to students, the teacher is condemned, and their reputation is left in tatters. When a top level lecturer at a medical school in the city of Urumqi in Xinjiang was found to be selling marks to students for a few hundred dollars in exchange for successful examination grades, he was condemned as corrupt. 5 But in reality, there is no difference between an institutional engaging in organized "income creation" and an individual doing the same thing by using the name of an institution. The term "income creation" and "corruption" are entirely interchangeable and provide a mutual shield. 
 
    Many of the individual victims in the resulting chaos are the same people who create the disorder in the first place and are capable of presenting one of two public faces according to particular situations. When evaluating their own behavior, they will unashamedly start by looking to their own interests, and conduct a bold, high-sounding defense of inappropriate activities. In evaluating the same kind of behavior by others, they will swiftly climb to the moral high ground, and sternly censure those who have been caught with their fingers in the proverbial till. The blackmail and extortion case involving Shang Meiying, a Deputy Director of the Trademark and Advertising Administration House, and an officer in the Xianyang City Bureau of Commerce and Industry in Shaanxi province, is a good example. In June 1997, Shang deemed that the Buzhang Company was adopting irregular trademark and advertising policies in the area under her jurisdiction, and proceeded to blackmail the person responsible at the company by threatening to send letters to all 151 of the company's clients, besmirching its reputation. Despite pleas from the Buzhang Company to lower the amount, Shang Meiying insisted that the price tag for not sending an individual letter was 10,000 yuan, a total of 1.5 million yuan. The company was left with no option but to report Shang to the police who detained her for a number of days before ordering her release on bail. On her emergence from prison, the Xianyang Commerce and Industry Bureau went so far as to formally organize a grand ceremony to welcome her back. The clearly corrupt Deputy Director of a government department was feted as a returning heroine.[6] 
 
    As mentioned above, what has emerged in China in the long period since the dissolution of the command economy is a "twin track economy" that has little in common with the former system. In other words, China's developing market system exists alongside administrative interference. By the latter, I do not refer to the normal macro-economic management of the economy by government, but chiefly to two sets of circumstances: firstly the implementation of policies aimed at satisfying influential sectors in society.  This includes, for example, the continued willingness of the banks to follow orders and issue new loans to loss-making state owned enterprises already way behind on instalments from previous loans.  Secondly, the improper interference in society's regular economic activity by powerful institutions and individuals bent on economic advantage for themselves. By its nature, this kind of interference is not subject to regulatory supervision, and consequently the central government cannot effectively control it. The government’s response is limited to occasional anti-sleaze and anti-graft campaigns to try and restrain improper interference. In fact, the plague currently afflicting China's “twin track” system of random administrative interference and market economics cannot be cured from within. Propaganda campaigns that rely on heavy punishments and the example of designated individual people as "models" of morality will not have any genuine effect. 
 
    The current "twin track" may well last into the foreseeable future as it does partially fulfil the functions of a market economy by bringing market regulation to exchanges between producers, and between producers and consumers, thereby ensuring continued economic activity. Another factor ensuring its continuing existence is that the "twin track" not only acknowledges and retains the original structure and organization of power, but, moreover, it has actually injected the original structure with a new lease of life that has consolidated its existence. Consequently, the overwhelming majority of civil servants, government officials and staff of various public institutions have emerged as the big winners in the "reform" process, and their support for the process is thus ensured. As a result, the Chinese government will definitely not launch any political reforms that will even slightly touch this present power structure in the short-term future. 
 
    Hot Spots of Corruption 
 
    A.Government Departments 
 
    Table 4~1: Statistics on Corruption Cases Investigated by Inpsection Bodies 
 
    Year              No. of Cases        No. of Officials involved
                                           (county level and above)
    1988               36,500                
    1989               58,926                 742
    1990               51,373                 1,188
    1991               46,219                 924
    1992               98,876                 915
    1993               56,491                 1,037
    1994               60,312                 1,827
    1995               63,953                 2,262
    1996               61,099                 2,699
    1999               38,382                 2,200
    2000               45,113                 2,680
    2001               54,367                 2,670
 
    Note: These statistics are from annual reports compiled by China's Supreme Procuratorate. However, there are two peculiarities to the figures that need to be noted. Firstly, there are inconsistencies in the annual specifications (or: annual statistical presentation); and secondly there are inconsistencies in the methodology. For example, the cases covered in the four-year period from 1988-1991 are presented as annual totals, but the figure for 1992—compiled in 1993—is presented as a sum of the five-year period from 1988 to 1992. In other words, the figure of 98,876 cases for 1992, was arrived at by subtracting the accumulated figure of 115,422 for the four-year period 1988-1991 from the total figure 214,318 for the five-year period 1988-1992. The 1998 Procuratorate report states the total number of cases for the five-year period 1993 to 1997, and shows different statistical specifications than in previous reports. The 1999 report has different specifications, and so the previous two years (1997-1998) are left blank. 
 
    Beginning in the 1990s, the following trends began to emerge in corruption: 
 
    The number of Party and government officials implicated in cases of economic corruption rose continuously. There was also a marked rise in the number of high-level officials involved in corruption. Among those sentenced for corruption and bribery were former Vice Chairman of the National People's Congress (NPC) Standing Committee, Cheng Kejie; former Deputy Governor of Jiangxi province, Hu Changqing; former deputy minister of the Ministry of Public Security, Li Jizhou; Vice Governor of Liaoning province and mayor of Shenyang city, Mu Suixin; former Governor of Yunnan province, Li Jiating, and former Anhui province Vice Governor, Wang Huizhong. The tentacles of corruption have also reached out to officials of the Procuratorate (Chinese prosecution service) and officers of the government's civil and legal administration bureaucracy. Criminal behavior by staff members includes extortion, blackmail, acceptance of bribes, perverting the course of justice and the use of public office to protect illegal business of their family and relatives. As the scale of corruption has grown, so has the incidence of people absconding with large amounts of ill-gotten cash. Criminals have forged links across provinces and countries in order to facillitate their activities. This phenomenon of widespread organized corruption is causing enormous harm to the reputation of the reforms and, to a degree, the political and economic stability of the country itself. 
 
    The corruption so far highlighted and exposed is limited to venal officials who have been publicly exposed. According to data gathered, only 42.7 of every 100 cadres who have been subjected to Party and government disciplinary punishment were formally investigated, and only 6.6 of them were actually sentenced by the courts. With a punishment rate of just 6.6 percent, the benefits clearly outweigh the risks, and it is hardly surprising that no sooner is one corrupt Chinese official caught another steps in to take their place. In the latter half of the 1990s, direct economic losses and losses to consumers—in the form of welfare and benefits—amounted to an annual average of between 987.5 billion and 1.257 trillion yuan - 13.2 and 16.8 percent of GDP! [7] 
 
    B.The Government Offices in Charge of Resource Allocation 
 
    The so-called "market economy" established during the course of the reforms is in fact little more than mimicry of the real thing. The power to allocate and distribute resources is still basically in the hands of the government and its officials, who, at all levels, remain the ultimate arbiters of who gets what. This reality gives appointed officials in ministries with control over resources, such as the State Bureau of Land Administration, the State Planning Bureau and financial organizations and institutions (state banks and securities companies, for example), considerable opportunities for rent-seeking activity. The methods these people resort to in order to gain advantage are hardly subtle and crystallized in the acceptance of bribes and the diversion of public funds. In 1995, there were a number of cases that serve as typical examples of this kind of corruption: Yan Jianhong, who served first as the Deputy Director of the Guizhou province Planning Committee and later as the Managing Director of the Guizhou CITIC, and Wang Jianye, head of the Shenzhen Planning Bureau’s Department for Finance and Trade. These government departments are in a position to approve or deny the use of materials and resources designated in government plans, as well as control the use of capital and various funds, which, in the particular environment of China’s “twin track” pricing system, amounts to nothing less than possessing the Midas touch. It is not rare for a single authorized “approval note” to immediately transform such people into millionaires.[8] 
 
    During the 1990s the China Procuratorate Publishing House published the “Records on the Elimination of Corruption in Modern China,” along with a publication entitled “Justice and Evil—Records of the Latest Important Cases in the Punishment of Corruption” compiled by the CCP’s Central Commission for Discipline and Inspection.” The cases featured in these two books clearly revealed that corruption existed at all levels of government, state and Party activity, from the Central Committee down to the county level, and even lower. 
 
    The State Bureau of Land Administration, which, as its name suggests, allocates land resources, is where corruption is especially severe, and it appears in the majority of cases that come to light. The investigation into the activities of Wang Ju, Deputy Mayor responsible for urban construction in the city of Shenzhen, ended with prosecution in 2001. The case found that 32 officials were involved in corrupt activities and the affair enveloped almost all officials working at the city’s Land and Urban Construction departments. The sheer amount of cash involved left the public—already accustomed to large-scale corruption—in a state of shock. The Wang clan, via Wang Ju’s daughter Wang Tao and her control of the project, harvested 120 million yuan in profits from the Windsor Square real estate development alone. According to government regulations, the plot was worth 150 million yuan, but Wang Ju ordered his subordinate, the Deputy Director at the Shenzhen Land Planning Bureau, Pang Chenghong, not to go through official land value procedures when dealing with the Windsor project. The price was subsequently valued at 27.6 million yuan, 122 million yuan less than its real value.[9] 
 
    The city of Beihai in Guangxi province has been hit particularly hard by the phenomenon of "land speculation", a problem exacerbated by the even more common occurrence of insider trading. Following a two-year investigation by the Central Investigation Group, 123 people were implicated in the Beihai "land enclosures" scandal, involving embezzlement and bribery. Five provincial-level cadres and 20 department-level cadres were caught up in the case, which involved a sum of 110 million yuan. Three standing committee members of the Beihai city Party Committee were punished for the large sums garnered via embezzlement and the acceptance of bribes. They were the Beihai Deputy Mayor in charge of day-to-day affairs, Wang Fangchun, the Secretary for the Committee of Politics and Law, Peng Fuqin, as well as the Director of the Department of Organization, He Youxue.[10] 
 
    The corruption case against Deputy Governor of Anhui province and Secretary of the Fuyang city Party Committee, Wang Huaizhong, involved 100 million yuan, the bulk of which appeared to come from profits from the resale of state land. According to the data that was made public, Wang Huaizhong oversaw the disappearance of state assets worth up to one billion yuan by approving various land sales beginning in 1996. In fact, at least ten tycoons have emerged in China whose wealth is rooted in the continuous flow of profits from the sale of state land.[11]
 
    The province of Guangdong has been a hotspot for corruption arising from improper land transactions. Between 1992 and 1994, there were 13,894 cases involving ratification of various forms of land use that violated the relevant laws and regulations. The total land put to illegal use came to 152,000 mu of which 80 per cent was government-owned. In 1996, Guangdong province underwent a "find waste, eliminate waste" inspection and campaign, which revealed that out of the 238,000 mu of non-agricultural construction land lying idle, 70 per cent  was rendered idle by the government.[12]

 
    In 1998, there were 287,000 cases of illegal sale or use of land on the public record alone. Of the 1.2 million mu of land involved, 387,000 mu was arable land.[13] On June 10 2001, Meng Xianlai, the Director of the Executive and Supervision Bureau of the Ministry of Land Resources, announced that there were 170,000 cases of land use violation in 2000, leading to an annual loss of 10 billion yuan in state-owned land. Despite this extraordinarily large number of violations, the ratio of cases thoroughly investigated remained small, and those successfully concluded even less.[14] 
 
    Financial institutions in China have become known as “cash captains” and are enveloped in similar corrupt work practices as the departments responsible for land, public security industry and commerce and taxation. If ordinary citizens need to acquire loans or mortgages, they have no choice but to resort to bribery.  This practice is so widespread that it has been dubbed the “All Chinese People’s Banking and Loan Service”, meaning that the people serve as an improper source of funds for the institutions. This kind of scandal is frequently reported in the press and other media channels. However, the underlying reason why this behavior is difficult to investigate and punish is because it is collective. A veritable sea of bribe-taking was exposed in the district of Linfen in Shanxi province in 1995. The manager of the Linfen Construction Bank, Liang Tianrong, and more than sixty colleagues working in the local financial system and enterprises were directly implicated in the case.[15] 
 
    For many years the Puqi city branch of the Bank of China in Hubei province enjoyed a golden reputation as a “model advanced enterprise,” and was frequently the focus of attention as news media vied to report on the bank’s successful management. Almost out of the blue, the branch was revealed as a nest of maggots who, headed by its Director, Xiong Xuebin, were worming their way at will through the bank's finances. The scale of graft and misuse of funds was so great that the bank’s operations resembled those of an independent kingdom. More than ten people, including the Deputy Bank Manager, Liu Shaoqin, Credit Department Manager Wei Jianxin, and Chief Accountant Li Junfeng, were involved in the operation.  It was described locally as an organized mafia led by a 'triumvirate of chariot-drivers to carry out the daily routine of graft'. From 1988 onwards, the bank’s accounts were distorted to a point that in 1995, when the gang’s activities were brought to a halt, the figures bore absolutely no relation to the real financial situation of the bank.[16] 
 
    Cases of meticulously planned scams by bank directors are a common occurrence. In April 2002, a massive case involving the theft and misappropriation of assets came to light in Kaiping, Guangdong province. Beginning in 1993, three successive bank managers made use of a mutually beneficial relationship to obtain personal financial gain. The criminal activities of Xu Chaofan,Yu Zhendong and Xu Guojun spanned nine years, during which they stole a total of US$483 million. The theft was carried out via the financial system of the Bank of China itself, and apart from a few token investment loans in Kaiping, the vast majority of cash was diverted out of the country into private bank accounts - and subsequently spent. Following the success of this criminal activity, the three crooks left the country in October 2001, and disappeared. At the same time, the Guangdong branch of the Bank of China was enveloped in a mushroom cloud of graft, as fresh financial scandals emerged in all areas of its activities. The crisis was worsened by the Wang Xuebing case at its New York branch, and the Bank of China (Hong Kong) had no option but to abandon plans to list on the US (New York) and Hong Kong stock exchanges.[17] 
 
    At present, the percentage of bad debts at the Bank of China is 30 per cent,[18] a figure directly related to the corrosive activities of corrupt officials. Although there are serious limits on the reporting of their activities in the media, the cases already revealed demonstrate a scale of corruption in administrative and law enforcement departments. These include the Public Security Bureau, the Procuratorate, the Department of Industry and Commerce, as well as Customs and Taxation, a revelation that has caused genuine alarm—even a sense of dread and foreboding—among the ordinary citizens of China.
 
    C: Public Utilities 
 
    Many of the sectors responsible for the provision of public services in China such as housing, electricity, communications, health and education, have their monopolies. Consequently, Chinese people come into frequent contact with the officials running these monopolies—they have no choice. The often-voracious behavior of the staff and administrative personnel has led to various utilities being dubbed "tigers." People refer to the "housing tiger" or the "electricity tiger" in reference to the way these officials make use of their "power" to line their own pockets. If someone needs an operation, then the doctor must be given lai see, or New Year gifts of cash. Headmasters and teachers receive gifts when a child starts school, and parents must meet the myriad and unreasonable demands made on them by schools. The effect is that people are left seething with anger, as they are forced to go along with what amounts to institutionalized bribery in order to obtain the relevant stamp of approval from various state-run monopolies. 
 
    At first sight, these issues appear to be rooted in a culture of unethical behavior in the working practices of various public utility services. While this explanation has some credibility, it does not explain the absolute nature of the graft, responsibility for which ultimately lies within the political system itself. During the mid-90s, when the Chinese people still retained some confidence in the system, articles frequently appeared in the media criticizing the immoral work practices among staff working in public utility sectors. Among them was an article published in China Youth Daily entitled "Survey Regarding Work Practices in Public Sectors." The article was based on a survey highlighting the eight most despised practices: use of public funds for lavish banquets and entertainment; refusing to deal with enquiries from the public; superficial responses to enquiries followed by chaotic and inefficient work performances; the chaotic and opportunistic charging of fees; the abuse of authority for personal gain; opportunistic levying of fines and penalties; abuse of expense accounts; and the seizure of assets by government and Party administrative organizations and their staff from work units and enterprises under their authority.[19] 
 
    The entrenched behavior of officials in public utilities is frequently dubbed as being "even worse than a whore." At least a whore, so the logic goes, provides a service in return for her money, and as such adheres to a "code of practice". This is in stark contrast to the staff of public utility services who take money without so much as a nod to any form of code of practice, in the process destroying all legitimacy. The salaries of these government officials are from taxes people pay, and the established motto of "serving the people" is nonsense in the face of this spreading corruption that undermines the very foundations of government, destroys its integrity, weakens its operation and even degrades the aims of social policy. By the latter half of the 1990s, when corruption had already completed the transformation from organized graft to systemic corruption, ordinary people were left with no option but to "accept" reality and manifest a high degree of tolerance.

    Public servants notwithstanding, it is the behavior of doctors and teachers in their respective sectors where the total lack of occupational ethics has the most damaging impact on society. The lack of medical ethics is a prime example. Revelations of serious corruption and poor work practices by the director of a top-notch triple prize-winning hospital, owned by the Xinjiang Production and Construction Corporation, caused enormous consternation among the public. The director exposed senior hospital administrators for basing their duties purely on the grounds of profit, rather than health. If a department or ward was able to earn money, it was judged as efficient, regardless of its medical results. An entrenched form of rent-seeking established by nurses provided myriad opportunities for obtaining money from patients, by fair means or foul. The main modus operandi included: 
 
    1. Every time a doctor referred a patient for a CT scan, he or she would receive a kickback of 4.5 yuan from the CT department. According to statistics made available by the whistle-blowing director, each doctor made 60 such referrals every month, but only 20 percent of these were for patients who genuinely required a CT scan. 
 
    2. Between three and four overnight stay forms were registered for each hospital bed, in a practise that became know as "phantom beds". Each one of these was worth five yuan to the department. In reality, there would be only one patient per bed, and the patients named on the bogus forms were diagnosed and treated at home, even though they had to pay the fees for hospital accommodation. 
 
    Extra charges: A 16-year-old youth named Hu went to the same hospital with the same compliant three times in the latter half of 1997, and was diagnosed differently each time. The cost of treatment totalled over 5,000 yuan, of which 1,000 yuan was for fictitious diagnosis and treatment. This included being charged for the use of medical equipment that was not used and injections that were never given. On top of these charges, the teenager's parents also had to pay for the nights they stayed in the hospital with their child, as well as for nursing costs. The hospital director stressed that this was simply a randomly picked case, and was not a typical example of extra charges. He explained that the vast majority of nurses were simply concerned with money, receiving cash gifts and getting their share of kickbacks, all of which were common phenomena. In order to safeguard the reputation of the hospital, protect the position of the leaders and ensure the continuous supply of departmental and individual bonuses, the director stated that staff at all levels lied about the problems, testament to the absence of any sense of professional pride or morality. 
 
    The total annual income of the hospital was 80 million yuan, a fair proportion of which ended up in the coffers of the local government’s Department of Health. Members of the public wrote letters of complaint about the hospital to the Department of Health on many occasions, but these were simply passed on untouched to the hospital authorities by officers from the Health and other Departments. As a result, those who complained were often the targets of revenge meted out by hospital staff.[20] 
 
    The lack of medical ethics was also an underlying cause behind the spread of HIV/ AIDS in the province of Henan, now a notorious and ongoing scandal. Poor needle management, including the use of dirty needles on people who were selling their blood, resulted in widespread HIV infection. This kind of practice is common throughout China. Hospitals in the city of Jinan, Shandong province—among them some well-known medical establishments—made a great deal of money by substituting industrial oxygen for higher-grade hospital quality oxygen, and charging patients requiring oxygen for the latter.  Ignoring the safety of their patients, this scam was worth over 300,000 yuan a year.[21] The practice of hospitals forcing patients to buy expensive medicine and taking a kickback on each sale is extremely common in China. Over 60 doctors at the Wuhan city Number One Hospital in Hubei province made between 100 to 200 yuan per day from kickbacks obtained by forcing patients to buy expensive drugs.[22] In this overwhelmingly "sellers' market", patients have no bargaining power, and little choice but to go along with the medical staff's flagrant exploitation of their position. Rarely in civilized societies do occupational ethics sink to such a terrible status. 
 
    A "sense of responsibility" is an important moral base for any market economy, and the source of this must be the willingness of all individuals to accept moral responsibility for all the results of their own actions. Without moral responsibility, an occupational sector will quickly lose its social value. As far as society is concerned, it will be unable to efficiently realize its full professional functions, establish a beneficial service and organize itself as a social structure that can stabilize social values. And for individuals, a lack of ethics means that the sector cannot offer a long-term career path or allow staff and workers to accumulate personal skills. As such, the sector cannot make a contribution, or provide or serve society in any meaningful manner. Simply speaking, by losing people with a sense of responsibility, the conduct of the sector as a whole will degenerate into criminal behavior. I have concentrated on medical ethics for precisely this reason. The problems in the medical sector are no longer simply a question of occupational ethics, but of criminality. 
 
    4.The Influence of Corruption on Chinese Society
 
    The large amount of hard evidence I have researched has led me to the observation that the starting point for the redistribution of wealth that we have witnessed during the reform process has been the commodification of political power. The essence of the process of primitive capital accumulation in contemporary China can be found in the 'power for money' exchange, and parallel activities such as rent seeking, that has distinguished the behavior of political and economic elites and their hangers-on in contemporary Chinese society. These two elites are carving up the country's wealth between them. The main target of this profoundly predatory form of primitive accumulation are the public assets that have been built from more than forty years of hard work, sweat and blood by the people as a whole. The chief technique for this plunder is to rely on power. And the consequences of this pillage - and I count systemic corruption among them - have now descended on China. And they are dire in the extreme.
 
    A.Large-Scale Capital Flight 
 
    Because modern China's process of primitive capital accumulation is racked with immoral and criminal behavior, the country's new rich have two chief considerations. The first is the enormous wealth gap that has emerged. The extremely sharp social contradictions of this fact have rendered China a high-risk society. The second is that an overwhelming proportion of the income and wealth of the aforementioned elites comes from the "gray area" between legitimate entrepreneurial activity and criminality. This renders them sitting ducks for the inherently unstable "struggle against corruption." Consequently, the majority of China's nouveau riche combines their questionable economic activities with a ready passport and preparations for departure. Once enough money has been accumulated, many leave the country permanently. As of January 2001, China had over 4,000 individuals categorised as "corrupt" people who had succeeded in spiriting away over five billion yuan out of the country.[23] But this figure represents only a tiny portion of the capital that has left - and is leaving - China. 
 
    Modern technology has presented unprecedented opportunities for the movement of capital, and it has reached new levels as a result. The trend of capital flight from China is upward. According to one researcher the total capital flight since 1985 amounts to 52.3% of the increase in foreign debt. This is higher than the average capital flight figure notched up by the world's 15 most heavily indebted nations during the 1980s.[24] As we entered the 1990s, capital flight was close to, or even surpassed, annual increases in foreign debt. In other words, at the same time as China borrowed heavily from foreign sources, over half of the capital borrowed was leaving China via various channels. Some of this cash then “disappeared”, never to return. Mr Wool, a consultant for the Royal Commission on International Questions in the UK, pointed out in a report presented to the Organization for Economic Cooperation that between 1989 and 1995, overall levels of capital flowing out of China had probably surpassed US$100 billion. Approximately half was not approved by the government.[25] According to research data from the general office of the Ministry of Finance published in "A Positive Financial Policy," capital flight in 1997 and 1998 reached US$36.5 billion and US$38.6 billion respectively. The situation was partially brought under control in 1999, but the level was still at US$23.8 billion. In 2000 capital flight again spiralled to approximately US$48.billion more than actual foreign investment, which stood at US$40.7 billion.[26] 
 
    The fact is that only a portion of this capital flight comes from private entrepreneurs who are shifting capital abroad due to anxieties about China's political instability. Corrupt officials involved in money laundering activity make use of all the methods at their disposal to give a respectable veneer to their ill-gotten gains so as to be able to spend the loot as freely as possible. Much of it is used as investment and continues to appreciate in value.
 
    The most devastating effects caused by the recent spate of corrupt officials fleeing overseas have been felt by finance departments and state-owned enterprises. The four top managers of the aforementioned Kaiping Branch of Bank of China successfully carried out their scheme to abscond with stolen funds. In 2001, of the 120-odd individuals charged with fleeing the country in cases filed by Beijing prosecutors, 70% were presidents, vice presidents or financial officers at state-owned enterprises. Many of the fugitives were also government office holders. One such example is the case of Cheng Sanchang, briefly hailed as a “model of SOE restructuring.” While jointly holding the positions of Mayor and Municipal Party Secretary of Luohe city in Henan province, Cheng sold off 27 state-owned enterprises, earning the nickname “Cheng Sell-off.” Via murky deals, “Cheng Sell-off” lined his pockets with funds embezzled from his sales of state-owned enterprises. In 1999, finding that the assets of the city’s public enterprises had largely been sold, he quit his official positions and moved to Hong Kong, where he served as CEO of the Yugang Corporation, a “window company” for the Henan Provincial Government. In May 2001, Cheng decided that the time was right to abscond, and he fled to New Zealand, taking with him his mistress and a sizable fortune.[27] 
 
    The government officials and heads of SOEs who flee the country with vast sums of embezzled funds, typically lay their plans carefully. Rather than waiting for their malfeasance to be exposed before taking action, they start the process of arranging family members, funds and property abroad and making mental preparations from an early date. Each element of their plans is set in motion at the appropriate time. A typical plan involves making seemingly innocuous arrangements, such as having their wives and children take residency abroad, while they use a variety of means to transfer large amounts of illegal assets overseas. During this time, the officials remain in China, continuing to engage in corruption and amassing wealth. There they bide their time until, at the first sign of danger, they run. With these methods, most of the corrupt officials who flee China get away scot-free – only one in six are tracked down and brought back. According to an official in the Foreign Affairs Bureau of the Supreme People’s Procuratorate, in recent years, the Bureau has actively pursued between 20 and 30 cases annually involving fugitive officials, but only approximately five cases resulted in extradition. The official went on to say, “But this could be just the tip of the iceberg, because a portion of the cases are not handled by us.”[28] 
 
    Since the 1990’s, the scale of capital flight in China expressed as a percentage of GDP has ranked second only to Russia, surpassing both Mexico and South Korea. In 1997, China’s capital flight as a percentage of GDP far exceeded that of Mexico in 1994-95, during the Mexican financial crisis, as well as that of South Korea in 1997, which was then experiencing its own financial crisis. Taking into account the possibility that, under China’s strict currency exchange policy, capital flows hidden in fraudulent trade reports and other kinds of hidden capital outflows may far exceed those of Mexico and Korea, one can conclude that the overall situation concerning capital flight from China may be much more severe than those two countries.[29]
 
    Between 1979 and 1997, China received a total of US$348.3 billion in actual foreign direct investment. Beginning in 1993, China ranked second in the world behind the US as a recipient of foreign direct investment for five years running. Meanwhile, according to IMF statistics, capital leaving China accounted for 2% of the total volume of international capital flows in 1995, making China the eighth largest supplier of capital in the world, and the top-ranked developing nation in terms of foreign investment. 
 
    The kind of threat that capital flight poses to China is easy to see – the financial crises in Mexico and Thailand are evidence enough of this. It is reasonable to claim that China might well have encountered a financial crisis of its own long ago, were it not for the large amounts of foreign investment capital that have flowed into China since the 1990’s to replace the departing capital. 
 
    One aim of this paper is to emphasize the political significance of large-scale capital flight. In actuality, the flight of capital out of China demonstrates the ever-increasing sense of crisis among China’s bureaucratic class. To the corrupt officials who have secretly prepared their foreign passports, China is nothing more than a good place to enrich them.
 
    B. The Influence of Organized Crime on Local Governments and the Gradual Merging of Crime and Authority 
 
    Perhaps the most foul-tasting fruit from the tree of widespread illegal land transactions by local governments has been the growing influence of organized crime syndicates – known in Asia as Triads – on local government. In fact, it is often hard to draw a line between government and Triad authority.
 
    Data gathered from investigations and cases where a crime ring has been successfully broken show that these Mafia-type organizations have rapidly risen to prominence over a very short period of time. The social chaos they cause cannot be underestimated. One of the major reasons behind the rise of the Triads has been their links with local government officials – especially the PSB – with whom they collude very closely in an exchange of services and favours that are nothing more than protection rackets. China's Triads differ from their Western counterparts in one important aspect. In the West, the basis for most crime syndicates' power and influence is their contact with the police departments and judiciary ministries. But the antennae of China's criminal gangs are even longer, with cadres serving as a reliable source of power and influence for the gangs and a number of crime bosses also working as leading officials, donning what we call the "red cap." In the city of Wenling in Zhejiang province, syndicate boss Zhang Wei also held eight separate official posts stretching way beyond the borders of Zhejiang province. Zhang's posts included Deputy Chairperson of the Yidu city Political Consultative Conference in Hubei, a member of Youth Federation's Standing Committee and Deputy Director of the Young Entrepreneurs Association in Suizhou city, Director of a well-known news agency in Zhejiang, and four more leading official positions. Zhang Wei's case implicated 69 members of the government and Party members, including the Wenling city Mayor, Chief of Police (PSB), 42 government or Party cadres, 15 members of the judiciary, and ten people from financial organizations. A copper plate hanging on the gate of Zhang's residence announced "Key Protection Unit of the Wenling PSB", encouraging local people to dub him "the red gang boss.”[30] 
 
    The execution of Jilin’s most important crime boss, Liang Xudong,[31] Liaoning’s notorious Liu Tong,[32] and Guangxi’s Zhou Shounan,[33] are all reminiscent of the Zhang Wei case. The evidence revealed during these trials proved beyond all doubt the existence of an “alternative” authority operating under the protection of powerful officials and their networks, and causing untold social damage. 
 
    Even worse, a recent report by the Ministry of Public Security has revealed that Triad forces had permeated into government offices at county and city level. They were succeeding in getting chosen as government "representatives", and taking leading roles in local Congresses. As such, corrupt officials are transforming organs of public power into channels for Triad activity. The overall picture is of a merging or blurring of the lines between the police and criminal gangs, who rule society between them. This is possibly the worst-case scenario for any given society. 
 
    One result of these developments that should not be ignored has been the spread of criminal behavior and values into society at large. The pernicious values of Triads and organized crime have had a serious influence on the daily behavior of Chinese people since the 1990s. This trend has shown itself particularly clearly in power struggles that frequently involve the activities of Triad groups, and it is against this background that the phenomenon of “officials killing officials” has emerged in recent years. Some of the more notorious cases include: the hiring of a contract killer by Chen Jinyun, the Anyi County Magistrate in Jiangxi province, to murder the county Party Secretary Hu Cigan and his deputy Wan Xianyong in 1995; the March 1997 conspiracy to murder the former mayor of Yangchun city in Guangdong province and his associates, hatched by Yangchun Party Secretary Yang Wenyao, Deputy Mayor Yang Qizhou, Deputy Director of the City Finance Office Lin Qiju and others; the June 28, 1999 murder of Lu Jingyi, leader of a nearby Batai town, and his wife by former Party secretary of Wugang city, Li Changhe; the March 16, 1999, murder of a public prosecutor named Huang Conghua by an official at the national tax bureau on Hainan island; the killing of a local county head by the leader of the Fushin city judiciary on March 26, 1999, 
 
    There are over ten cases of government officials resorting to criminal methods that are normally the terrain of organized crime.  The contract killers themselves are either Triad “gophers”, or extremely poor and marginalized members of society. 
 
    It is true that competition for posts between officials in China was not previously conducted by relying on more commonplace criteria such as an individual’s moral integrity, skills, diligence and ability to get results. Chinese society has already been heavily punished for its preferred method of cadre selection. The recent added ingredient of organized crime will only serve to aggravate a system that is already devoid of procedure. Worse still, the entry of organized crime and its evil methods into political life will encourage other sections of society to imitate their methods. Cases of kidnap and ransom and murder have already become a common feature of everyday life over recent years. Ordinary people in China suffer from a profound lack of security as a result of living under an authoritarian and dictatorial system. The addition of alternative power structures dominated by a casual use of violence and Triad activity will do nothing but add to their insecurity and fear. 
 
    C. A Widening Wealth Gap Gives Rise to Acute Social Tensions 
 
    One result of rampant rent-seeking activities is that the income gap that has been steadily widening since the 1990s has begun to show a clear trend towards “polarization”, where the rich get richer while the poor become even poorer. 
 
    China’s income gap can be measured using two methods: Gini coefficients and the distribution of bank deposits. 
 
    According to calculations by the World Bank, in 1978, before China embarked on the policy of “reform and opening”, the Gini coefficient for personal income distribution in cities and towns was just 0.15. This was essentially the lowest in the world at the time, and reflected the effects of China’s egalitarian ideology and the “big rice bowl” system. From the mid-1980s onwards, however, the income gap grew rapidly, as the following table of Gini coefficients illustrates: 
 
    Table: Changing Gini Coefficients 
 

    Note: The Gini coefficient for 2001, as reported by the National Bureau of Statistics, does not distinguish between urban and rural incomes. See Economic Daily, 29 October 2001: page 7. 
 
    It should be noted that the Gini coefficients reported by the Chinese government do not entirely coincide with the perceptions of ordinary people. For, while the statistics for middle and lower income families presented in these surveys are fairly reliable owing to the relative transparency of these families’ incomes, the figures for the upper income brackets should be viewed with skepticism, as these families tend to have hidden sources of income. Nevertheless, even going by these vastly under-reported official government figures, it is undeniable that in the brief span of 20 odd years, China has changed from an egalitarian society into one in which the gap between rich and poor causes social unrest. In 1998, those in the top 20% of the urban income scale earned 9.6 times the income of the bottom 20%; the top 10% earned 38.4% of total income; while the bottom 20% earned a meager 5.5% of total income.[34] According to a 1998 report by the World Bank, China has already overtaken Eastern Europe and many of its Asian neighbors with its steadily rising levels of income inequality. Unless China’s current taxation policies are changed and increasing levels of official corruption reigned in, China’s income gap will continue to widen. 
 
    The distribution of banking deposits reveals the “inverted pyramid” structure of wealth distribution in China. Data on personal bank deposits show that in 2000, just 1.26 per cent of depositors owned 27 per cent of the 7 trillion yuan of total bank deposits, and 7.8 per cent of depositors owned 65 per cent of the total. Other data shows that currently in China, 15per cent of the population owns 85 per cent of society’s wealth, with the remaining 85per cent controlling just 15 per cent of the wealth[35] – a perfect inverted pyramid. 
 
    As the data cited in this paper show, we can depict income distribution in China as an inverted pyramid and the following observations can be made: 
 
    The top 10 per cent of income earners, who occupy a place at the very top of the pyramid, save most of their income and control more than half of China’s private wealth. The villas, upscale apartments, fancy imported cars and luxury boutiques – so far beyond the reach of ordinary Chinese – are for their consumption only. In the race to accumulate wealth, these individuals have become rich not, in most instances, as a result of merit, but because of their personal connections and the positions they hold. Evidence of their "success" might be measured in the observation that the food these people give to their pets is of a higher quality than the food the poor have to feed their children. 
 
    At the bottom of the pyramid are the 20 per cent of the population who live in poverty, the vast majority of whom are accumulating debt. Their circumstances are described above.
 
    At the middle of the pyramid sits the vast wage-earning class. They are able to save only a small portion of their hard-earned salaries. Judging from the urban living conditions of the 1990s, the “wealth” of the wage-earning class primarily consists of furniture, other household articles and a meager amount of cash savings, government bonds, stocks and the like. In coastal regions such as Shenzhen, the typical “wealth” of the wage earning class might consist of a “welfare apartment” (i.e. a state-subsidized home) that cannot be resold on the housing market. A portion of these families (those falling below the middle line of the pyramid) must constantly struggle lest they fall to the bottom. The speed at which they are able to increase their savings is far outpaced by the rate with which the government introduces new measures aimed at emptying out their pocketbooks. 
 
    This group makes up more than 80 per cent of the population and bears the “costs of reform”, while the per cent in positions of power enjoy the “fruits of reform”. This pattern of wealth distribution will eventually lead to a scenario in which those at the bottom, unable to make a living, resort to violence to seize back the wealth that was taken from them. 
 
    D. Barriers to the Free Flow of Information in Society
 
    The most direct threat that official corruption poses to China’s government does not come from a decline in public trust. China’s government is not elected and, ever since the Mao era, has followed the violent political doctrine that “power issues from the barrel of a gun,” though it always proclaims that it represents the will of the people. Rather, the greatest threat to the Chinese government is the softening of political power, where the pursuit of individual interests on the part of government officials is based overwhelmingly on the contravention of laws and the flouting of ethical standards. Such a “softening” of political power will inevitably put the Communist regime’s hold on power in jeopardy. 
 
    In the process of this gradual dissipation of government authority, the aspect that is most damaging to the government’s functioning is the habitual falsification of information by corrupt officials. Time and time again, the Chinese government has fallen into traps created by the reporting of bogus figures by officials, where policy decisions made using faulty information often exacerbated the very problems they were designed to address. 
 
    Falsification of information is hardly a new problem for China’s government. Indeed, there is a longstanding tradition of fabrication in the political culture of the Communist Party. During the notorious “Great Leap Forward” period, official fabrications reached new peaks of absurdity. Although the problem receded in the early Deng Xiaoping era (the 1980s), the Chinese government’s accustomed practice of falsifying information returned in full force during the administration of Jiang Zemin, when official appointments and compensation for cadres became tied to a handful of economic development indicators, encouraging fraudulent reporting by officials on a large scale. The public’s take on the illegitimate use of statistics is vividly captured by such sayings as, “The village cheats the township, the township cheats the county, each level cheats the next level up,” and “Officials make the numbers, numbers make the officials.” 
 
    The Chinese government has publicized a number of cases where punishments were imposed for the falsification of data. In the second half of 1997, a nationwide investigation into the implementation of statistical regulations was jointly conducted by the State Bureau of Statistics, the Ministry of Supervision and the Bureau of Legislative Affairs of the State Council. The investigation uncovered more than 60,000 violations of statistical regulations, 56.7% of which involved the misreporting, concealment, fabrication, or doctoring of statistical data. According to Ye Changlin, director of the Department of Policies and Legislation of State Bureau of Statistics, these were relatively minor infractions, hence the name “violations of statistical regulations”; an additional 15,000 cases nationwide, involving more serious statistical illegalities, were investigated, and those responsible punished. 
 
    One such case provides a good illustration of the problem: Since assuming the post of Magistrate of Xichong County in Sichuan Province in 1993, Liu Rongzhi repeatedly forced data collectors to report fraudulent statistical data to suit his own purposes. For instance, in 1995, the actual countywide gross industrial product was 179.21m yuan, but the reported figure was 289.55m yuan – an overstatement of 110.34m yuan, or 61.57 per cent of the actual measured value. The worst instances of over-reporting involved township enterprises, where reported numbers were 1.18 times the actual figures.[36] 
 
    In 2001, China’s national statistical system saw more than 62,000 violations of statistical regulations were investigated and punished.[37] 
 
    Falsification of data is not confined to government. The practice of issuing falsified financial reports in conjunction with fraudulent accounting practices on the part of accounting firms – which are entrusted to uphold the interests of society – has grown into a chronic and intractable disease in Chinese society.  
 
    In 2000, China’s Ministry of Finance instructed various local financial supervisory offices to investigate the quality of accounting data for the 1999 financial year from a sample of 159 companies. The investigation included companies doing business in the sectors of foreign trade (import-export of foodstuffs and chemicals), telecommunications, automobiles and machinery, along with the 117 accounting firms who had prepared the companies’ audit reports. It was found that 147 of the 159 companies under investigation had misreported their assets: asset value totaling 1.848 billion yuan had been over-reported, and 2.475 billion yuan in the value of actual assets had gone unreported, representing a 0.95 per cent rate of misreporting on assets. The investigation found misreporting of owners’ equity in 155 of the companies. The amount over-reported totaled 1.936 billion yuan, and 1.817 billion yuan of equity went unreported, representing a 1.82 per cent rate of misreporting. And 157 of the companies had misrepresented their earnings figures. Altogether, 1.472 billion yuan was over-reported and 1.943 billion yuan was under-reported, representing