Nepotism in China: the First Step Is Admitting You Have a Problem

China’s former state auditor has identified the business dealings of Communist officials’ children as the main source of public “dissatisfaction” in an online broadcast by the People’s Daily newspaper, the official Communist party mouthpiece.

“From the numerous cases currently coming to light, we can see that many corruption problems are transacted through sons and daughters [of officials],” Li Jinhua said in the online forum[.] (Financial Times)

This is not a new problem, but the fact that a high-ranking official (Li is Vice-Chairman of the National Committee of the Chinese People’s Political Consultative Conference) put it out there publicly has raised some eyebrows. Even though the central government has been aggressively targeting corrupt officials nationwide for a long time now, that does not mean that open criticism is always condoned.

What Li said is common knowledge. A People’s Daily poll this year found that 91% of respondents believed that rich people enjoy strong political connections. This is accepted as fact and is cited as one of the major causes of public discontent with the current political structure.

I confess to having the same beliefs as those survey respondents. The last time I was in the U.S., my wife and I had to make a visa pilgrimage to the Chinese Consulate in Los Angeles. After being given a number like a deli customer, and after the 20-minute wait (could have been much worse), we were called up to one of the customer service windows, where I was “helped” by this arrogant chick whose English was atrocious (we broke into Chinese very quickly).

After 15 minutes of talking past each other and at least getting one visa straightened out, we left. I immediately turned to my wife (who was fuming) and said “I wonder whose daughter she is?” In other words, there was no way that girl could have secured that job on her own merit.

I should point out that nepotism is certainly not a problem reserved to China. Just consider that the U.S. recently suffered through eight years of an astonishingly bad presidency that owed its very existence to nepotism. Doesn’t get much worse than that.

For a country like China that has prided itself on being a meritocracy for hundreds of years, not to mention being one that is currently governed by egalitarian socialist principles, nepotism has got to be a particularly nasty thorn in its side. Corruption in all of its ugly glory is bad enough, but nepotism carries with it suggestions of aristocracy, a reminder of that ever-widening income gap and a departure from the Harmonious Society.

There are no easy fixes for the problem, either. The “children” at issue are, by many accounts, smart and successful in their own right. They have been to the best schools, have received excellent training, and have been exposed to different cultures and experiences, many of which are the result of overseas education and work. That is all well and good. If their business practices were all above board, no one would be complaining.

The problem is that not only do these privileged children receive the best training, but when they return from school and start their business careers, profitable deals virtually fall from the sky for no other reason but that Daddy or Mommy made it happen.

We Promote Family Values Almost As Much As We Promote Family Members

China wants to encourage these bright, well trained young people. They are part of the country’s future and have valuable skills to employ. It’s just those influence-backed deals that need to be stopped, but in a society that places deep significance on family ties and mutual support, how can you stop a doting parent from doing everything he/she can to give their kid an edge over everyone else?

What will help? Tighter audits, more reporting and transparency at the government level? Certainly, all of those measures are needed anyway to curtail other forms of corruption. But if all that filthy lucre is being funneled not to Deputy Assistant Vice Minister Wu, but to his son Cheng, a 22-year-old recent Middlebury grad with his own software company and new government contracts worth millions, how does an audit uncover that sort of thing?

Should investigations of government officials’ finances include their children? How would an investigation separate “grey” income from legitimate income? What about government contracts that, although they may have been secured because of influence peddling, are nonetheless arms-length agreements whose terms of service are adequately met?

Given that nepotism has been an intractable problem for centuries, it would be foolish to think that this sort of thing will be done away with overnight. There are many underlying causes to the problem, including a large income gap that is creating haves and have-nots, an education system where access is based on the ability to pay exorbitant fees, and a legal system that has not yet caught up with the complexities of modern day white collar crime.

Any magic bullets out there? Your suggestions are welcome. CPAs get to jump the comment queue.



14 Comments

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  1. “A People’s Daily poll this year found that 91% of respondents believed that rich people enjoy strong political connections. This is accepted as fact and is cited as one of the major causes of public discontent with the current political structure.”
    I’m sure a poll in the US or UK would yield similar results.

  2. anon

    This is typical of Chinese history. Same thing happened with the Qing dynasty came into power and as well as the Ming dynasty. The rules of who went to the schools and who became rulers were from the rich and powerful fathers. It’s something that sucks about China, no matter who is in charge, the system stays the same.

    • I’m having a hard time seeing how this is fundamentally different from any other country. The rich and powerful people have always gotten more access to resources than others, everywhere, right?

      • It’s not really about China so much as it is about a developing country with a widening income gap and public discontent. Lots of new money and opportunities in this country and, I would argue, a perception that these new gains are primarily going to a select few. In the long run, this is a problem for social/political stability as well as continuing economic progress.

        Danger, Will Robinson, danger!

  3. Joe

    “Just consider that the U.S. recently suffered through eight years of an astonishingly bad presidency that owed its very existence to nepotism”

    I assume this is coming from someone who had never met President Bush. Bush was helped by having connections and experience in previous elections (his own and his father’s) but that does not mean he won the election because his father was once president. Bush was more charismatic than his opponents. He may not be an eloquent speaker but he knew how to work a room full of donors. That is a hard skill to learn.

    • hm

      And you met Bush?

      • Jones

        I did, actually. Back in 1999 when a tornado annihilated the neighboring town. He was governor then and toured the area to survey the damage. Declared it an emergency zone or whatever. Seemed like a nice guy at the time. However…little did we know…he was there to challenge the tornado to bet to see who could ruin more of the US.

    • Bush did not get elected by direct Daddy intervention, but I think his entire professional/political career is based on family connections and money. He was successful in manipulating, or capitalizing, on those connections, but he still needed them, particularly early on. For example, he first met a lot of those donors when working on his father’s political campaigns.

      • King Tubby

        Stan. Family connections initially, yes. Murky Saudi funding, but he got over the line primarily because he romanced the christian right with a lot of dog whistle politics. There were very big differences between Bush Sn and Junior re: Americs’s global role. The neo-cons were a totally new admin grouping who went out of their way to exclude James Baker types. Craig Unger makes this argument in highly referenced detail..

  4. b.

    I’ve been enjoying the new blog, lots of posts that are really on point, but this one needs to go back to the drawing board. I hate George Bush, but his becoming President had very little to do with nepotism and more with America’s stupidity. Further, the “91% survey” would be true anywhere in the world and I completely disagree with the idea that it “is cited as one of the major causes of public discontent with the current political structure.” More so than in other countries, I believe the Chinese understand their “place” a farmer in Jilin understands and accepts that he has no power to even influence things at the village level. Chinese, because of their history, don’t expect to have influence or even a connection to their leaders.

    While US-style transparency would help a lot with cleaning up nepotism in handing out contracts (though not always, look at Chicago), that’s not even an important factor in nepotism in China. The “princelings” are given sweet jobs or are able to easily influence foreign and domestic companies into signing agreements with them due to their power.

    At the same time, nepotism isn’t always a bad thing. Would Bo Xilai be where he is today without nepotism?

    • On Bush, see my other reply. Bush the politician would have been a non-starter without the family name and money. I don’t consider that to be even disputable.

      I agree that the survey would have achieved similar results in many countries. I don’t have other stats to back up my thinking here, but you certainly hear people in China complaining about nepotism frequently. That farmer may understand he cannot influence things in Beijing, but when he sees the son of a local official driving around in a BMW, it pisses him off.

      Cleaning up the system here will be very difficult. I think the best way is to work on narrowing the income gap. Audits and such are necessary, but I agree that the effects will be minimal. It’s all about access and power.

      Re: nepotism and Bo Xilai. — I’m a big fan of the late Ted Kennedy’s career and even voted for him, but I was never happy about the Kennedy dynasty.

      • King Tubby

        Bo Xilai breaks the mold and introduces the celebrity politician by appealling directly to the masses. He cant be excluded from the promotions ladder, but I’ m sure he pisses off the competition for the 9 spots on the Polituro Standing Committee. This is one media savvy princeling.

  5. yangrouchuan

    Ok, point out Bush, but a President or PM in a democracy does not get elected by a phone call from Daddy or Mommy. It is their support staff and high level cabinet choices that also gets them elected. Likewise, Hu Jintao’s dad (or grand dad) was killed by the Red Youth during the CR. Nepotism does not get you into the “top” position.

    What nepotism does get the young uns is exclusivity. Hu Jintao’s daughter’s adoption company handles most adoption cases. The same can be said for other cases of nepotism, exclusive contracts with the PLA, mining companies, oil/gas, insurance, banking, etc.

    And China, unlike most non-western and/or developing countries, has actually backslid on the promise of what the civil service exam turned college entrance exam can do. Because now dumb kids from good families get top PRC university slots, and visa slots for overseas study, while smart poor kids wallow at degree factories.

    And the steep tuition makes it nearly impossible for these smart peasant kids to go to a good school…unless they are deemed valuable to the PLA or possibly receive patronage from powerful companies would would hire them (as indentured servants) upon getting their degree.

Continuing the Discussion