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.
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.