Guanxi

If you are a China junky, or if you read the papers, you may have noticed that Minister of the State Food and Drug Administration Zheng Xiaoyu recently met with some bad news. He's going to get a bullet in the back of the head for embarrassing Beijing. Beijing is often embarrassed because corruption is endemic throughout all levels of government a Chinese colleague recently reminded me. But Mr. Zheng didn't have friends in high places.

Don't feel too badly for Mr. Zheng. He raked in over $800,000 US in bribes for approving food and drugs for the domestic and export markets, many of which were later determined to be fraudulent and/or contain toxic ingredients. Mr. Zheng has appealed the sentence; however as one local in Beijing stated "he has zero chance of not dying".

By contrast, in 2006 Beijing decided it had enough of Chen Liangyu, the Communist party chief of Shanghai. The Communist party chief of a province or city is the highest post, above the mayor. Shanghai and Beijing have traditionally had a rivalry. That has escalated recently as Shanghai quite openly refuses to implement many of the central government policies. And it has not gone unnoticed in Beijing.

In addition to planting himself firmly on the other side of the aisle from President Hu, Mr. Chen managed to misappropriate 10 billion RMB from the social security fund in Shanghai. For perspective, 10 billion RMB is approximately 1/3 of the fund. But Mr. Chen wisely understood the importance of friends, and as a result, his head is still attached to his body. Shanghai was a stronghold of former president Jiang Zemin who protected Shanghai's ruling elite, and whom it appears is largely responsible for the survival of Mr. Chen.

China and Hong Kong are ripe with banking scandals. Papers are full of stories in the past 5 years of corrupt banking officials scamming millions of dollars from Chinese banks (none of which were particularly solvent to begin with). Death sentences were passed around, many commuted, again depending on the level of guanxi the executive had with the party. It is a particularly effective means of eliminating the political competition.