Why Do State-Owned Enterprises Generate So Much Corruption?
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Why Do State-Owned Enterprises Generate So Much Corruption?

Wang Yong
Caixin, 2013
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Chinese president Xi Jinping began an extensive anti-graft campaign in 2013. Its motto “killing tigers and swatting flies” communicated that the government would investigate high-ranking government officials (tigers) and local civil servants (flies) alike. So far, the government has looked into hundreds of thousands of civil servants and indicted more than 120 high-ranking officials – including senior officials at China National Petroleum Corporation (PetroChina), one of China’s largest state-owned enterprises (SOEs). Caixin columnist Wang Yong explains why state-owned enterprises are hotbeds for corruption and suggests ways to bring about change. getAbstract recommends this insightful article to anyone interested in the political and economic systems in China.

Summary

In the planned economy of former chairman Mao Zedong’s time, the Chinese state owned all enterprises. The central government had total authority and wielded strict control over businesses, leaving almost no opportunity for money laundering. At that time, state-owned enterprises (SOEs) didn’t breed corruption. Today, China has a market-oriented mixed economy under one-party rule. The central government’s authority is weaker, and SOEs have much more money than they used to. SOEs, especially the ones that hold monopolies, receive substantial government investments and generate huge profits. Thus, SOEs have become an environment that’s favorable to powerful and greedy individuals eager to allocate themselves a large piece of the cake. Although the government promised to “kill tigers” – fight corrupt high-ranking government officials – the phenomenon has deep roots in the way SOEs interact with the government and isn’t easily fixable. 

SOEs are important moneymakers for the government that also serve hidden political...

About the Author

Caixin columnist Wang Yong is a professor of civil and commercial economic law at the China University of Political Science and Law.

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