Richmond World Affairs Council

Growing Economic Disparity in Modern China

On April 3rd 2016, an anonymous source leaked 11.5 million documents containing sensitive financial and legal information to the German newspaper Süddeutsche Zeitung. This leak, the largest in history, is known as the Panama Papers. The documents originated from the Panamanian law firm Mossack Fonseca, the world’s fourth largest law firm specializing in offshore money management. They revealed how a global elite used offshore accounts and shell companies to hide billions of dollars in financial transactions from taxing authorities. Public outrage was swift and widespread. One of the first casualties of the leak was Sigmundur Gunnlaugsson, the former Prime Minister of Iceland who resigned two days after the story broke.

 

Another country heavily implicated by the Panama Papers is China. Beijing quickly censored all mention of the leak on domestic traditional and social media platforms. The Papers implicated eight current or former members of the Politburo Standing Committee and their family members including President Xi Jinping’s brother-in-law, former Vice President Zeng Qinghong’s brother, former Prime Minister and head of parliament Li Peng’s daughter, and Mao Zedong’s grandson-in-law. In the weeks after the papers surfaced, the Global Times, a mouth piece of the Chinese Communist Party, claimed the Panama Papers was “a new means for the ideology-allied Western nations to strike a blow to non-Western political elites.”

 

Political corruption in China is a way of life for many citizens. It is a major problem in China’s corporate sector and also affects its government. In addition, China’s mixed market economy is controlled by the state and makes it easier for individuals to use their position for personal gain. Charney Research’s 2015 white paper on corruption in China found that bribery and gift-giving are necessary for 35% of companies in China. That number increases in metropolises like Beijing, where 43% of companies believe that bribery and gift giving are necessary. According to academic studies based on cross country experiences, corruption and economic growth are generally inversely related. The Carnegie Endowment for International Peace’s Yukon Huang notices the opposite trend occurring in China. There, the economy is growing rapidly despite its rampant corruption. However, China’s people name corruption as their number one complaint against the government, with Transparency International’s 2015 Corruption Perceptions Index giving China a rank of 83 out of 168 countries. Corruption increases citizens’ distrust of the Communist Party of China and makes it difficult for poorer families to gain a foothold in the economy.

 

The Panama Papers is the latest evidence of corruption and is influential because of the amount of evidence it contains. The degree to which high-ranking members of China’s society evaded taxes and government regulations flies in the face of Xi Jinping’s far reaching anti-corruption crusade. Because the Chinese government is notorious for confiscating private wealth without provocation, there are legitimate reasons for people to hide their wealth. Furthermore, thousands of the rich and powerful are in prison because of Xi Jinping’s anti-corruption drive. However, family members of government officials hiding their assets for personal gain is a problem because it increases citizens’ perception of corruption in China.

 

Xi Jinping claims that his anti-corruption campaign is meant to reform China’s political culture. However, the presence of corruption within his inner circle suggests that Xi’s campaign is more a tool to eliminate political opponents than to truly eliminate governmental wrongdoing. The right to due process is effectively denied to those accused of ‘disciplinary violations’. In addition, Xi and the Party control the Central Discipline Inspection Commission (CDIC), which investigates those accused of corruption. The CDIC has investigated over 200,000 government officials since 2013, with a 99% conviction rate. Powerful officials like former Chongqing chief Bo Xilai who once were threats to Xi now serve life terms in prison.

 

The gap between China’s rich and the rest of their society is increasing. Corruption in China increases tension among members of the working and middle class, many of whom feel uneasy about the growing wealth and privilege dominating Chinese society. A 2016 report from Peking University states that the richest 1% hold 33% of China’s privately held wealth, while the bottom 25% control only 1% of the country’s wealth. In a country that traditionally prizes hard work and frugalness with a party that nominally fights for the working class, the showy extravagances of China’s richest leads to significant backlash from many citizens, who believe that their actions do not line up with the country’s values.

 

The fuerdai, or “second generation rich” are the children of China’s wealthy elite and are the controversial subjects of popular Chinese dramas such as “Noble Bride: Regretless Love” and “Ice and Fire of Youth”, as well as the reality show “Ultra Rich Asian Girls of Vancouver”. The ‘new money’ fuerdai and their families are often criticized for their shallow lives and lavish spending. Though they are a relatively new social class in China, they are one of its most hated classes. Typical fuerdai posts on Instagram and Weibo such as a picture of a dog wearing two Apple watches worth $30,000 attract controversy and bring up questions of how the country and its government will adapt to the increasing wealth of its top citizens.

 

 

Theresa Dinh