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Sunday, October 09, 2005

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Angry Economist

China is a fertile ground for corruption...

• A large, developing economy: China is a large country with a population of 1.3 billion. Its economy has growth by about 9 per cent per annum since 1978. The Chinese economy is open with low tariff barriers, a developing infrastructure and a large workforce.
• A state-led economy: Half of the productive capacity of China is in state hands. State Owned Enterprises dominate the economy, and represent the majority of potential and actual overseas inward investors. All of China’s 11 Fortune 500 companies are state-owned.
• A diverse nation with many sub-economies: China is often mistakenly considered as a uniform entity, whilst in reality it is very diverse – there are 31 provinces and 656 cities. There are seven major dialects, and 80 languages spoken. Economic development and growth has not been uniform. Economic and investment opportunities are not uniform. Despite the appearance of a strongly centralised state, decision-making is highly decentralised.

The power of central government is much exaggerated. Local governments have much power. And they are largely corrupt. Its an enormous challenge to address corruption in China. Impossible I would say. What is often forgotten is that in existing and former Communist states, corruption was endemic too. Trying to reverse 50 years or more of this in China, Russia, Ex-Soviet Union is proving extremly hard/ nigh impossible. The whole system of public administration, armed forces, law and order etc has corruption as an integral part.

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