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Debunking a Lie: Foreign investment in China accelerating political reform?
Foreign investors have influenced China in many ways. They have brought into China advanced management systems, and have increased employment. But some are negative, and these negative effects of foreign investment are, at their root, caused by the China system itself. This article discusses the foreign investors’ influence on China’s political system.
Recently, an article titled “Shocking Bribery: The Inside Story of the Telecom Industry; Anti-corruption Organizations Face a Serious Challenge” has been posted on many BBS sites in Mainland China. BBS's are a major source of news that the Chinese state-run media dare not report. This article discusses how international telecom corporations have bribed their way into the Chinese market. The article also quotes a survey by ANBOUND group (www.anbound.com) which investigated just how common bribery by foreign investors into China is. The number of documented cases of foreign investors bribing in China has steadily increased over the past decade. Chinese authorities have investigated at least 500,000 bribery cases, 64 percent of which are related to international trading and foreign businessmen.
The way foreign investors use China’s soft bribery laws is a sign that the following arguments the business world often uses to justify its pumping money into China are not in tune with reality: “Market liberalization in China will be followed by social and political reform,” “Economic development will spur political reform in China” and “After China joins the WTO, international companies will force the Chinese government and state-owned companies to comply with international regulations, reducing corruption.” Until now, these arguments have won the day in discussions on China.
The argument that economic development will lead to political reform has attracted many foreign investors to China. It makes investment in China seem like a partly altruistic endeavor, which the European and American governments are happy to be associated with. The argument has helped businesses successfully lobby the European and American governments to have extremely favorable trade policy toward China, and has even persuaded some human rights organizations.
It is no secret that foreign investors must use the golden key — “money for power” exchanges — to open the Chinese market.
As far as I know, when foreign companies first came to China to explore the market in the middle 1980s, they were not used to bribery. They found out very quickly that they were not on the same playing field with those who bribed, and that the ones who did not bribe lost many opportunities. As a result, most multinationals accepted the “money for power” exchange game in Chinese society.
Hong Kong and Taiwanese businesses were the first to come to terms with Chinese corruption. These two areas share a cultural background with China and thus have no cultural resistance to corruption. The next ones were the Japanese and Korean companies, which each have a closer relationship in culture with China. Finally, came the European and American multinationals.
Facing the pressure from a business environment that is systemically corrupt, international companies have become fully aware that in order to get, first you must give. In China, when accessing public resources, one must give to individuals. “Wool comes from sheep”; the high price and large profits from a successful deal will fully compensate the cost of bribery, so normally foreign businesses choose the strategy of maximizing profits by minimizing costs.
They accept the corruption. The only difference is that European and American bribery methods are more sophisticated. Hong Kong and Taiwan businessmen just can't compete. International companies have not only failed to improve the conduct of Chinese companies and government officials. They have conformed to China’s corrupt environment, followed the Chinese way, and have become the instigators of bribery.
The rationale, “Trade will accelerate China’s economic development, and in so doing will eventually accelerate political reform in China” is flawed. However, such a rationale's influence on China’s politics should not be underestimated.
First, these foreign companies lobbying efforts for their own benefit greatly influenced their native government’s China policy. Many foreign investors recommended their native governments build a good relationship with China and not criticize China’s human rights and politics. This greatly reduced the pressure the international community had been applying to the Chinese government to improve its human rights. As a result, China’s human rights condition is getting worse and worse.
Secondly, foreign businesses have helped corrupt Chinese government officials by establishing a way out of China. Many bribes by international enterprises were completed via overseas channels, for example, by establishing Swiss bank accounts for Chinese officials, assisting Chinese officials in getting passports and Permanent Resident status in other countries, or in sponsoring Chinese officials’ relatives and family members to study or migrate abroad. These are the bribery methods most welcomed by Chinese officials, and which Hong Kong and Taiwanese businesses can not offer.
With these foreign companies' help, China’s corrupt officials have no more worries, which have changed the Confucian “Boat and Water” theory that helped to keep emperors from over-exploiting their people during the course of Chinese history. The theory of “water can carry the boat, but also can overturn the boat” required the ruler to maintain a reasonable relationship with its people for its own benefits. It's similar to the relationship between wolves and sheep. For the wolf's long-term benefit, it should not overkill, and should maintain sheep's ability to reproduce. However, with the escape path offered by foreign companies, China’s corrupt officials do not have to share with their people the consequences of the disastrously polluted environment, and the extremely corrupt and instable social environment they created.
The two beautiful lies, “Economic development will accelerate political reform in China,” and “The large amount of foreign investment entering China will force Chinese officials to play according to international rules,” should not be assumed correct any more, because the reality in China proves the contrary.
This article was featured by The Epoch Times.
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