A Mountain of Fragrant Grease

How the Chinese System Works

Bribery has been part of Chinese society for centuries. The Chinese government has publicly condemned corrupt behaviour, and vowed to stamp it out. The vow and the stamping are hollow. The practice is so intrinsic to China that that it is difficult to see how "top down" governmental programmes to outlaw bribery, graft, and fragrant grease are going to succeed now or in the foreseeable future. It could be argued that China is one great, vast, decentralised mafia.

In a recent piece in the Sydney Morning Herald, China expert, John Garnaut profiled some research by Graeme Smith of the University of Technology in Sydney. Smith has spent considerable time focusing upon one county in Anhui province, tracing where the money flows.

Smith has spent four years getting to know everyone he can in Benghai (a pseudonym for the actual county Smith researched) and working out exactly how the money flows. He has now mapped the internal logic of Chinese corruption in Political Machinations in a Rural County, in The China Journal.

The first thing to note is that the average Chinese citizen does not view the practice of fragrant grease as morally wrong. It is just what needs to be done in order to get ahead or make things happen.

The perpetrators of corruption are rarely morally good or bad. Rather, they are playing by the unwritten rules of a system that makes them utterly dependent on the patronage of those higher up the tree - and oblivious to the needs of those below.

The object is to send money up the tree (the state run bureaucracy) to win favour, to make sure government and state money comes back down.

One reason Benghai County is doing well is that it has opened embassies in seven cities for the purpose of cultivating higher officials. ''What do you think these offices do? Hand out brochures? The money goes up, and then the money comes down,'' a Benghai business source told Smith. Despite its relative wealth, or perhaps because of it, Benghai convinced Beijing to reinstate it on China's ''impoverished county'' list, which led to two major international aid projects and additional national infrastructure projects. Once the money comes down, a huge and rapidly growing bureaucracy divides it up in places like Sauna City.

Within Benghai county, the Communist Party secretary is king. He has the final say in all personnel decisions and the interpretation of central government policy. He runs the bureaucracy like a giant franchise system.

The 12 members of his standing committee vie for his favour rather than hold him to account. Below them are the party departments and government bureaus, whose rank and status are determined mainly by the amount of money flowing through them from above.

In order to get jobs within the vast state bureaucracy and to secure contracts and funding and permits for business activity, one must have the right connections, and make the right moves. Family links are often critically important; but bare nepotism has to be overlaid with money and payments.

The Organisation Department is on top. Smith says all the township party secretaries paid money for their posts, as did the heads of 80 per cent of government bureaus. Lower officials pay lower sums to ''show their appreciation''. . . . Job applications in Benghai are not simple commercial transactions. Candidates must also be capable and have good family or personal connections. Paying in the right manner to the right person is an art in itself.

"To avoid potential charges of bribery, there are games of mahjong between the spouses of the relevant actors where the applicant's wife has a deliberate bad run of luck," writes Smith. "Department store cards arrive in red packets; overpriced tea is purchased from a retailer recommended by the contact; useful intermediaries are banqueted; and trust-building visits to saunas or massage parlours smooth the deal.''

There is a ''shadow state'' of personal secretaries, chauffeurs and relatives to mediate the deal-making process. One driver has now earned himself three investment properties.

When a business deal involving state approvals and funding, the pressure to "spread the wealth" around amongst one's friends and extended family is immense.

The status of bureaus shift with government policy. Each new grant from Beijing is an opportunity to open a new bureau or add graduates, retired soldiers and relatives to the payroll of an existing one. ''The pressure from the friends and relatives of county government staff is particularly acute,'' writes Smith.

The fortunes of each institution can usually be measured by the number of shiny new government cars parked outside. The most impressive office in Benghai was set up to supervise an expansion of a hydroelectric dam, which provided a sudden windfall from construction kickbacks. The hospital is also a lucrative business, with cadres making their money from fee-paying patients and pharmaceutical kickbacks.

Surrounding each bureau is a cartel of relatives and friends supplying goods and services at a healthy surcharge. ''A cut of around 20 per cent will be taken by the gatekeeper who purchases goods or services from these firms, either up front as cash, or later as a gift,'' writes Smith. Occasionally, however, an official gets overly greedy or the winds of political favour blow the wrong way, and someone must be sacrificed.

A deputy secretary was recently placed under house arrest for receiving more than 2 million yuan in construction kickbacks. The real sums involved were thought to be much larger. There was no open court trial and the bribe-paying businessmen were left alone, ensuring the other officials who were implicated would not be publicly exposed

The vast corrupt system works so long as people get what they want; it will crumble only when the majority of people refuse to pay or partake--and that will require a complete change of religious and social world-view from the bottom up.

The logic of Chinese corruption requires that the 95 per cent of citizens who ultimately foot the bill do not complain too loudly. That's where the propaganda department, the public security bureau and the petitions office come into play.

My guess is that the sorry state of governance in Benghai is more or less replicated across China's 1600 rural counties. Equivalent systems operate in urban areas, although usually in less blatant form. The patronage networks extend well into the Politburo.

Corruption and nepotism might well be the party's single greatest public relations problem. But it is also an effective strategy for keeping cadres, bureaucrats, soldiers and business people unswervingly deferential to those above them.

New Zealand has signed a free trade agreement with China. It is almost inevitable that the culturally endemic Chinese practice of fragrant grease will insinuate itself into the practices of NZ firms doing business in China and trading in that country. No doubt some very public corporate scandals will eventually surface. It would be smart for any NZ business operating within, or trading with China, to face this issue up front, determining from the outset how the problem is likely to present itself, and what counter-measures the company will adopt. Smith's research will be very valuable in this regard.

As China becomes increasingly christianised systemic corruption will fade away. For the moment, however, neither rules nor regulations, politburo fulminations nor propaganda campaigns, nor occasional public scape goats will make any dent in the problem. It is too vast, too ingrained.

But in the end, Christians will end up preferring to do business with other Christians naturally, because it will be easier and less expensive. Non-Christians will end up preferring to do business with Christian corporations because of the "above board" nature of transactions. In the end bottom-up rectitude and widespread integrity will boil down the use of fragrant grease. At that time Government proscriptions against bribery and corruption will end up with street credibility and will consequently have traction.

In the meantime, the fulminations of the Politburo remain cavernously hollow.