Posted on 09/01/2004 5:37:58 PM PDT by TigerLikesRooster
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 Chinas 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 Chinas 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 Chinas corrupt environment, followed the Chinese way, and have become the instigators of bribery.
The rationale, Trade will accelerate Chinas economic development, and in so doing will eventually accelerate political reform in China is flawed. However, such a rationale's influence on Chinas politics should not be underestimated.
First, these foreign companies lobbying efforts for their own benefit greatly influenced their native governments China policy. Many foreign investors recommended their native governments build a good relationship with China and not criticize Chinas 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, Chinas 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, Chinas 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, Chinas 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. Debunking a Lie: Foreign Investment In China Accelerating Political Reform?
He Qinglian
Special to The Epoch Times Sep 01, 2004

Two boys walk past a billboard in Shanghai, 11 February 2004. Foreign direct investment in China rose 13.6 percent in January from a year earlier, but whether it has had any impact on China's political reform is another story. (LIU JIN/AFP/Getty Images)
Ping!
The author though didn't mention one thing...the well runs dry for those who isolate themselves...
It creates superficial 'changes', while the real change is much more subtle.
They accept the corruption. The only difference is that European and American bribery methods are more sophisticated."
"...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."
Well buckeroo's, there it is. This corruption is so deeply ingrained that, IMO, it is not going to change.
And why should outsiders expect it to change? Its what, in this example, the Chinese have evolved to CYA. Its what the price of doing business is. There will be a few 'show trials' and 'executions of corrupt enemies of the state' as time goes on. But the reality is, this is not going to change.
The conclusions drawn in the last paragraph should be remembered.
And by the way, bribry and corrupt business practices are by no way confined to the PRC in the Pacific Rim area.
If you work hard enough and are lucky enough to find yourself at the top of the heap of a major corporation, then you can jury rig the system so that no matter what happens to your company, you have a golden parachute to escape with.
It's interesting that in China they use the ploy: Some time in the future there will be no corruption, so we must accept some corruption now to be players in the system.
In America the ploy is: We already live in a relatively free and uncorrupted economy so any contract entered into freely must make it even more free, even when such freely entered into contracts restrict information to the marketplace and guarantee outcomes in a supposedly competitive environment.
In America the ploy is: We already live in a relatively free and uncorrupted economy so any contract entered into freely must make it even more free, even when such freely entered into contracts restrict information to the marketplace and guarantee outcomes in a supposedly competitive environment.
I had many heated arguments on this issue with people who want complete hands-off policy on corporations, even their corruption, or distorted information. All they said is that the market will correct it somehow. That is not true. Markets could be destroyed due to the collapse of confidence before any meaningful correction occurs.
For example, a truly free market (by definition) is supposed to have a completely free flow of information.
But in the same free market I should be able to engage in any legal contract. So, for example, if I am the head of the NYSE I can specify in my contract with the NYSE that no negative things can be said of me if I should ever leave their employ.
But if I was a horrible leader, then this would be good information to share with the market so that noone else would be so uninformed as to hire me at the same salary.
This is why I personally support patents which limit the use of information and anti-monopoly laws which limit economic rights of free association to the betterment of the average Joe.
Once it is established that there is some need for political limitation of the economic system, then the cat is out of the bag and we could slowly convince ourselves over time that socialism is the only fair solution for everyone. This is what seems to have already happened in Western Europe and is quickly happening here in America.
But just because it might seem like a good idea to limit contracts such that incompetent CEO's are necessarily impoverished when they fail, doesn't mean that we should also support a Lilliputian army of lawyers, politicians, bureaucrats and activists to drag us all down into the socialist sewers.
Outsiders tend to underestimate the extreme length Chinese go to uphold "One China." One China and its Manifest Destiny are 2,200-year-old religion. Every time an old dynasty falls, China was broken up into rivaling countries. In the ensuing struggle to restore one China, usually two-thirds of population perished.
As you said, the Chinese Achilles' Heel is its restive and angry population. That is why Chinese regime has been so harsh on Falun Gong. It could become a magnet for disenchanted people and eventually become a political force to topple the regime. Chinese dynastic change followed this pattern in the last several hundred years. When the economic boom eventually busts or Chinese military adventure turns into disaster, we will witness the population rise up on a scale you have never seen in your life. After all, there are 1.2 billion people in China.
I think that you and I agree on many points. Unfortunately, I am not connected to any policy makers. I hope that some of them lurk here and read our posts.
You cannot catch every crook. On the other hand, you cannot abandon catching him. Holding off one's Utopian urge is the key. That is why wisdom matters as much as expert knowledge in this kind of issue.
I have met socialist Utopians(there are too many.) I have also met "market Utopians"(ones I described in my previous post.) I consider myself a realist.
Great find.
So the Truth itself outs.
But only half of the truth -- for those who live by the corrupt shall also be done to death by the corrupt.
[Old-ish Chinese philosopher-wife's saying she coined and delivered about three minutes ago]
Blessings -- Brian
QUOTE:
Book Review by John Derbyshire
The Washington Times - April 14 2002
Dream On
The China Dream - By Joe Studwell
Atlantic Monthly Press; 360 pp. $27
The dream of Joe Studwells title is the dream of The China market: of one point three billion consumers just waiting to be sold clothes, medicine, cars, toothpaste, or whatever else the dreamer has to offer.
As an English writer of the 1840s put it: If we could only persuade every person in China to lengthen his shirttail by a foot, we could keep the mills of Lancashire working round the clock. The dream has been dreamed by many westerners across many centuries. For a very few the opium merchants of the 19th century, the fast-food franchisers of our own time it has actually come true. Much, much more often, it has proved to be only a dream, the waking from which has sometimes been abrupt and unpleasant.
In recent years there have been three cycles of dreaming and waking for foreign businessmen eager to tap into the China market. The first cycle began in the early 1980s, after a 50-year period when dreaming about China was out of fashion altogether. With the ascendancy of Deng Xiaopings faction following Maos death, it became clear that the fantasy economics of the Mao period had definitely been abandoned. So far as industry was concerned, they had mostly been abandoned in favor of the kind of incentivized state socialism attempted in Eastern Europe twenty years before. This was not much noticed, however.
What was noticed was Dengs maxim to get rich is glorious, and the revitalization of Chinese agriculture that followed the retreat from collective farming, and the surge in disposable incomes among urban Chinese from a Mao-era base very close to zero. Western businessmen, dreaming the dream, poured in to set up joint ventures with Chinese partners. The massacres of June 1989 are a convenient punctuation mark for the end of this first dream cycle. Many businessmen had already woken even before that, though; the book Beijing Jeep, published earlier that same year, told the dismal story of a typical joint venture fiasco.
The atmosphere of widespread state terror that followed the Tiananmen massacres offered a splendid opportunity for the Chinese government to administer some unpleasant medicine to an overheated economy. When this had been done to the leaderships satisfaction, Deng started the second cycle of dreaming with his famous southern tour of early 1992, in which he urged his countrymen to go for maximum economic growth. Following the massacres it was clear that the Communist Party had no intention of going away; but it seemed, from Dengs 1992 speeches, that it might be willing to leave the economy alone. This all happened just as the rising fad for globalization was seizing the attention of western business people.
Once again, the dream took flight.
The actual experience of western business in China during the 1990s was closely watched by Joe Studwell, a writer on business and economics he is founder and editor-in-chief of the excellent China Economic Quarterly who lived in China for the entire decade. He saw the 1990s flood of dreamers arrive, bright-eyed and eager to engage this new, busy China. He watched the bright eyes glaze over as the reality of China gradually revealed itself to them. Signed agreements and memoranda of understanding turned out to be worthless; court rulings were not enforced; state-owned enterprises were exempt from costly environmental regulations; expensive licenses, processed by lackadaisical bureaucrats, were required at every turn; counterfeiting and abuse of intellectual property rights were rampant; the early-1990s purchasing-power models for the disposable income of the Chinese turned out to be too optimistic; ad hoc technical standards were used to impede trade; local management personnel were scarce, and of poor quality.
As difficulties multiplied, the dream faded.
Then, in December last year, Chinas accession to the World Trade Organization became official. As this author points out:
The government committed to the WTO from a position of weakness, not strength, because of quiet desperation, not unified political resolve. It reached for an outside force to do a job it was failing to do itself the deregulation and de-bureaucratization of Chinas economy.
WTO accession arrived just as serious disillusion was setting in among foreign investors in China. There are signs that it has initiated a third cycle of dreaming. Certainly the Chinese government hopes this is so. Knowing that they cannot solve their countrys economic problems without making political reforms they are unwilling to contemplate, Chinas communists hope that the standards implicit in WTO membership, and the compulsory procedures for resolving disputes between members, will, all by themselves, force Chinas domestic economy to shape up. Joe Studwell shows convincingly why this is unlikely to happen.
The China Dream will inevitably be compared with last falls book on the same topic, Gordon Changs The Coming Collapse of China. [Which I reviewed in these pages August 12 2001] Studwells book is lighter on cultural insights than Changs, but better organized and richer in hard economic facts. He notes, and abundantly documents, such large and intractable truths as the following:
For all the talk of reform, of retreat from socialism, of the unleashing of the energies of the Chinese people, and so on, government payrolls increased all through the 1980s and 1990s.
From being debt-free in 1979, China is now saddled with liabilities that will soon make her the worlds most indebted nation.
Given the states determination to micromanage economic activity, there [is] almost no strictly legal way for foreign investors to make money.
Studwell offers two possibilities for Chinas near future: a long period of stagnation and low growth like the one Japan has been enduring, or a major fiscal crisis, with runs on the banks followed by Latin-American levels of instability and social disorder. He notes that neither scenario offers a very exact analogy to China: a stagnant debt-crushed economy with a per capita GNP of $25K per annum is not the same thing as one with $1K per annum, and Argentina has never had either Chinese levels of social and political control or modern Chinas imperial responsibilities and hegemonic ambitions.
The authors advice to foreign investors is to use the country as a manufacturing base for exports (if you can squeeze in among all the overseas-Chinese doing exactly that), but to engage in the domestic market only with utmost caution.
It sounds right to me, though given the violence of regime change in China, and the xenophobic outbursts that traditionally accompany such change, I would add one more thing:
Keep a suitcase packed and ready under your bed at all times.
END QUOTE.
February 18 2002 - Updated 2230 Hrs ET
President's uncle shares Bush family ties to China
By Debbie Howlett, USA TODAY
CHICAGO When President Bush arrives in Peking on Thursday, he'll embrace a policy that's something of a family tradition.
Bush's approach centers on promoting U.S.-China economic ties. That's a course favored not only by his father, the first President Bush, but also by his uncle, Prescott Bush Jr., a longtime acquaintance of Chinese President Jiang Zemin.
The Bush family's ties to China go back to 1974, when President Nixon named George Bush ambassador to China. The college-age George W. Bush spent two months in China visiting his parents during his father's two-year stint.
Seven years after his brother left the ambassadorial post, Prescott Bush made his first trip to China. He later joined with Japanese partners in 1988 to build a golf course in Shanghai, the first in China. He met Jiang, who was then the mayor of Shanghai.
Prescott Bush, now 79, also developed a close working relationship with Rong Yiren, a former trade minister and vice president, who in 1993 introduced Bush to a group of Chinese business leaders as "an old friend." In 2000, Forbes publications reported that Rong, who has retired from government, was the richest man in China.
The president's uncle concedes that he sometimes relied on his name to open doors, but he says any deals he made were the result of his own hard work.
"You can get a meeting because of it, you can meet a lot of people because of it," he said in a recent interview in Chicago, where the U.S.-China Chamber of Commerce has its headquarters. "But I don't get a lot of business because my nephew is president or my brother was president."
Some experts argue otherwise. A name is not just helpful, it's essential, says Nick Larty, a professor of international relations at George Washington University in Washington, D.C.: "Who you get access to in China is pretty much a function of how important you are."
Along with access, the family name has also brought scrutiny to Prescott Bush's deals:
He was criticized in 1989 for visiting China to meet with business and government leaders just three months after the Tiananmen Square massacre, in which army troops fired at pro-democracy demonstrators.
His Shanghai partnership with the Japanese firm Aoki in 1988 proved embarrassing when revelations surfaced that Aoki at the same time was allegedly trying to get business contracts by bribing Panamanian leader Manuel Noriega, whom the first President Bush later ousted from power.
His connections to an American firm, Asset Management, came into question in 1989, when the company was the only U.S. firm able to skirt U.S. sanctions and import communications satellites into China.
When Asset Management went bankrupt later that year, Bush's deal to arrange a buyout through West Tsusho, a Japanese investment firm, raised eyebrows. Newspapers reported that Japanese police were investigating West Tsusho's alleged ties to organized crime.
Bush declines to discuss those controversies. "That's old news. It's in the past," he says.
Last year, he opened the U.S.-China Chamber of Commerce offices in Chicago. The membership roster includes United Airlines, American Express, McDonald's, Ford and Arthur Andersen, the beleaguered company that audited Enron's books.
Bush says opportunities abound now that the 1997-98 Asian financial crisis is in the past: "The Chinese are very much interested in getting foreign capital in. They desperately need the jobs."
Last fall, Bush hosted a well-attended trade conference in Chicago at which U.S. Trade Representative Robert Zoellick gave the keynote address. At a dinner he sponsored last month at the Yale Club in New York, the U.S. ambassador to the United Nations, John Negroponte, was guest of honor.
Perhaps the most intriguing question about Bush's China connections is whether he played a role in ending a U.S.-China standoff in April, when a Chinese fighter jet collided with a U.S. Navy surveillance plane over the South China Sea. The Chinese pilot was killed, and the U.S. plane made an emergency landing on Hainan island, where 24 U.S. crewmembers were held for 11 days.
The president's uncle traveled to China just hours after news of the incident broke. He flew aboard United's inaugural flight from Chicago to Peking. Other dignitaries on the largely ceremonial flight stayed a few days, but Bush didn't return home for two weeks. Moreover, U.S. Ambassador Joseph Prueher met Bush but not the rest of the group.
Prueher says their meeting was simply a social call.
"I might have joined him for a cup of tea or a Coke maybe we had a beer, I don't recall," says Prueher, who left his post in June. "We spent an hour chatting."
Bush denies any involvement in the diplomatic settlement that ended the crisis.
"I couldn't possibly do something like that," he says. "It would be very embarrassing for the president if it was found out that I was going to see my friends when he was trying to work things out."
The standoff ended when Prueher sent Jiang a carefully worded letter of regret over the incident.
The next day, the U.S. crew was permitted to leave.
Bush left a day later.
The Prescott Bush file
Age: 79. Born Aug. 10, 1922.
Education: Yale University.
Background: Chairman, U.S.-China Chamber of Commerce; president, Prescott Bush Resources.
Politics: Unsuccessfully challenged U.S. Sen. Lowell Weicker in Connecticut's Republican primary election in 1982 for the seat once held by his father.
Family: The oldest of five children of Sen. Prescott Bush and Dorothy Walker Bush. Lives with wife, Beth, in Greenwich, Conn. Two grown children.
Source: USA TODAY research
BUMPping
No wonder they got along with Bill Clinton so well.
Chinese state is leeching on private sectors to sustain itself. And the size of leech is way too big. The requirement of keeping the empire together by doling out subsidies and favors gets in the way of efficient business. The empire runs on large carrot(subsidies and favors) and huge stick(oppression and occasional brutal crackdown.) That is why China did not go the way of Europe, i.e., one common culture and many countries.
In the ocean of people known as China, once in a while, a political storm brews, gathers its strength, and takes a life of its own which nobody can control. It will ravage everything on its path until it dissipates. It will be of epic size.
#13 ping
<< In the ocean of people known as "China," once in a while, a political storm brews, gathers its strength, and takes a life of its own which nobody can control. It will ravage everything on its path until it dissipates. It will be of epic size. >>
And let us not forget that the vast majority of those who comprise the ocean of -- for the most part obscenely poverty-stricken -- Peoples its present owners, operators and controllers call "China" live in their own lands, more than two and a half million square miles of which lands -- from a total of "china's" three point seven million -- are brutally colonized, occupied and murderously enslaved by Peking's predatory phychopaths.
And when it spontaneously implodes?
Wow.
Cannot wait!
What a day that shall be.
What an epic, indeed.
Blessings -- Brian
PS: Some days you and I, Tiger -- in agreement and/or in harmony about so much -- must discuss the clichés of socialism you employ when you're discussing FRee Market Capitalism. Bit naughty of you, that.
[PPS: And, while we're talking here, nasamn777, also about al qaeda, wonder if Peking's chow lan chow one-china pack remembers how and when and where, against whose claimed borders -- and against what, then, "super power" [HaHaHaHa HaHaHaHa HaHaHaHa HaHaHaHa HaHaHaHa HaHaHaHa] evil empire -- al qaeda got its start in life. I do. I was there, too. Tzai tzien, Pern Yew]
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