Corruption and growth: Learnings from the dragon

January 2, 2021 7:30 AM

In China, corruption does not impact the day-to-day life of common citizens; in India, however, corruption is pervasive

Corruption in China is largely confined to ‘facilitation payments’ made to the top to get market entry, new projects sanctioned, or regulations altered to new businesses.Corruption in China is largely confined to ‘facilitation payments’ made to the top to get market entry, new projects sanctioned, or regulations altered to new businesses.

By Rakesh Mohan Joshi

India and China both share the 80th rank with a CPI score of 41 in the Global Corruption Perception Index 2019—an empirical measure for corruption accepted worldwide—of the Transparency International. Corruption is often cited as a reason for the dismal performance of India, but it is interesting how China, an equally corrupt country, could achieve remarkable growth and emerge as an economic powerhouse. Despite being equally corrupt, it has had remarkable progress on the economic front vis-à-vis India, which calls for introspection.

The Chinese economy grew at a double-digit rate since 1961 consistently for 22 years with a peak of 27.27% in 1970. China’s share in world exports grew remarkably, from merely 0.9% in 1948 to 13.3% by 2019. China virtually emerged as the ‘factory of the world’ with a 28.4% share in global manufacturing in 2018, as per the United Nations Statistics Division, compared to India’s meagre share of 3%. In 2019, China became the world’s largest exporter with $2.5 trillion worth of exports, accounting for a 13.3% share in global exports and an impressive trade surplus of $430 billion. On the other hand, India’s exports hovered around $300 billion, with 1.7% share in global exports for the past 10 years.

Both in China and India, the anti-corruption movement has traditionally been used as a tool to implicate opponents. Corruption had always been used as rhetoric across political parties in India for electioneering. Exposing rivals on the grounds of corruption has got ready takers in mass-market of voters to establish credibility. Gandhian leader Jaiprakash Narayan’s nation-wide ‘total revolution’ (sampoorna kranti) in 1974-75 was aimed at eradicating corruption from public life that culminated in the imposition of the Emergency on June 25, 1975.

Paradoxically, some of the young turks who emerged from this episode as eminent leaders of national and provincial repute themselves got allegedly involved afterwards in multiple scandals. A few years ago, another Gandhian leader, Anna Hazare’s ‘India Against Corruption’ (IAC) movement that began on April 04, 2011, to fight corruption in public life also mobilised India’s youth in an unprecedented frenzy, and also gave birth to a number of popular leaders with tall political ambitions. Despite that, India ranks very poorly in corrupt practices in the comity of nations.

On the other hand, the anti-corruption movement in China has sustained over the last eight years, unlike India, where it is seasonal and dissipates quickly. Corruption seems to be a systemic problem of the Chinese Communist Party (CCP). China has implicated over 30 lakh government officials from finance, judiciary, law enforcement, etc, since 2012. Removing corrupt officials does work as a disincentive for corrupt practices and also helps in curbing corruption, but for only a short span.

There is no short-cut to structural reforms and transparency in government procedures across various spheres of public activity. There has been remarkable progress under the Modi government to bring down the complexity of procedures and improve their transparency with very effective use of technology. Promotion of digital payments, universal citizen identification mechanism by way of Aadhaar, Jan Dhan accounts, and direct benefit transfers online, online approvals by government departments in time-bound and simplified manner have been some of the landmark reforms to bring in transparency and curb corruption.

This has led to a significant reduction in corrupt practices at the grassroots level in several sectors. However, headways made in curbing corruption remain very limited, as evident by the marginal improvement in India’s ranking on the Corruption Perception Index. India’s rank improved from 85th in 2014 to 76th in 2015, but slipped in subsequent years to 80th in 2019.

The concept of guanxi is strongly embedded in Chinese culture; historically, it is a crucial part of business operations to get things done in China and succeed. Guanxi refers to the system of social networks and relationship with influential people to facilitate business dealings and operations too complex for foreigners to comprehend. Therefore, traditionally, it had been very difficult to get things done in China without ‘connections’ with people in power, such as government officials, politicians and other influencers. All foreign companies entering China are advised to cultivate and build strong guanxi as quickly as possible.

Facilitation payments and gifts are an integral component of guanxi and have socially been an acceptable norm in China. Numerous companies across China have emerged to facilitate guanxi. This offers a very thin line differentiating between guanxi, bribes and corrupt business practices. Although China has developed a very comprehensive legal framework that criminalises bribery and corrupt business practices, implementation has been selective.

Corruption in China is at a higher level—top officials and politicians grant favours and privileges. On the other hand, corruption in India is all-pervasive, present even at the very lowest level.

Corruption in China is largely confined to ‘facilitation payments’ made to the top to get market entry, new projects sanctioned, or regulations altered to new businesses. Such ‘facilitation payments’ or ‘oiling’ in the Chinese system often serves as a motivating factor to facilitate business operations while having little impact on the common citizens’ day-to-day operations.

While continuing its efforts to increase transparency and eradicate corrupt practices from the very root (this may take much longer than anticipated), India needs to learn from Chinese system to progress at a rapid pace to be world’s economic powerhouse and become atmanirbhar, wherein common citizens don’t feel the punch at the grassroots level.


Chairperson (Research), IIFT Delhi

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