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Posted at 12:30 PM ET, 12/16/2010

Global impact of Chinese corruption

By Steven Gore
Guest Blogger

About this blog: In the thriller, “Absolute Risk,” private investigator Graham Gage tries to piece together a series of unconnected events that point to a possible global collapse – and a key part of the puzzle seems to be China’s ingrained corruption. Author Steven Gore, himself an international private investigator before he turned to writing, brings a credibility to his high-octane action. As Library Journal said of his novel, recently released by Harper, “The possibility of his plot devices coming to fruition is alarmingly real in today's world.” Gore's research in China has left him concerned about the possible course of events there. He believes that even with a stern, guiding hand in Beijing, the country still risks an economic upheaval that could have a whiplash effect across the globe. Here, Gore describes how Chinese corruption threatens the world economy.


Premier Wen Jiabao of China is worried, worried enough not only to think the unthinkable, but to say it aloud in a recent interview: inflation and corruption threaten to destabilize China and wreck its economic miracle.

The dangers of inflation are obvious: uprisings of rage and despair in the hungry rural provinces and uprisings of frustrated expectations in the industrial zones. As with the rest of the Chinese economy, defending against inflation is a matter of state direction and central planning.

But not so with corruption. It is endemic, multileveled, and interlinked and the publicized prosecutions and executions orchestrated from Beijing have done little to suppress it.

During one of my investigations in China before turning from private investigation to writing, I walked through setting up a front company to smuggle goods out of China. Every government official with whom I met — from civilians managing foreign trade to military officers guarding the border — agreed to participate in the crime. Everyone. Without exception.

Other investigations I performed implicated high level party and government officials, managers of state owned banks and companies, and agents in Hong Kong and elsewhere who handled offshore payments.

Lest you think these examples reflect a sampling error or a matter of looking only through the gray lens of crime, the Chinese government admits as much, recognizing that disgust with corruption is a central driver in the hundred thousand “mass incidents” each year — for corruption is also murderous.

It is reflected in mine collapses and in the earthquake-induced disintegration of schools and hospitals built from “tofu” concrete, in ground, air, and water pollution; in nearly half a million industrial deaths, disfigurements, and dismemberments and in hundreds of thousands of deaths from fraudulent medicines each year.

Where those in the West might assume regulatory failure, the Chinese recognize corruption.

The instability Wen fears could range from a short term increase in the current unrest, controllable by the usual means of repression, to a conflagration of simultaneous rebellions in the rural areas and ethic provinces and involving scores of millions of surplus and itinerant laborers, students, and a frustrated middle class — one that would fracture the leadership and divide the army.

What would widespread instability mean for the United States?

It would mean that China might not be able to exercise full control over its own — and therefore our — economic future. The question, for example, might no longer be “what if China decides to stop buying our debt,” but “what if China cannot continue” because it is forced into a panicked and massive shift from investment in foreign securities into domestic spending. Or what if trade between China and the United States freezes because of disruptions in logistics: transportation, ports, and telecommunications.

Set aside for a moment thoughts about the reduction in our supply of I-pads and smartphones and think in macro terms: a depreciating dollar, rising interest rates and reduced government spending.

We all remember whose side we were on during the Tiananmen uprising in 1989, before we became so dependent on China. Maybe it’s time to ask ourselves whose side we’ll be on next time, unless, of course, the answer would be unthinkable.

By Steven Gore  | December 16, 2010; 12:30 PM ET
Categories:  Guest Blogger  | Tags:  chinese corruption; global instability; economic instability;  
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