By Chen Yong (陈勇)
Economic Observer Online
Nov 24, 2011
Translated by Zhu Na
Original article: [Chinese]

 
Wu Ying (吴英), who committed the country’s biggest fund-raising fraud, was sentenced to death on her first trial. Four years and nine months later, she was given new hope; the People’s High Court in Zhejiang Province decided to reconsider her case.

Of course, this is welcome news to Wu, but a nightmare to those who dreamt of her death. Wu Yongzheng, Wu Ying’s father, said he won’t play his last card until the last minute: if Wu Ying is put to death, he said, then many others will follow her to the execution chamber. This was a veiled threat implying that if she was sentenced to death, Ying and Yongzheng would reveal the names of more corrupt officials that she did dealings with, whose illegal activities would then be revealed. Wu said this not just out of desperation to save his daughter, but also because it’s true.

According to the court documents, Wu Ying’s creditors include many officials. When they heard about the decision to reconsider the case, fourteen officials jointly signed a petition calling for her death. If Wu Ying doesn’t die, then many other people will be taken down – either to the execution chamber, or possibly stripped of their careers. In order to protect herself, Wu Ying revealed the names of officials she did dealt with, including the president of a bank and senior officials.

The Wu Ying case not only reveals chaos in private financial institutions, but, more importantly, it shows rampant rent-seeking by officials. Officials in collusion with businessmen exploited the resources under their control. The Wu Ying case is therefore not only an individual person’s crime and punishment; it is representative of problems at the deepest level of society. Aside from reviewing the imperfections of the financial system, we should more think seriously about how to eliminate officials’ rent-seeking behavior.

Given their salaries, how can section-level officials in government departments afford to make loans? The property declaration system for officials above section level has been in force for several years, but its records have never been made public. The true wealth of officials remains a mystery. And yet, for private property, the law is very strict. If tax payers earn more than 120,000 yuan a year, they have to make a declaration otherwise they will be fined. Power is in the hands of officials, but different levels of officials have different levels of power. Even so, no matter how much power they have, normal public servants don’t have millions to lend out.

The abuse of power for personal gain is an open secret in Chinese officialdom. Looking at the media coverage of corrupt officials for these many years, it is clear that such rent-seeking is the root of corruption. Its prevention should be the top priority for China’s leaders.

Reinforcing the market mechanism in the fields of public procurement, trading in public assets and production of public goods is the main means of reducing and avoiding such behavior. Only when we base resource allocation on market principles can we minimize the type of corruption that is rife when power is concentrated in a few hands.