The quasi-criminalization of a business sector in China: Deconstructing the construction-sector syndrome

Crime, Law and Social Change

Volumn 35, Issue 3, 2001, Pages 177-201

  Ding, X L ^a  

^a HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY   (Hong Kong)

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[No Author keywords available]

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EID: 0035315403     PISSN: 09254994     EISSN: 15730751     Source Type: Journal    
DOI: 10.1023/A:1011294000877     Document Type: Article

References (97)

1. Based on "The Qijiang Rainbow Bridge Case: Outside The Courtroom," Nanfang Weekend 9 April 1999, 2 & 4. For a brief report in English, see "Death Bridge Court Case Shown Live on Television," South China Morning Post (hereafter SCMP) 27 March 1999, 9.
2. Based on "The Qijiang Rainbow Bridge Case: Outside The Courtroom," Nanfang Weekend 9 April 1999, 2 & 4. For a brief report in English, see "Death Bridge Court Case Shown Live on Television," South China Morning Post (hereafter SCMP) 27 March 1999, 9.
3. "Suppose the Rainbow Bridge had not Broken Apart. . ." Nanfang Weekend 9 April 1999, 2.
4. "CPPCC Deputies are Complaining: The Roots of Building Accidents lie in Corruption," Huasheng Bao Electronic Edition (hereafter HBEE) 8 March 1999, 1-2.
5. Based on Statistical Yearbook of China 1997 (Beijing: Chinese Statistical Publishing House, 1997), p. 150.
6. These cases are summarized in a twelve page-long table. Due to space limits, it is impossible to present the table in this paper, which is available upon request. In the following discussion, individual cases, which are numbered, will be cited from the table for illustration.
7. See Statistical Yearbook of China 1997, p. 291.
8. See a condensed review of these two approaches in Oliver Williamson, "Visible and Invisible Governance," American Economic Review (AEA Papers and Proceedings) May 1994 (84:2), 323-326.
9. Andrew Schotter, "The Evolution of Rules," in Richard Langlois (ed.), Economics as A Process (New York: Cambridge University Press, 1986), pp. 117-118.
10. For a more eclectic perspective on institutions, see William Riker and David Weimer. "The Political Economy of Transformation: Liberalization and Property Rights," in Jef" frey Banks and Eric Hanushek (eds.), Modern Political Economy (New York: Cambridge University Press, 1995), p. 99. They stress that "institutions are complex bundles of formal and informal rules." This dialectical view, so to speak, certainly has some advantage in interpreting other types of social and political processes.
11. "Be alert to bribery made by public-sector organizations with public funds," People's Daily 17 January 1996, 9. Some interviewees told the researcher that bribes to high levels of government bureaucracy for project approval proportionate to the size of the project, but no solid quantitative information on this is available. During fieldwork, this researcher also learned that a prudent, safer graft pattern has now become more and more common among senior officials: They do not take money directly from the "contributors" but would advise them to secretly sponsor their children to study at prestigious Western universities. Four-year sponsorship for a college student in the United States is worth about $120,000, which in the late 1990s is almost twice a senior Chinese bureaucrat's life-time official salary.
12. The following is based on interviews in fieldwork and three reports from provincial and municipal governments' auditors, the digests of which were published under the head" line "Cost exaggeration and fraudulent accounting in construction projects." Jingii Ribao (hereafter Economic Daily, which is its official English title) 14 August 1991, 3.
13. Jasper Becker, "Zhu Breaches Silence on Three Gorges Dam Failures," SCMP Internet Edition 27 May 1999, 1-2.
14. Jasper Becker, "Zhu Breaches Silence on Three Gorges Dam Failures," SCMP Internet Edition 27 May 1999, 1-2. For more on the political ambitions behind Li Peng's and his associates' drive for the project, see Dai Qing, Yangtze! Yangtze!, translated by Nancy Liu et al. and edited by P. Adams and J. Thibodeau (London and Toronto: Earthscan, 1994); Jing Xiaoming, Fengyu Sanxia Meng [Dreams of the Three Gorges] (Chengdu: Sichuan People's Press, 1992), pp. 267-273.
15. Jasper Becker, "Zhu Breaches Silence on Three Gorges Dam Failures," SCMP Internet Edition 27 May 1999, 1-2. For more on the political ambitions behind Li Peng's and his associates' drive for the project, see Dai Qing, Yangtze! Yangtze!, translated by Nancy Liu et al. and edited by P. Adams and J. Thibodeau (London and Toronto: Earthscan, 1994); Jing Xiaoming, Fengyu Sanxia Meng [Dreams of the Three Gorges] (Chengdu: Sichuan People's Press, 1992), pp. 267-273.
16. The following is based on Janos Kornai's classic discussions on the soft versus hard budget constraint, see his Economics of Shortage (Amsterdam: North-Holland, 1980); "The Soft Budget Constraint," Kyklos 1986 (39:1), 3-30; and The Socialist System. The Political Economy of Communism (Princeton, NJ: Princeton University Press, 1992), Chap" ters 8-9.
17. The following is based on Janos Kornai's classic discussions on the soft versus hard budget constraint, see his Economics of Shortage (Amsterdam: North-Holland, 1980); "The Soft Budget Constraint," Kyklos 1986 (39:1), 3-30; and The Socialist System. The Political Economy of Communism (Princeton, NJ: Princeton University Press, 1992), Chap" ters 8-9.
18. The following is based on Janos Kornai's classic discussions on the soft versus hard budget constraint, see his Economics of Shortage (Amsterdam: North-Holland, 1980); "The Soft Budget Constraint," Kyklos 1986 (39:1), 3-30; and The Socialist System. The Political Economy of Communism (Princeton, NJ: Princeton University Press, 1992), Chap" ters 8-9.
19. The following is based on interviews and an investigative report: Xu Li, "How have Construction Costs become so High?" Jingrong Shibao (hereafter Financial Times) 27 April 1996, 1.
20. Based on "The Construction Market in Nantong becomes Clear," Zhonghua Gongshang Shibao (hereafter Chinese Business Times) 22 March 1996, 4; "Problems in the Construc" tion Sector have Originated from the Lack of Control over Public-Sector Units as the Project Proposers and Possessors," Wenhui Daily 14 November 1995, 2.
21. Based on "The Construction Market in Nantong becomes Clear," Zhonghua Gongshang Shibao (hereafter Chinese Business Times) 22 March 1996, 4; "Problems in the Construc" tion Sector have Originated from the Lack of Control over Public-Sector Units as the Project Proposers and Possessors," Wenhui Daily 14 November 1995, 2.
22. The data were released by HBEE 1 April 1999, 1.
23. "Investigating the Vanished Three Gorges Resettlement Funds by beginning with doufuzha Constructions," Nanfang Weekend 11 June 1999, 6.
24. "Zhu Rongji's special inspectors are in action," Zuojia Digest (Beijing) 2 July 1999, 2.
25. HBEE 29 December 1999, 1.
26. Based on interviews with Chinese journalists and "The Auditing Agencies in January-June Found that more than 100 Billion Yuan had been Misused," HBEE 16 August 1999. Cf. Agence France-Presse, " Millions in Flood-Fighting Funds Diverted," SCMP 8 July 1999, 1. Because these higher-level scandals were closely related to Li Peng, who headed the Ministry of Water Resources before, their exposure has earned Zhu Rongji enormous popularity from Chinese citizens but deep loathing from the affected bureaucrats.
27. Based on interviews with Chinese journalists and "The Auditing Agencies in January-June Found that more than 100 Billion Yuan had been Misused," HBEE 16 August 1999. Cf. Agence France-Presse, " Millions in Flood-Fighting Funds Diverted," SCMP 8 July 1999, 1. Because these higher-level scandals were closely related to Li Peng, who headed the Ministry of Water Resources before, their exposure has earned Zhu Rongji enormous popularity from Chinese citizens but deep loathing from the affected bureaucrats.
28. The following is based on interviews and Xu Li, "How have Construction Costs"; Dai Qiru (a CPPCC deputy)'s open letter from Nantong, Jiangsu province, "The Chaotic Construction Market needs Urgent Measures," Renmin Zhengxie Bao 18 November 1993, 2; the Ministry of Construction's news briefing, " Regulation must be Placed on the Construction Market," People's Daily 22 April 1996, 2.
29. The following is based on interviews and Xu Li, "How have Construction Costs"; Dai Qiru (a CPPCC deputy)'s open letter from Nantong, Jiangsu province, "The Chaotic Construction Market needs Urgent Measures," Renmin Zhengxie Bao 18 November 1993, 2; the Ministry of Construction's news briefing, " Regulation must be Placed on the Construction Market," People's Daily 22 April 1996, 2.
30. The following is based on interviews and Xu Li, "How have Construction Costs"; Dai Qiru (a CPPCC deputy)'s open letter from Nantong, Jiangsu province, "The Chaotic Construction Market needs Urgent Measures," Renmin Zhengxie Bao 18 November 1993, 2; the Ministry of Construction's news briefing, " Regulation must be Placed on the Construction Market," People's Daily 22 April 1996, 2.
31. See, e.g., Ricky Tung, "The Depletion of State Assets in Mainland China," Issues & Studies 1996 (32:1), 1-17; specifically 12.
32. These guesstimates were released by Wenhui Daily 22 May 1996, 1 and People's Daily 9 October 1996, 9.
33. These guesstimates were released by Wenhui Daily 22 May 1996, 1 and People's Daily 9 October 1996, 9.
34. See the CCFDI's statistics in People's Daily 17 January 1996, and the Ministries of Construction's and of Supervision's statistics in People's Daily 12 December 1995, 10 and 25 April 1997, 11.
35. See the CCFDI's statistics in People's Daily 17 January 1996, and the Ministries of Construction's and of Supervision's statistics in People's Daily 12 December 1995, 10 and 25 April 1997, 11.
36. Cf. Joshua Charap and Leila Webster, "Constraints on the Development of Private Manufacturing in St. Petersburg," Economics of Transition 1993 (1:3), 299-316.
37. The Zhen Lihua case in People's Daily 25 April 1997, 11.
38. Andrei Shleifer and Robert Vishny, "Corruption," Quarterly Journal of Economics August, 1993 (CVIII), 599-617; specifically 613-615.
39. See a report in Economic Daily 20 November 1991, 2.
40. The following is based on fieldwork; cf. Statistical Yearbook of China 1997, pp. 457-59.
41. Investigations in Shanghai in 1995 revealed that certificate rental could bring 3-5 percent of a project's fund from the subcontractor back to the original contractor (Dong Zihua, "Transfers of Construction Projects must be Stopped," People's Daily 27 December 1995, 10).
42. For details see Li Feng and Liu Guangjun, "Forging and Selling Certificates around the Beida Campus are Severe," Jingii Cankao Bao 28 June 1999; and "Ten Intermediary Agencies in Shenzhen are Shut Down," Ming Pao 18 May 1999, A15. For comparative comments on this crucial weakness in the market-regulatory mechanism in transitional systems, see Thomas Hyclak and Arthur King, "The Privatization Experience in Eastern Europe," World Economy August 1994 (17:4), 529-550.
43. For details see Li Feng and Liu Guangjun, "Forging and Selling Certificates around the Beida Campus are Severe," Jingii Cankao Bao 28 June 1999; and "Ten Intermediary Agencies in Shenzhen are Shut Down," Ming Pao 18 May 1999, A15. For comparative comments on this crucial weakness in the market-regulatory mechanism in transitional systems, see Thomas Hyclak and Arthur King, "The Privatization Experience in Eastern Europe," World Economy August 1994 (17:4), 529-550.
44. For details see Li Feng and Liu Guangjun, "Forging and Selling Certificates around the Beida Campus are Severe," Jingii Cankao Bao 28 June 1999; and "Ten Intermediary Agencies in Shenzhen are Shut Down," Ming Pao 18 May 1999, A15. For comparative comments on this crucial weakness in the market-regulatory mechanism in transitional systems, see Thomas Hyclak and Arthur King, "The Privatization Experience in Eastern Europe," World Economy August 1994 (17:4), 529-550.
45. Lin Yunzi and Xu Jianan, "The Quality of Constructions Concerns People's Lives," Financial Times 21 October 1995, 1.
46. Dai Qiru, "The Chaotic."
47. See a law scholar's report: Liu Renwen, "Making Inspections and Rectifications more Effective," People's Daily 16 October 1996, 9.
48. "Honghu Lake Dikes Can Not Sustain New Flood Peaks," Yangcheng Evening News 8 July 1999, 1.
49. "An Airport in Xinjiang was Forced to Close," Chinese News Agency Urumqi news, 29 March 1999.
50. Based on the author's fieldwork; Zhou Wei, "Black Societies' Power in the Chinese Mainland," Fanzui yu Gaizhao Yanjiu [Studies on Crime and Reform (Beijing)] 1993 (7), 27-30; a seven-volume collection Daji Fanzui Dajishe [Records of Striking Crimes] (Beijing: Police Education Press, 1993).
51. Based on Gongheguo Hongse Taifeng [Red Storms over the Republic] (Beijing: Tuanjie Publishing House, 1993), pp. 217-245; Jingti: Zhongguo Heishehui Shili [Be Alert to the Power of Black Societies in China] (Taiyuan: Be: yue Wenyi Publishing House, 1993), pp. 282-313.
52. Based on Gongheguo Hongse Taifeng [Red Storms over the Republic] (Beijing: Tuanjie Publishing House, 1993), pp. 217-245; Jingti: Zhongguo Heishehui Shili [Be Alert to the Power of Black Societies in China] (Taiyuan: Be: yue Wenyi Publishing House, 1993), pp. 282-313.
53. Such reports often appear in the Hongkong press; cf. David Zweig, "Cadres vs. Villagers. Can China's Government Manage Rising Rural Conflict?" Asiaweek 21 May 1999, 68.
54. The crime family's eventual fall was caused by the direct interference from Beijing including President Jiang Zemin; see Wang Pujian and Qiu Shewen, "The Hainan Mafia Nanbatian's Fall," Xin Sheji [New Century (Haikou)], 1994 (10), 34-39.
55. For example, Gao Dengfa was a senior bureaucrat of the Futian Tax-free Zone Administration in the city of Shenzhen. When he was indicted in August 1994 for taking large amounts of bribes from building companies, he tried to shoot the prosecutor with an illegally obtained handgun (Case 61).
56. Wan Renlong, "The Case of a Mud Structure in Hangzhou," Beijing Youth Daily 30 April 1999, 4; Pan Jiankai, "Shen Bohu's Misfortune," Guangming Daily, 4 June 1999.
57. Wan Renlong, "The Case of a Mud Structure in Hangzhou," Beijing Youth Daily 30 April 1999, 4; Pan Jiankai, "Shen Bohu's Misfortune," Guangming Daily, 4 June 1999.
58. "Nobody in Shenyang Dares to Claim Awards," Ming Pao, 2 June 1999, A20; "Reporting on doufu-zha Structures but Declining Awards," The China Press 3 May 1999.
59. "Nobody in Shenyang Dares to Claim Awards," Ming Pao, 2 June 1999, A20; "Reporting on doufu-zha Structures but Declining Awards," The China Press 3 May 1999.
60. Li Hanlin (ed.), Guoyouzichan Daliushi [The Massive Flow-Away of State Assets] (Lanzhou: Lanzhou University Press, 1994), pp. 5-8.
61. The General Office and the Research Section of the CCFDI (eds.), Zashi Shenru Youxiao [Firmly, Profoundly, and Effectively Against Corruption] (Beijing: Chinese Fangzheng Press, 1996), pp. 84-85.
62. Sources: Huang Weiding, Zhongguo de Yinxingjingji [The Shadow Economy in China] (Beijing: Chinese Commerce Press, 1992), pp. 65-66; Economic Daily 11 August 1991, 3.
63. Sources: Huang Weiding, Zhongguo de Yinxingjingji [The Shadow Economy in China] (Beijing: Chinese Commerce Press, 1992), pp. 65-66; Economic Daily 11 August 1991, 3.
64. Yang Xingqiang and Li Yan (eds.), Shinian Mo Yijian [Ten Years to Sharpen a Sword] (Nanjing: Jiangsu People's Publishing House, 1994). pp. 44-45; Case 70 in our data set.
65. Quoted from Financial Times, 27 April 1996, 1.
66. "China Building Law to Take Aim at Corruption," Reuters 1 November 1997. This is also the conclusion of investigations conducted by Chinese law-enforcers in many regions: see The General Office and the Research Section of the CCFDI (eds.), Firmly, 84-92 and 149-155; People's Daily, 31 July 1995, 9; Xinhua News 21 December 1995; Chinese Business Times, 20 March 1996, 4.
67. "China Building Law to Take Aim at Corruption," Reuters 1 November 1997. This is also the conclusion of investigations conducted by Chinese law-enforcers in many regions: see The General Office and the Research Section of the CCFDI (eds.), Firmly, 84-92 and 149-155; People's Daily, 31 July 1995, 9; Xinhua News 21 December 1995; Chinese Business Times, 20 March 1996, 4.
68. "China Building Law to Take Aim at Corruption," Reuters 1 November 1997. This is also the conclusion of investigations conducted by Chinese law-enforcers in many regions: see The General Office and the Research Section of the CCFDI (eds.), Firmly, 84-92 and 149-155; People's Daily, 31 July 1995, 9; Xinhua News 21 December 1995; Chinese Business Times, 20 March 1996, 4.
69. "China Building Law to Take Aim at Corruption," Reuters 1 November 1997. This is also the conclusion of investigations conducted by Chinese law-enforcers in many regions: see The General Office and the Research Section of the CCFDI (eds.), Firmly, 84-92 and 149-155; People's Daily, 31 July 1995, 9; Xinhua News 21 December 1995; Chinese Business Times, 20 March 1996, 4.
70. "China Building Law to Take Aim at Corruption," Reuters 1 November 1997. This is also the conclusion of investigations conducted by Chinese law-enforcers in many regions: see The General Office and the Research Section of the CCFDI (eds.), Firmly, 84-92 and 149-155; People's Daily, 31 July 1995, 9; Xinhua News 21 December 1995; Chinese Business Times, 20 March 1996, 4.
71. HBEE 8 March 1999, 1; People's Daily 16 October 1996, 9.
72. HBEE 8 March 1999, 1; People's Daily 16 October 1996, 9.
73. Cases 41 and 42; Financial Times 21 October 1995, 1. Ironically, this project had been granted a "quality award" by the local public authorities. Senior bureaucrats in the local government were implicated in notorious schemes of misappropriating public funds and appointing crony firms to build public works.
74. These statistics are quoted from People's Daily, 7 December 1995, 8; Chinese Business Times, 2 September 1996, 1; HBEE 8 March 1999, 1.
75. These statistics are quoted from People's Daily, 7 December 1995, 8; Chinese Business Times, 2 September 1996, 1; HBEE 8 March 1999, 1.
76. These statistics are quoted from People's Daily, 7 December 1995, 8; Chinese Business Times, 2 September 1996, 1; HBEE 8 March 1999, 1.
77. Xinhua News 18 August 1998; HBEE 2 September 1998, 1; Ming Pao (http://www.mingpao.com/newspaper/980907/cadlh.htm) 7 September 1998.
78. Xinhua News 18 August 1998; HBEE 2 September 1998, 1; Ming Pao (http://www.mingpao.com/newspaper/980907/cadlh.htm) 7 September 1998.
79. Xinhua News 18 August 1998; HBEE 2 September 1998, 1; Ming Pao (http://www.mingpao.com/newspaper/980907/cadlh.htm) 7 September 1998.
80. Xinhua News 23 May 1999; HBEE 8 March 1999, 1.
81. Xinhua News 23 May 1999; HBEE 8 March 1999, 1.
82. "Doufu-zha Constructions Cost China 100 Billion Yuan a Year," HBEE 1 April 1999, 1.
83. Sources: Statistical Yearbook of China (Beijing: Chinese Statistical Publishing House, 1994, p. 144; 1995, p. 141; 1997, p. 154; 1998, p. 190). Volumes of the later years sometimes make adjustments on the previous years' data.
84. Edgar Feige (ed.). The Underground Economies (New York: Cambridge University Press, 1989), pp. 26&28.
85. Cf. "China Says Pace of Investment Slowed in July," Asian Wall Street Journal 16 August 1999, 3.
86. Cf. Statistical Yearbook of China 1998, p. 278.
87. Xinhua Daily Telegraph, Beijing News, 1 May 1999.
88. Eight weeks after this paragraph was written, investigative journalists in Guangzhou and Hong Kong reported that the top official of the Guangzhou subway project was arrested for taking large bribes from builders. The per unit construction cost of the subway was three times that of the Shanghai subway, but less than six months under tentative use, the Guangzhou subway's Section 1 already showed serious quality problems including cracks in the tunnel, water leakage, and deformation of rails (Nanfang Daily Internet Edition 24 December 1999; Ming Pao, 7 December 1999, B16).
89. Eight weeks after this paragraph was written, investigative journalists in Guangzhou and Hong Kong reported that the top official of the Guangzhou subway project was arrested for taking large bribes from builders. The per unit construction cost of the subway was three times that of the Shanghai subway, but less than six months under tentative use, the Guangzhou subway's Section 1 already showed serious quality problems including cracks in the tunnel, water leakage, and deformation of rails (Nanfang Daily Internet Edition 24 December 1999; Ming Pao, 7 December 1999, B16).
90. For detailed discussion on Russia in this respect, see, e.g., Phil Williams (ed.), Russian Organized Crime. The New Threat? (London: Frank Cass, 1997).
91. See Tanya Frisby, "The Rise of Organized Crime in Russia: Its Roots and Social Significance," Europe-Asia Studies 1998 (50:1), 27-49, especially 29 and 35.
92. For more discussion on this from the perspective of law and economics, see Arye Hillman and Adi Schnytzer, "Illegal Economic Activities and Purges in A Soviet-Type Economy: A Rent-Seeking Perspective," International Review of Law and Economics 1986 (6:1), 89.
93. For a powerful comment on this, see David Satter, "The Rise of the Russian Criminal State," The Jamestown Foundation Prism September 1998 (4:17), 1-5.
94. Paul R. Gregory, "Sketches of New Russians. The Mafia Monument, Commercial Structures, and the Unanswered Telephone," Problems of Post-Communism September/October 1996 (43:5), 51-61.
95. A sketch of the advanced formations in Russia can be found in Louise I. Shelley, "Organized Crime in the Former Soviet Union," Problems of Post-Communism January/February 1995 (42:1), 56-60.
96. The strong correlation between these factors is elaborated in the World Bank, World Development Report 1997: The State in a Changing World (New York: Oxford University Press, 1997). For Chinese public debates on this, see Rong Jingben (ed.), Fubai: Quanti yu Jinqian de Jiaohuan [Corruption: The Exchange Between Power and Money], (Beijing: Chinese Economic Press, 1993).
97. The strong correlation between these factors is elaborated in the World Bank, World Development Report 1997: The State in a Changing World (New York: Oxford University Press, 1997). For Chinese public debates on this, see Rong Jingben (ed.), Fubai: Quanti yu Jinqian de Jiaohuan [Corruption: The Exchange Between Power and Money], (Beijing: Chinese Economic Press, 1993).