32
scrupulous. In fact, since taking power in late 2002, he has given instructions to his
family to be extremely scrupulous about conflicts of interest.
In the past year the CCDI
has, under Hu’s patronage, been successful in taking legal action against at least twelve
ministerial level cadres for corruption.
70
The reforms undertaken by the CCP thus far are focused on engineering the costs and
benefits facing officials. However, even though the costs of corruption have risen due to
increased rule of law especially in the 2000s, officials’ behavior has not changed, and the
total level of corruption has even increased. In the next two sections, I will expand on
how the endogeniety of officials to institutions and informal social norms produce a
corrupt outcome regardless of the level of the costs.
The Role of Government Decentralization in Causing Corruption
During the fast pace of economic reforms over the last twenty years, the central
government devolved a great deal of power to the local governments. The local
governments are responsible for a significant amount of legislation, economic growth and
fiscal responsibility in their region. By the late 1980s, the central government decreased
its role in three primary areas: resource allocation, as shown by the proportion of capital
goods included in the state’s mandatory plan declined from 80 percent to 30 percent;
investment power, as shown by only reviewing investment projects over 50 million yuan;
and managerial power, as shown by directly controlling only 190 out of 400,000
industrial enterprises.
71
This system of devolved federalism has resulted in a two-tiered
system of law creation and enforcement, and two sites of possible rent seeking.
72
Economists argue that the fragmented system increases corruption and the inefficiency,
by increasing the number of bureaucracies that citizens or firms have to deal with to
70
Willy Wo-Lap Lam, “Chinese Corruption Crusade Causes New Factional Infighting,” Jamestown
Foundation China Brief IV, 20 January 2004.
71
Gong 115.
72
Alford 21; Jia Hao and Lin Zhimin, Changing Central-Local Relations in China, Boulder: Westview
Press, 1994. Jia Hao and Lin Zhimin argue that the changing power dynamic in China between central and
local government has created more opportunities for corruption despite an increase in anti-corruption laws.
Convention