China's Trapped Transition_ The Limits of Developmental Autocracy - Minxin Pei [7]
Among leading Chinese academics was a widely shared consensus that the political system had lagged behind the economic system and that the failure of political reform was the most serious constraint on China’s development. In their judgment, however, the imbalance between an increasingly open economic system and China’s current political system was unlikely to improve. Half of the academics interviewed by the researchers from the Chinese Academy of Social Sciences in 2003 thought the imbalance would persist, and a third said it would worsen.48 Even many officials shared the view that such an imbalance existed and was likely to grow worse.49 Four polls of officials being trained at the Central Party School (CPS) between 2000 and 2003 show consistently that the issue they were most concerned with was political reform, an implicit admission of their recognition of the political system’s relative stagnation. 50 Like leading academics, 80 percent of the 133 cadres polled in the CPS survey in 2002 said that lack of progress in political reform would be the most important factor in constraining China’s development—even more important than economic reform.51
The lack of progress in political reform in the 1990s not only highlighted the stagnation of China’s autocratic polity vis-à-vis its fast-changing economy and society, but undermined the regime’s ability to maintain effective governance and to address three critical challenges.
Rampant Official Corruption
Partially reformed economic and political institutions provide a fertile environment for official corruption because institutional rules are either unclear or politically unenforceable in such environments. The ruling elite are unaccountable and immune from punishment for wrongdoing. Consequently, it is unconstrained from adopting predatory policies and practices. In the Chinese case, corruption by the ruling elite reached endemic proportions in the late 1990s.52 Public opinion surveys in this period consistently ranked official corruption as one of the top political issues facing China.53 High-profile scandals involving senior government officials, from members of the Politburo to provincial governors, to chief executives of large SOEs, have become a staple of the Chinese media. Invariably, these ruling elite members were found to have engaged in illegal real estate deals, accepted huge bribes, sanctioned large-scale smuggling operations, participated in financial fraud, provided protection for organized crime, and sold government appointments for personal gains.
The costs of uncontrolled corruption are enormous, both economically and politically. Rough estimates of the total costs of corruption range from 4 to 17 percent of GDP—a substantial amount of resources diverted from public coffers into private pockets.54 The political effects of corruption perpetrated by the ruling elite are difficult to estimate, but are likely to be even more harmful than pure economic losses. Corruption by government officials undermines the integrity of many key institutions that enforce laws, maintain rule and order in the marketplace, and deliver crucial public services. Corrupt practices adopted by government officials—such as taking bribes, rigging bids, insider dealing, selling government offices, fraudulent accounting, and large-scale theft—inevitably reduce the effectiveness of the affected state agencies, increase the costs of market transactions, and raise the level of systemic risks, especially in the financial sector. Thus, state capacity of countries governed by corrupt regimes is always found to be weak. More important, official corruption