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October 16, 2012

China completes more high speed rail and an estimate of China's corruption is 3 to 4% of GDP

Xinhuanet - new high-speed railway was put into operation in east China on Tuesday, integrating local cities into the country's high-speed rail network that covers developed coastal regions. The 132-km new railway links Hefei and Bengbu, two cities in the inland Anhui Province, cutting the journey between them by at least one hour to 38 minutes on train traveling at a maximum speed of 350 km per hour.

The section also connects with the high-speed railway between Beijing and Shanghai, and is part of the special passenger lines that link Shanghai, Wuhan and Chengdu, and connect Beijing and coastal Fuzhou.

The integration greatly shortens trips from the Anhui cities of Hefei, Bengbu and Huainan to the Yangtze Delta in the east, Pearl River Delta in the south and Bohai Sea Rim in the north, all national economic engines.

The shortest trip from Hefei to Beijing has been cut to less than four hours after the new railway entered service. Previously, traveling by train from the capital city of Anhui to Beijing took about 10 hours or more.



The New Yorker has an investigation into the corruption in the building of China's high speed rail system

In the months that I spent talking to people about the rise and fall of Liu Zhijun (previously in charge of China's high speed rail construction), his story seemed to confound both his enemies and his friends. His rivals acknowledged that, unlike many corrupt officials, Liu had actually achieved something in office, and produced a railway system that, if the problems can be repaired, will ultimately benefit the nation. And his defenders found themselves awkwardly saying that he was doing nothing that his peers were not. Liu’s colleague, an affable former military man, told me that at a certain point corruption became difficult for Liu to avoid: “Inside the system today, if you don’t take bribes you have to get out. There’s no way you can stay. If three of us are in one department, and you are the only one who doesn’t take a bribe, are the two of us ever going to feel safe?”

Not long ago, I met a subcontractor for the railway, and I asked if things had been cleaned up since Liu’s downfall. He let out a humorless laugh. “They made a show of it, but it’s still the same rules,” he said. “They caught Ding Shumiao, but she’s just one person. There are many, many Ding Shumiaos.” Li Xue, as I’ll call him, is fifty-four, with a growl of a voice and a face weathered by life outdoors, but he was funny and relaxed when we met, and I liked him immediately. He’d spent his career blasting railroad tunnels—assembling crews, punching holes through mountains, and then moving on to the next job. He is a grandfather now, and proud of all that the country has built in his lifetime: “America always criticizes us for human rights,” he said. “It’s our weakness. But construction is our strength. We put people together fast. The bosses don’t have to listen to anybody but themselves.”

In February, 2011, five months before the train crash, the Party finally moved on Liu Zhijun. According to Wang Mengshu, investigators concluded that Liu was preparing to use his illegal gains to bribe his way onto the Party Central Committee and, eventually, the Politburo. “He told Ding Shumiao, ‘Set aside four hundred million for me. I’m going to need to spread some money around,’ ” Wang told me. Four hundred million yuan is about sixty-four million dollars. Liu actually managed to pull out nearly thirteen million, Wang said. “The central government was worried that if he really succeeded in giving out four hundred million in bribes he would essentially have bought a government position. That’s why he was arrested.”

Liu was expelled from the Party the following May, for “severe violations of discipline” and “primary leadership responsibilities for the serious corruption problem within the railway system.” An account in the state press alleged that Liu took a four-per-cent kickback on railway deals; another said he netted a hundred and fifty-two million dollars in bribes. He was the highest-ranking official to be arrested for corruption in five years.

There are two basic views of how corruption will affect China’s future. The optimistic scenario is that it is part of the ambitious transition from Socialism to a free market, with highways and trains that inspire envy even in the developed world. In July, the U.S. Transportation Secretary, Ray LaHood, told a reporter, “The Chinese are more successful because in their country only three people make the decision. In our country, three thousand people do.”

The other view holds that the compact between the people and their leaders is fraying, that the ruling class is scrambling to get what it can in the final years of frenzied growth, and that the Party will be no more capable of reforming itself from within than the Soviets were. Last year, the central bank accidentally posted an internal report estimating that, since 1990, eighteen thousand corrupt officials have fled the country, having stolen a hundred and twenty billion dollars—a sum large enough to buy Disney or Amazon.

Officials and businessmen looked out for each other by organizing themselves into “protective umbrellas,” a step in what Chinese scholars have termed the “mafiazation” of the state. By 2007, the China scholar Minxin Pei found that nearly half of all Chinese provinces had sent their chief of transportation to jail for corruption. It was costing China three per cent of its gross domestic product; that would be two hundred billion dollars today—more than the national budget for education.

Middlemen expected cuts of between one and six per cent. “If a project is four and a half billion, the middleman is taking home two hundred million,” Wang said. “And, of course, nobody says a word.”

So estimates of corruption costs in China are 3% of GDP.
200 million out of 4.5 billion (4%)
Over 120 billion out of an economy of 7 trillion.

Here at Nextbigfuture we have written that losses to society caused by excess bureaucracy, corruption and incompetence are equivalent. It is the scale and losses that matter

Bureaucracy and incompetence increased costs by 700% (from $780 million to over $6.3 billion) on the San Francisco Bay Bridge repair. If China levels of corruption increases costs by 30%, then the US should considering trading bureaucracy and incompetence for corruption.

It appears that China corruption is even more efficient and only costs 3-6% and seems to usually stay below about 12%.

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