Rent-seeking and economic governance in the structural nexus of corruption in China

Abstract

This article examines the sources of widespread rent-seeking practices and their relations to corruption in China. It argues that rent-creation and seeking are difficult to eliminate because they have become institutionalized as the constitutive parts of economic governance. Using case studies drawn from a number of industrial sectors, this study shows that the creation and allocation of economic rents has become a major policy instrument used by various levels of governments to manoeuvre industrial plans and development priorities. At the same time, the discretionary power exercised by state agents in implementing development priorities has created mounting opportunities for exchanging rents with bribes. The result is a structural nexus between economic governance, rentseeking and corruption that defy administrative measures aiming at achieving a clean government in China.Rent-seeking constitutes one of the most common sources of corruption in present-day China. Economic rents are generated when productions licenses are rationed, when prices are fixed, when trade quotas are imposed by the government, and so on. Typically, bribes are offered by businesses to government officials in exchange for the creation and allocation of rents. Ample opportunities of rent-seeking therefore bear directly on the prevalence of corruption in China.Constraining the creation and the pursuit of economic rents thus constitutes one of the many steps towards controlling rampant corruption in China. This article argues, however, that rent-creation and seeking are difficult to eliminate because they have become institutionalized as the constitutive parts of economic governance. Rent has been used by the central government as a policy instrument in effecting industrial plans and development priorities. Local governments have relied on rent allocation to manoeuvre the development of local political economies. At the same time, many private businesses have become

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“…Furthermore, according to Ngo (2008), economic rents are generated in China through the government's rationing of production licenses, fixing of prices and imposition of trade quotas with a view to effect industrial plans and development priorities. In his investigation of the links between rent-seeking, economic governance and corruption in China, Ngo's study concluded that rent-seeking is already intertwined with economic governance and it is being used in a corrupt way by agents of the government as they (the agents) collude with business handlers to accrue extra profits through bribery in areas such as construction works, property rights transfers, medical supplies, government procurements and exploration of natural resources.…”

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“…In our study, we found that in China, market fragmentation and state intervention have led to significant rent-seeking activities (cf. Ngo, 2008).…”

Government Intervention, Perceived Benefit, and Bribery of Firms in Transitional China

“…As a result, firms offer bribes to government officials in exchange for the creation and allocation of the rents. A great amount of rent-seeking opportunities thus bear directly on the prevalence of corruption/bribery in China (Ngo 2008). Thus, we propose the following hypothesis:…”

“…It is said that rent-seeking is one of the most common sources of corruption in today's China (Ngo 2008). The Chinese government uses various tools or policies to speed up economic growth, to boost exportion of goods and services, to adjust the distribution of incomes, to control price of commodities, and so on.…”

“…A growing number of studies (e.g., Chow 2006;Gao 2010;Gordon 1996;Hung 2008;Johnston 2008;Lu 1999Lu , 2000Manion 2004;Ngo 2008;Tullock 1996;Yang 2005) have taken efforts to disclose the underlying causes of corruption in China. These studies deepen and broaden our comprehension on the widely diffusing corruption in China.…”