Bureacrats devour China's national resources

HU XINGDOU

BEIJING, China, Feb. 14

China's state monopolies in many sectors are throttling the development of independent businesses and causing tremendous waste of the nation's resources.
For example, the aircraft-to-staff ratio of state-owned airlines in China is 1:300-400. That means every airplane is supporting 300 to 400 persons, compared to several dozen in developed countries. These airlines are sustaining serious losses while their employees enjoy high salaries and good benefits. The only measure they have taken to help cut losses was to impose a fuel surcharge on passengers.
Only a few governments in the world hold a state monopoly on tobacco. Throughout China, the activities of the State Tobacco Monopoly Bureaus are closely intertwined with the business interests of the national tobacco companies. Tobacco growers are forced to sell their produce at extremely low prices to government procurement officers.
Railways are a relatively high capacity, low energy consumption, environmentally friendly industry that should be rapidly expanded in a developing economy like China's. However, at present, the per capita length of China's railways is less than the length of a cigarette. The Ministry of Railways holds a monopoly over the industry, with subordinate departments across the country operating under an extremely opaque bureaucratic system, without clear financial regulations or transparent management. For this reason the industry's costs and earnings are not clear.
As far as road transport is concerned, there are also impassable barriers. If an enterprise wants to build a new road in an undeveloped area, it must submit a proposal to local authorities for approval. If the applicant is not a local company, it is common for transport departments to protect their own interests by throwing up insurmountable obstacles aimed at forcing the outsider to beat a retreat.
Figures from the National Bureau of Statistics at the beginning of 2006 showed the average salary plus benefits of employees in the power, telecommunications, finance and tobacco industries were five to ten times higher than average. These monopolized enterprises often raise their prices on the excuse that they are losing money, so as to maintain their subsidized incomes while the costs are born by the public.
Privileges, monopolies and bureaucracies have engendered tremendous waste among state investments and enterprises in China. Audits on urban infrastructure projects funded by national bonds have revealed that up to 50 percent of them have encountered expensive problems in implementing project plans.
A key sector where privilege rules unfettered is real estate, which is controlled by people of influence, wealth and position. Property agents make huge fortunes through illegal collusion with government officials, at the same time evading taxes on a large scale. Since 2002 real estate has been ranked among the top ten profiteering industries in China. In 2006, among the top 50 magnates on the China Rich List published by Hurun Report, 20 were engaged in real estate. However, among the top 500 taxpayers in China, only 0.6 percent were involved in real estate. A survey released last fall by the State Administration of Taxation revealed that property agents were involved in 90 percent of suspected tax evasion cases.
China's privileged classes are consuming an enormous amount of national resources. The Shanghai-based legal magazine, Jian Cha Feng Yun, reported last year that state-financed trips aboard, travel, dining and drinking by officials made up over one-third of China's total public expenditures.
Such misuse of public funds has left sectors such as health care, education and environmental protection without funding. In 2005, 80 percent of the government's outlay for health care went to the 8.5 million Communist Party and government officials. Rural and village residents receive almost no government assistance.
Social security expenditures take up 12 percent of China's public finances, of which a considerable portion is used for administration.
With regard to education, a survey conducted on the fairness of the nation's education system found that eight children of Communist Party and government officials are admitted into the nation's top schools and institutes for every one child of a worker or farmer.
China's people currently make up 22 percent of the global population, while the country's expenditures on education and health represent only 1 and 2 percent respectively of the world's outlays. A professor at the Central Party School has pointed out that the nation ranks last in the world in terms of domestic expenses as a percentage of its GDP.
Indeed, not only is education suffering damage from the privileged classes, but academia itself has become their lackey. In the past 55 years, the Department of Physics at Beijing University has produced 22 academicians, of which only four do not hold official government posts.
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(Hu Xingdou is professor of economics and China issues at the Beijing Institute of Technology. Professor Hu is also deputy director of the Institute of International Business Management at Beijing University's College of Resources. This article is exerpted and edited from the Chinese; the original may be found at www.ncn.org. ©Copyright 2007 Hu Xingdou)

Translated by Taylor Poon; Edited by Kathleen Hwang