British weekly The Economist has released its “Crony Capitalism Index,” and China, which has always ranked at the top of the list, was No. 11 for last year.
Since the ongoing anticorruption campaign was launched in 2012, hundreds of government officials from the provincial level up to the national government have been found guilty of corruption, making it clear the nation has a long way to go.
When Alibaba Group Holding Ltd founder Jack Ma (馬雲) became chairman of the China Entrepreneur Club last year, he stressed the importance of avoiding bribery, while Chinese billionaire Wang Jianlin (王健林) said that businesses should cultivate a good rapport with the government while staying away from politics.
Other entrepreneurs have also pointed out that private businesses should avoid relying on private connections with local government officials, as it is shortsighted.
Based on these descriptions, it is clear that relations between power and capital are complex and to a great extent remain unchecked.
In East Asia’s developing states, governments and businesses have typically developed a close relationship by working together to carry out industrial transformation, which has nevertheless led to crony capitalism.
When there is a high level of government intervention, little regulation, limited judicial independence, no market transparency, insufficient protection of property rights and low capital market efficiency, businesses will be more inclined to develop a close relationship with the government to increase profits.
Chinese President Xi Jinping (習近平) has mentioned the need for the government to create a new relationship with businesses in which the state is kind, helpful, honest and fair. The idea of reforming the government-business relationship is closely related to China’s 13th five-year plan aimed at boosting economic growth and living standards.
When the two sides share mutual interests, it often develops into crony capitalism and can prevent fair competition and lead to corruption. When there are alliances between the powerful and the rich, there are also relationships between those who provide protection and those who are protected.
The contribution of the private economy to national finances and employment is important and creates a symbiotic relationship between government and business. Excessive competition between places results in vicious competition, as local governments come up with measures to please businesses that far exceed those given to the public.
For example, while many local governments have emphasized the need to “maintain a close relationship with businesses” or “focus on business development,” others have created slogans such as “protect businesses,” “help businesses” or “respect businesses.”
To maximize profits, businesses want to build government relations to gain protection, and governments are willing to provide help to maximize revenue. Businesses will not become less reliant on government unless the market becomes significantly more competitive.
Business development relies on many factors, meaning that government-business relations cannot be changed overnight.
The alliance between government and industry in Chinese crony capitalism is giving entrepreneurs an advantage in terms of financing, taxes and relaxed regulations, which is detrimental to fair competition.
Inappropriate relationships between industry and government can cost entrepreneurs their political independence and prevent them from becoming a force for political reform.
Liu Chin-tsai is an assistant professor in the Department of Public Affairs at Fo Guang University.
Translated by Tu Yu-an
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