36、Strengthen Management on Government to the Public Assets of Government

Advice on Repairing Corruption of Officials

April 2004

Corruption in official workers not only happens in China, but also happens everywhere in the world. In a socialist country like China, officials should insist on principle of serving for civilians, but the corruption behaviour works the opposite to basic principle and country law. It’s believed that corruption behaviour can be eliminated. However, many corruption cases happening around us are worth our meditation. We need to find the root and destroy it completely, since it causes a negative effect on the image of party and socialism. If we compare socialism to a mansion, corruption is like borers and termites that bite on it and will finally destroy it if we cannot eliminate them in time.

Because corruption is a behaviour of an official, it’s related to politics.

Meanwhile, corruption is also an economic issue, and it’s related to economy.

Therefore we plan to analyse from the angle of politics and economy in an attempt to find the essence and root of corruption.

Analysis from the political angle:

China is a socialist country in which total assets of all state-owned enterprises belong to civilians. The Communist Party of China represents civilians to manage assets. In other words, the Communist Party of China represents civilians to exercise ownership and management rights. The head office of the Chinese government is located in Beijing, but officials who manage public assets are from the local government branch. The government distributes their rights to its branches. Distribution can be classified into two types: ownership and management rights. Meanwhile, the government uses party discipline, national law, regulations, and system to limit the range for given rights. It’s regarded as corruption when officials disobey party discipline, national law, regulations, or system in order to occupy ownership of public assets illegally that belong to the public. If officials keep to party discipline, national law, regulations, and system, no matter how much profit they make, it’s not corruption. In essence, corruption is a behaviour to deny the leadership of government.

Analysis from the economic angle:

When analysing from the economic angle, distribution can be also classified into two types: ownership and management rights. Management rights allow owners to manage production and organise economic actives. For companies, any action for management needs management rights. For factories, raw material purchase, product sale, and payment obtainment need management rights. Management rights can be needed for fulfilling duty as general manager, making profit for company, or for working as a go-to. In broad sense, any behaviour to receive income on behalf of the government needs management rights. For example, tax income, road maintenance fee, education expense, and fine all need management rights. However, if we consume public assets, it needs ownership. For example, extra bonus, allowance, item transferring, car purchase, house purchase, restaurant expense, and traveling all need ownership. Ownership is needed for fulfilling the duty as chairman to consume cash.

Apart from management rights given to local government and officials, many party discipline, national law, regulations, and system are used to limit the range of ownership. It’s regarded as corruption when officials disobey party discipline, national law, regulations, or system in order to occupy ownership of public assets illegally that belong to the public. From the economic angle, corruption is a kind of infringement since they use extra ownership beyond the range given by government to embezzle public assets.

Ownership and management rights sound familiar to people who study economy, but they are not familiar to most civilians since they are seldom talked in daily life.

These concepts will be easy to understand trough the following examples.

They are many various business beings in our society due to the influence of the reform policy. The simplest one is self-employed entrepreneur. They open a barbershop or a grocery store to sell living items, clothes, cats, and shoes. People call them small boss. Capital and production tools all belong to them or the family, so they have full ownership. They have rights to manage their own business legally free from interference, so they have full management rights. All in all, self-employed entrepreneurs have full management rights and ownership of their companies.

A bigger one than self-employed entrepreneur is private enterprise, which is a bit bigger than self-employed company. Private enterprises have different sizes, such as a small one with only few workers and a big one with hundreds of employees. Here we classify private enterprise into two types:

1. management rights are incorporative with ownership

2. management rights are separate from ownership

That management rights are incorporative with ownership means people who invest on business manage company directly. In this condition, the chairman usually takes over the position of general manager as a part-time job. Generally speaking, this kind of company does not have branches. It’s usually small-sized, since no matter how excellent the chairman is, the employees he/she can manage directly are limited. The employee number usually ranges from ten to twenty. In such a small-sized company, the chairman or director own assets of the company, so they have ownership. Meanwhile they take part in management, so they also have management rights. That’s the incorporation of management rights and ownership. In such companies, financial personnel are usually relatives of the chairman.

With further development, it’s possible for the company to be expanded and have its own factories, sales departments, branches, and so on. Besides, branches are usually distributed to different places. Under this condition, it’s their choice to take part in management or not. The chairman can distribute rights to employees who are not shareholders but are good at some important skills by putting them on positions like sales manager, plant manager, branch manager, or head office manager. They do not invest on the company and have no ownership, but they have certain management rights allowed by the chairman. That’s the separation of management rights and ownership.

In all types of companies, the chairman is likely to give full rights for production, sales, and management due to the trust to employees, but no chairman will give full rights for financial affairs and give absolute freedom to financial workers with no monitoring measures. Besides, no chairman will employ a chief financial officer he/she doesn’t trust at all.

These things discussed above are part of basic common sense in modern enterprise management, which is not hard to understand.

In the discussion above, it’s regarded as corruption when officials invade and occupy ownership of public assets that government represents civilians to exercise. However, what give chance for corruption to happen over and over again?

The answer of that question is associated with understanding for ownership of economic society, which is mainly represented by recruitment right for financial personnel in the company.

In all types of companies including self-employed entrepreneur, private company, and joint company, the financial personnel is always appointed by the owner of the company directly. The financial personnel is employed to manage, calculate, and sort out the capital of the company. The owner of the company get a clear idea of financial condition through the financial personnel. Therefore, the financial personnel can be compared to the eyes and hands of the company owner. People who control the financial personnel can control the flowing of capital and know the overall financial condition. How much capital is lost, how much profit is earned, who should pay more, who should pay less, which debt needs to be lagged, which debt needs to be paid at once, when and how company should spend capital, purchase of house and purchase of car, all are operated by the financial personnel.

Control to the financial personnel is equal to control of the whole company. Importance of the financial personnel can be compared with military leadership in war, which determines the success.

With military leadership as strong support on the back, people can do many huge affairs like overthrowing the government, eclipsing sun and moon, making exploitation, bullying civilians, doing things without rule and restriction. They can keep superior and subordinate in the dark, go opposite to the government, and make the world not different from hell. Military leadership in economic life cannot influence the world directly, but the effect caused is similar.

It’s believed that many people have heard one popular thought, ‘where there is a policy, there is always a byway to cope with it’. That shows that military leadership is in the control of government. However, in economic life, military leadership has been out of control of government. People inheriting from that thought have full ability to be immune to policy from government since they have strong economic power. The government has to refer people with economic power to put policy into practice, so they have nothing to fear.

It’s seen that performing ownership of state-owned assets is really important. The government has enough reason to put it in a place equal to building of military force for more attention paid to management. When we go to the tax bureau to pay tax, we often see the slogan posted on the wall, ‘Tax is the pulse of a nation’. It’s absolutely true. Apart from tax, all state-owned assets are pulse of a nation and need special institute appointed to manage carefully.

However, management of ownership of state-owned assets is ignored in China. Ownership and management rights are distributed to lower branches instead of a special institute managed by the government directly.

Concept about ownership and management rights is not as obvious as traditional military leadership. Only after society production reach a certain scale and economy develop to a certain degree will it show up. It doesn’t exist in slavery society, feudal society, and even junior phase of capital society. It’s a concept of rights and economic relationship between people after the economy is highly developed.

Since our country is transformed from a feudal society into a socialist society and miss the process to get the economy highly developed that happens in a capital society, it’s understandable that we do not have a clear idea of concepts based on a highly developed economy.

The analysis is made on a relationship between corruption and economic leadership.

There are two bottom-line conditions for corruption to happen:

1. Corrupt officials have the chance to get capital that belongs to the public.

2. Corrupt officials have a way to prevent their illegal behaviour from being found at once.

Corruption will be unlikely to happen if one of the conditions cannot be met. Therefore, corruption will be prevented on condition that we destroy one of the necessary conditions.

Features of corruption behaviour are concluded as follows:

1. It’s a confidential behaviour.

2. It’s a behaviour tightly connected with profit.

3. It’s a collective behaviour instead of individual behaviour.

Corruption refers to behaviour that aims to occupy public assets. It can be classified into two types:

1. Financial personnel takes advantage of his/her position to occupy public assets.

Generally speaking, it’s individual behaviour that is comparatively easy to be detected and solved.

2. Official leader takes advantage of his/her position to occupy public assets.

This kind of corruption is abominable and invisible. It’s usually a collective behaviour that is deeply hated by civilians. In theory, discussion will focus on this kind of corruption.

In normal financial system, movement of capital needs to be operated by three persons: leader, financial personnel, and cashier. Without any of them, movement of capital cannot be done. In other words, corruption cannot be done if any of them disagree to cooperate. Therefore, any corruption case of the official leader must be a collective behaviour. Personnel and cashier have guilt of duty dereliction even they announce to know nothing about it.

Even if the Chinese government has granted accounting law to regulate responsibilities and behaviour of financial personnel, it’s still hard to achieve expected justice by using accounting law under current social situation.

1. Financial personnel is alone and helpless. They are just junior employees in the charge of leaders.

2. They need to feed family, get married, and gain status in the company. All of what they need support from leaders. Leaders have top rights for finance, administration, and HR management. Those rights are what leaders deserve and reflection of regime. Without those rights, leaders cannot be called leaders, and regime cannot be called regime. Naturally, the fate of financial personnel is determined by leaders.

3. Many leaders employ and raise people they trust as financial personnel. In that way, financial system means nothing but hot air and conscience will be the unique element to decide how leaders behave.

Measures taken by the government like building anti-corruption bureau, encouraging civilians to report on corruption, and organising a detective group to reveal corruption are all subsequent measures. If criminals give chance easily for others to find the evidence, they are the foolish instead of the leaders. Corruption that can be seen by every civilian around is more robbery than corruption. Therefore it’s difficult to solve a corruption case for leaders.

In my opinion, it makes more sense to prevent corruption from the angle of basic system, since subsequent measure is never ended. As long as we improve basic system to prevent it, it can be really eliminated completely. In China, what leads to corruption is the drawback existing on the management of public assets. Capital flowing is necessary for a developing economy, but it also gives chance for a corrupt criminal to occupy flowing capital illegally. Capital flow is necessary for a developing society, but we need to ensure no possible capital flow into the personal pocket in the process. To solve this problem means to solve corruption issue.

Reasonable capital flow needs support from both entrepreneurs and officials. Management action and rights owned by them promote economic activities happening in society. Civilians give rights to government, and government distribute the rights to local officials to manage capital flow. People compare money to water, and those officials operating economic activities are hard to keep hands dried after touching water-like money. Those officials with wet hands are cases of corruption. Here is a method that can give chance for them to promote the economy but keep them away from water.

Like we discussed before, leaders have to escape from monitoring of financial personnel and cashier if they want to succeed. However, financial personnel are on the weak side in this defence battle. They are alone and helpless, which leads to failure in the fight against corruption.

President Mao used to point out that ‘our principle is to ensure government leading the gun, instead of the gun leading us’. Economic construction is not different from the real battle, and it’s a silent battle in the dark. Many colleagues are lost and reduced to criminals with guilt to the public.

What makes them lost? Those cash are like thousands of soldiers and endless bullets. They can be used for improving the economy, but they can work the other way to corrupt our officials.

As for capital, the government has to realise it’s a coin with two sides. Besides, it’s essential to keep capital in strict control. As long as we can make sure the financial personnel comply with government and national laws, corruption can be eliminated completely. Like the discussion made previously, financial personnel are alone and helpless in the face of corruption. Therefore, in order to solve this problem in essence, it’s suggested that the government should manage financial institutes independently and set financial personnel of state-owned companies as officials so that they can keep away from the influence of corruption. On condition that financial personnel have enough strength to fight against corruption, this problem can be solved.

Politically, by taking measure, the government can centralise power on finance, which will help strengthen people’s democratic dictatorship to protect exercise of government policy from opponent measures.

Economically, by taking measure, government gets feedback from financial institutes around the nation so that they can give instruction on any mistake that will destroy the government’s image on public. Therefore, it’s necessary to take this measure.

When appointing financial personnel, it’s suggested that the government should pay attention to the following points:

1. Independence given to financial personnel cannot influence economic development.

Firstly, financial personnel cannot be restricted by anyone except government force, and especially cannot be restricted by leaders. Only independent work can reflect true financial condition so that the government can take correct measures to improve and adjust the current situation. Only independent work can monitor the leaders’ work to ensure there is no corruption. Only independent work can really exercise government policy correctly to ensure that civilians can get the welfare they deserve.

However, independent work doesn’t mean that it’s allowed to influence normal economic development and doesn’t mean that it’s allowed for financial personnel to interfere with the action of leaders that are reasonable.

Except the right of leaders to appoint financial personnel, any rights of leaders work as usual. The only thing different is that there are some eyes around leaders for monitoring to ensure legitimacy and rationality of the leaders’ work. Any action of leaders to operate finance will be monitored. Meanwhile, innocence and loyalty of leaders will be witnessed by financial personnel. With government’s monitoring, leaders will have more motives to work hard legally.

2. Financial personnel need to receive necessary training to master financial acknowledge, understand relevant government policies and regulations, and master basic skills to fight against economic crimes. Finance is a professional work, which must be based on enough financial acknowledge. Therefore, financial personnel need to be proficient on financial acknowledge.

New-generation financial personnel represent government and civilians to monitor the leaders’ work. They need to check if any action of leaders complies with party discipline, national law, policy, legal regulations. They have to report to the government if they find anything suspicious. Therefore, they have to be familiar with policies and regulations from the government.

3. Financial personnel need to be relocated periodically.

People compared money to water. Theirs is a popular Chinese saying that flowing water is always keeps fresh and an often operated door can avoid being destroyed by a moth. It’s hard to ensure that financial personnel won’t be influenced by corrupted leaders around them. Therefore, it’s necessary to relocate the financial personnel periodically, and by the way, they can test the performance of previous financial personnel to check authenticity and reliability of their work. By doing that, the government can get feedback from financial work in time to ensure they won’t be influenced by corruption.

Financial work is complicated, but the work target is limited, inflexible, and dogmatic. Any financial personnel can do it well as long as they are given some time to get familiar with the local condition of the working place. What they need to do is just to operate data the way they do as usual.

Therefore, periodical relocation of financial work is feasible.

From the political angle, building of financial team can help centralise government power and strengthen people’s democratic dictatorship so as to prevent corruption from happening in China. Meanwhile, it shows the superiority of socialism and helps gain faith from civilians, which give strong economic support to the communism government.

From the economic angle, building of financial team protects legal rights of civilians and standardises economic behaviour of state-owned companies and government branches, which pave the way for economic development based on socialism.

In addition, standardised management on state-owned assets maximises the faith from civilians, which enables us to get ahead with our reform strategy. As long as political power, financial power, and military power are in the charge of government, we can have strong support to try any method that are likely to improve our economy.