Chinese corruption and looting on a vast scale: industry, government, and military

Here's a well-cited and pretty scary article describing the vast scale of corruption at the highest levels in China, and the extent to which "the success of 300m Chinese who live in western level prosperity depends on the continued exploitation and good nature of one billion people who live on an average of $5000 per annum." The author, Steve Keen (Professor of Economics & Finance at the University of Western Sydney) ranges widely over Chinese industry, government, and the military.

Zoomlion has an interesting business model, it is similar in many of ways to Caterpillar, except whereas Caterpillar report falling sales, Zoomlion reports astounding sales growth with a fivefold increase in revenue since 2007. Zoomlion customers sometimes buy ten concrete mixers when they planned to initially by one or two. They have a perverse incentive to buy more than they need because these concrete trucks are purchased via finance packages supplied by Zoomlion.

Then the machines can be garaged and used as collateral to borrow further funds from other lenders. Zoomlion continues to grow while cement sales have plunged. In May, cement output increased 4.3 per cent YoY, down from 19.2 per cent recorded last year. Zoomlion’s new debt of $22.5B buys roughly 900,000 trucks which could produce enough concrete (at six loads a day) to build over thirty Great Pyramids of Giza a day .

Every sector is infected with these kinds of perverse business practices, steel traders used loans meant for steel projects to speculate in property and stocks , it has been common (apparently) for steel traders to secure loans to buy steel then use this same steel as collateral to borrow funds to invest in property development and the stock market. In many ways this is the steel version of the Zoomlion model. A fundamental foundation of any lending market is the ability of the lender to ensure title and guarantee ownership of collateral...

...The current political leadership of China represents the greatest looting of a country by the political class ever seen in history. In the Hurun Report released in March 2012—the richest 70 members of the government have a net worth of $89.8 billion, an average of over $1B each. This compares to $7.5 billion for the 660 for the US government, an average of $11M each. China’s Billionaire People’s Congress Makes Capitol Hill Look Like Paupers. In a country so indoctrinated in the works of Marx, it seems only a matter of time before the current Chinese proletariat, suffering under extreme wealth distribution, will rise up. One only has to look at the geographic distribution of wealth to see where the problems might begin.

Furthermore, this does not take into account the wealth held by the families of these politicians. Nor is this corruption limited to politicians. The military, according to John Garnaut’s report, has become one of the most corrupt state enterprises of all. China’s wealth distribution is becoming completely one sided The success of 300m Chinese who live in western level prosperity depends on the continued exploitation and good nature of one billion people who live on an average of $5000 per annum. This week Chinese military leaders have been ordered to report assets under the following CCP directive – The General Political Department, Discipline Inspection Commission: Leaders Must Report Income, Real Estate Holdings and Investments. This is likely to be met with extraordinary resistance. This could result in a standoff between the CCP and the PLA , where both bodies equally riddled with corruption struggle for the upper hand. The great

The Looting of China by the Kleptokapitalist Bourgeoisie Roaders (via Naked Capitalism)


  1. People should add Steve Keen’s DebtWatch to their ‘Sites I visit every coupla days’ folder.

    Always interesting, often maddening (but in a good way).

    /off to read…

      1.  I guess I’d have to start using RSS, in order to no longer use it…

        Firefox’s middle-click-a-folder is just too handy.

  2. You’d think China would have realized from all those western movies that the “house” always wins.

  3. All those Republicans clamoring for the US to be more pro-business “like China”… they either know this or they don’t and either case should discredit them.

    1. Think of it as a extreme version of the American Dream. They all see themselves as joining the 1% at some point and so want to make sure the law will favor them at that time.

  4. Shouldn’t we take a lesson from our hedge funds. Encourage them to do more, while simultaneously shorting them x100. When they crash, who cares – we’ll just cash in our shorts just like the Wall Street did.

  5. If they’re not careful, they’re going to end up with some kind of Communist revolution taking place!

    1. Maybe we’re copying them now, just a little bit maybe, because corporations found out that corporations run more “smoothly” without democracy?

      1. Meh, corporations have no nationality any longer. First they played US state vs state to make the charter laws as loose as possible via a race to the bottom. And now they have done the same globally over trade and workers rights.

  6. Hey with some deregulation we could be just like that.  Who cares about clean air or water when there is money to be made.  Let the peasants eat twinkies!

  7. I, for one, am disturbed to hear that the communist chinamen are overtaking us in the critical area of financial services fraud. Without our comparative advantage there, how will we ensure broad-spectrum dominance in the 21st century?

    1. Heh, he only did that walk out of a sense of duty as his original prediction was over a longer timeframe than the bet ended up being about. And recent trends seems to favor his original prediction.

  8. I’m not surprised by the wealth of China’s top .00001%, or even the 300 million middle-class Chinese.  What does surprise me, though, is how well off the poorest billion are, compared to the Mao Zedong days or the earlier empires.  $5000 is still poor, but it’s approaching First-World poverty, as opposed to starvation poverty or Third-World poverty.   There’s a long way still to go, and a lot that needs to be fixed, but there’s been a lot of progress.

    1.  Yeah, that’s the surprising thing about China… a lot of commentators who haven’t been over here and don’t know what’s going on make it sound like life hasn’t changed at all in the last 30 years for most Chinese, which is a load of bollocks. I’ve been to a lot of small towns and villages in many provinces of China, and the *average* (not middle/upper middle class) standard of living in rural China is a modern one. The typical “peasant”:

      -is literate
      -lives in a spacious home with electricity, running water, and at least partial heating & air conditioning. In most cases, the family owns their own home, with no mortgage, as well as a small plot of land (that they’re generally forbidden from selling, but can rent out for income if they don’t want to work it).
      -has household appliances and a TV
      -carries a cell phone
      -Can go use a computer at a local wangba (“internet bar”) or print shop for about $.20/an hour
      -has access to basic healthcare, though they have to pay out of pocket. Antibiotics, immunizations, and casts for broken limbs usually aren’t a problem, though serious traumatic care or cancer treatments can bankrupt them (like uninsured Americans).
      -sends their kids to school, generally through high school, though college is usually out unless they do exceptionally well on the gaokao, or are able to save enough money for a private school
      -can afford the occasional domestic vacation, though nothing very fancy- usually a bus tour groups and cheap hotels, or backpacking through hostels for the younger and more adventurous
      -probably has a motorscooter, but no car- though, as the aftermarket grows, as well as the cheap domestic auto industry, this is changing too.

      So the typical mode of living isn’t terribly different than that of poor rural people in the US, or anywhere on the high side of the developing world.

  9. This is just one of several grand challenges faced by the old guard in the “Party” and the Military, while they struggle to manage growth; maintain harmony, and cling to power. The vast migration of country agricultural laborers to cities; the stirrings of tribal, ethnic and regional tensions; the collision of technology and totalitarianism – all will impact China’s evolution through the next few, critical years. Though it is clear China will remain a major, influential player on the international stage, anyone who invests expecting a long, straight, uneventful ride to the top is beyond naive.

  10. “the success of Americans who live in western level prosperity depends on the continued exploitation and good nature of the other 99%”  
    Fixed those typos!

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