Chinese Corruption?

The outgoing leader of China, Hu Jintao, has made fighting corruption one of the centerpieces of his party’s agenda.  Perhaps because of that, my corruption antennae were working overtime while I was in China. 

In Beijing, it seemed like our tour guide was perhaps a little corrupt.  For example, we attended an acrobatic show one night.  Included in the tour package were regular tickets to the show.  There were also two more expensive classes of tickets available, we were told, that would afford a better view.  The difference in price was not that great – maybe an extra $10 per person for the best tickets, and $5 more for intermediate tickets.  We gave the tour guide the extra $10 per person and told him to upgrade us to the most expensive tickets.  Our seats were indeed not bad, roughly the twentieth row of a theater that had perhaps 60 rows.  The back of chair was emblazoned with the letters “VIP.”  But here is the thing:  almost every seat in rows 16 to 20 was filled.  Rows 3 to 15 were completely empty (as were rows 40-60…it was not a big crowd on hand).  Rows 1 and 2 were completely full.  The only logical conclusion I could draw was that within each price range, the theater filled seats from front to back, and that our tour guide had taken the extra $10 per person, pocketed half of it, and bought us tickets in the intermediate price range.  Had the theater not been so empty, his scheme wouldn’t have been at all obvious – we would have thought it was just bad luck that we were in the back of the VIP section, but the empty rows gave him away.

We then headed to Shangrao city in Jiangxi province where my youngest daughter Sophie lived before we adopted her.  We were given the warmest, most wonderful welcome imaginable at the orphanage where she had been.  They gave us a tour of the facility, took us to meet the foster family she had lived with, fed us a lunch that was more delicious and plentiful than the fancy Beijing restaurant we had eaten at a few days earlier, gave us gifts, and showed us the documents in Sophie’s file.  By the time I realized that I was probably supposed to make a side payment to the orphanage director, it was too late.  I felt terrible.

I didn’t repeat that mistake at our next stop, which was the old-folks home where Sophie was found when she was three days old.  She never spent any time there – she was handed over to the police and sent to the orphanage.  Our plan was simply to make a quick stop there to take some pictures, but one of my daughters desperately needed to use a bathroom.

When our translator explained the situation to the people at the old-folks home, we were immediately welcomed in, lavished with gifts, and treated to a city tour and a ceremonial dinner.  I figured this sort of treatment warranted a large financial gift in return.  When I offered the money to director of the old-folks home, she just laughed and waved me away, completely unwilling to accept the money.  I was shocked.

But remarkably, I got the exact same reaction two more times in China.  I couldn’t get people to take my money – reasonably large amounts of money – even when it seemed to me they deserved it for entertaining us a large chunk of the day.  Hu Jintao would be proud.


Dan

Knowing Levitt's food preferences, I'm still eagerly awaiting his thoughts on eating KFC in China :-)

Joe

I wonder in the acrobatic show, if the middle section might not actually be the better section? Obviously I wasn't there, but often for shows like Cirque du Soleil, I'd rather be a bit higher up than right in front - you get a better view of the action that's often twenty or thirty feet off the ground without craning your neck.

Rodge

This was what I was thinking also, but again I'm also not sure about how they do things over there.

JPB

I'm puzzled as to why you assumed that money is required in compensation for everything? Is this an American thing?

Corban Saezer

Here's the chain of logic:

Time is money.
If you use someone's time, you're costing them money.
Give them some of yours so the books are balanced.

If something is seen as mutually-beneficial fun time, however, then the books are automatically balanced when you guys laugh together. Therefore, I can only conclude that money is used when someone is clearly enjoying themselves mroe than the other. More specifically, you think the other person isn't having fun with you.

Gustavo Piga

I fail to see corruption in the first case (a mere fraud) and potential corruption in the second (an off the market transaction).

Enter name here

Its usually not the the common citizens that are corrupt, just those in power like government officials and police. Most other nationalities that hate us Americans really hate our government and vice versa.

In regards to JPB, I think its a courtesy to offer compensation for services and goods rendered even if unexpected or planned. I do know some find it offensive to a degree. But some people do such things specifically to help make additional money. So I think its hard to know for sure.

Suf Hayes

Rows 16-20 are typically considered the best seats in the house. The director and designers sit here during rehearsals and the show is generally staged more towards this area than other seats in the theater.

Matt Groves

For the first case, another thought would be that the first 16 rows were not available to the average customer, even if they pay $10.They are reserved for the party elite. Only the 0nly the American's wouldn't know that. Another case of corruption?
However, your theory seems more sound.
I think most of the corruption happens when dealing with the government, because there is no competition and those people are in those positions because of connections not ability or by election.

aubrey

You're supposed to offer three times

MMC

"By the time I realized that I was probably supposed to make a side payment to the orphanage director, it was too late."
--- I am not so sure if that was expected, even taking into consideration the different culture. There are decent folks around.

RGJ

All I know about China is bring your own TP, but it occurs to me that anyone from Cho Bagadonuts to the Old Folks Director might look askance at taking money from someone being escorted around by a translator, who it seems to me would be a canary in the coal mine back to the authorities.

As to the seats....I don't see the smoking gun there. Look at the Giant's Metlife Stadium on TV -- two years after construction, and all the best seats around the 50 yard line are still unsold.

If you tell people you have regular, $5 more is better, $10 is best, I'll wager most people would opt for "better".....especially as a visitor to a public event in a classless society.

Nathan Guo

Actually, in Chinese culture you are supposed to insist through several denials. Just because they turned you down once does NOT mean they would not take it, just that you didn't understand the cultural dance.

MMC

@Nathan Guo: with respect, I am Chinese although I do not live in China. From the experience of a large majority of my Chinese friends, this isn't part of the Chinese culture we know and practise. On the other hand, generosity and being hospitable usually are.
I don't think one can generalise like that. I know it's unintended but it comes across as rather insulting to Chinese.

MMC

Clarification: I meant the general assumption that most Chinese would fish for a bribe/payment etc.

John Burns

In all my travels in Asia, including China, I've found the people very hospitable and generous when not in a business setting. I once got in an argument with a family friend over paying for his families dinner in Taipei one night after he let me stay with them for a week free of charge. I eventually got to pay the bill, but it was after a somewhat heated argument at the dinner table in a relatively crowded eatery.

I also wonder how many times Mr. Levitt offered the gifts and in what manner. Chinese are very conscious of saving face. They will always refuse a gift at least three times before accepting it. Also, gifts like that should probably be offered in private, away from the eyes of others who might judge the reception to be in poor taste.

mfw13

This is where cultural norms come into play.

In the West, paying a bribe is considered "corrupt" (unless its a campaign contribution).

In the rest of the world, paying an additional fee for preferential treatment/service is considered to be completely normal.

Much of what Westerners considered to be "corrupt" is considered to be completely normal in many parts of the world.

MMC

Difficult circumstances for some business people. Example would be "grease payments" or "speed money".

equired

What about the fact that the orphanage & the old-folks home were spending government money on visitors rather than orphans or old folks?

"For years, many of Beijing's finest establishments have paid premium rents to be close to government ministries and state-owned monopolies.

They were rewarded, especially in the month leading up to Chinese New Year, the country's biggest holiday, with bookings for extravagant banquets for Communist Party officials. "
http://www.telegraph.co.uk/news/worldnews/asia/china/9858397/Communist-party-cancels-Chinese-New-Year-celebrations.html

Gayan

I am not Chinese, but I feel you have misunderstood their culture.

Go to a small town anywhere in the world (certainly in Asia), and people will go out of their way to welcome you, and invite you to stay for a meal.

If I went to a small town in America they might chop me up, for not being white, but that's not how it works in most of the civilized world.

It's not a money thing, It's a human thing.

Wait a minute.... all us economists know "People Respond to Incentives", so just saying it's a "human thing", is meaningless, so let's look a bit closer.

I believe there are 2 things going on here:
1) In a small town, farming culture, people rely on their neighbors to help produce their crops, everyone is interconnected through a system of karma. Favor for a favor is the currency, not $.

2) The winning strategy in game theory is to start with "co-operating", this is what they do. there is no money value expected, but their co-operationg, would be expected to be met with the same.

On a side note, I believe in history, this is why my country was colonized. The western invaders played "the game" unfairly. When they were met with open arms, instead of reciprocating with kindness, they reciprocated by taking what they were offered, and more (their wives, children, and their farms). Ha ha chumps!

Thanks a lot for not understanding how to reciprocate goodness.

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Gkm

Tour operators typically have side deals going all over the world. I would have suspected the same thing in oh I don't know Washington.

Rajiv Khanna

Very few westerners would imagine c0-existence of both the tendencies of genuine warmth and care for the guest and the posturing in expectation of a return. It could co-exist in the same individual too. This kind of a dual behavior in the Asiatic societies could be attributed to inherited conventional cultural traits still alive , mixed with modern day market influences with the individual more or less randomly deciding when is he playing what role - a responsible citizen or a hedonist maximiser.

Anna

While traveling in China a few Summers ago, I happened to come across the same tour guide insincerity. It was the fourth of July and my tour group and I went to Tienanmen Square (A controversial place for American Teenagers to visit on our day of Independence, but carpe diem, right?) Our tour guide just talked about how the square represented all that China was and when we asked her about the massacre that happened there she was surprised we asked. She was convinced she had never heard of anything like that but was sure that her government would not kill college students over something as trivial as a protest.
One of the girls were were with happened to have an Uncle who had been a reporter at the time of the incident. He was in China while the protest happened and saw first had what the government had done to its people. He refused to turn off his camera when an official asked him to, so (on camera) he got beaten up and taken into custody for 5 years- completely going MIA from his family and the country.
Having our tour guide Skye be completely oblivious to what had happened in her country really made us nervous at what else the government was keeping from the Chinese people...

Note to self: when in China, don't mention the "Three T's" : Tibet, Tienanmen, Taiwan.

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Anli Gu

Hello Dr.Levitt,
As a fellow Chinese, I have to tell you that you completely misunderstood the circumstances there -- at the orphanage you were welcomed as a savor; at the acrobatic show, they see you as a big spender, thereofore they figured it would be okay to trick you giving them 10 more bucks.
Also the manager at the orphanage might very likely have received advanced degree and professional training in order to be able to run an international orphanage and hold higher moral standard; and the tour guides, from my personal experience, usually don't have college degree.
The 2 groups of Chinese people you encoutered are not comparable at the first place.

Then lastly, there is a circumstantial difference with whom they would ask money for: when you are there for fun, for non-serious purposes, it is perceived "okay" to get some extra from you; if you are perceived as someone who comes to China to help with some project, then it is perceived "not okay" to get money from you, not even asking money.

If I re post this to the China version of Twitter, many Chinese would feel offended.

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True

reading this from china right now. and so true.