Introduction

The disclosure of the Panama Papers in 2015, the elections of 2016 (“Brexit” and Donald Trump), and the further disclosure of the Paradise Papers in 2017 have demonstrated that money and power are more internationally intertwined than ever before and increases opportunities for corruption. As a growing world superpower over the past decade, The People’s Republic of China has attracted increased attention by scholars studying crime and corruption in order to discover what makes China akin or dissimilar to other developed and developing countries (e.g., [1]).

More recent critiques of China and its practices have not remained solely within the pages of academic publishing, with popular media headlines such as “Bad For Business? China’s Corruption Isn’t Getting Any Better” [2], “Why Corruption Is Here To Stay In China” [3], and “What China’s Anti-Corruption Campaign Is Really About” [4]. The stories belie an all-to-familiar Western narrative: “China is corrupt, has been corrupt, and will be corrupt.” There is a level of assumed intransigence here; China continues to be corrupt because it is working or so the narrative goes. This claim echoes through Chinese media and the general populace, with the well-worn rationalization that “a rising tide lifts all boats.”

This assumption, and its effects (inequalities in the concentration of wealth, extreme pollution, unsafe products, etc.) would seem to have a breaking point. Studies of developing countries, such as the many nations that make up the Pacific Islands region, have found that while a certain amount of corruption might “grease the wheels,” modernization tends to drive cultures away from corruption (or at least public and widespread corruption). These practices, such as bribery through gift-giving (popular in the Pacific Islands and China), are illegal in the United States of America, though larger scale “lobbying” remains quite legal:

I think people are under the impression that the corruption only involves somebody handing over a check and getting a favor. And that’s not the case. The corruption, the bribery call it, because ultimately that’s what it is. That’s what the whole system is. – Convicted felon and former lobbyist Jack Abramoff [5]

We know a bribe is when you show up with a stack of cash and say, ‘Here’s $10,000 in cash, and can you do this for me”’. But if I show up with ten $1,000 campaign contributions and say the same thing. That’s not a bribe in Washington. Outside of Washington, everybody gets this… but inside Washington, that’s the way it’s done… We have institutionalized corruption in Washington. It’s perfectly accepted, and it’s acceptable to virtually everybody, and that’s where things need to change. – Jack Abramoff [6]

This mixture of politics and money occurs in China as well, though the avenues are different. For example, in the U.S. there has not been a concerted effort to remove money from politics, while in China periodic “anti-corruption crackdowns” are performed. These crackdowns are at best “anti-corruption theater,” but more commonly act as a tool to stamp out political opposition. This study will examine the similarities and differences between China and the U.S. regarding responses to corruption through codes of corporate conduct and governmental crackdowns.

Literature review

The utility of a comparative criminological perspective in studying corruption and informing policy was examined in detail by Zimring and Johnson [7] who note that the value of such work is not simply to document differences and similarities among countries and systems, but to effectively analyze the distinctive character of domestic practice and policy. They use the example of extraordinary rates of life-threatening violence in the U.S. that becomes highlighted when cross-national comparisons are made [8]. First, comparison highlights more than simply observed variations between countries. “It is an essential device for understanding what is distinctive (and problematic) about domestic arrangements” ([7], p. 457).

Second, Zimring and Johnson [7] argue that the incentives to conduct such comparisons are not evenly distributed throughout developed nations. Smaller countries, such as many of the Pacific Islands, may be more easily convinced of the necessity for comparative work than larger ones, such as the U.S. or China, but the value of comparisons in understanding and potentially reducing various domestic problems may be just as important for large countries as it is for small ones. They note:

The less natural a comparative perspective seems in the study of social behavior, the greater the chances that errors are made and opportunities for understanding are missed because of its absence. Similarly, the more students of a system assume its own uniqueness, the easier it will be to avoid evidence of non-uniqueness and the harder it will be to identify differences that are dysfunctional and problematic. The assumption of uniqueness thus frequently defeats opportunities to study how American behavior and institutions are exceptional ([7], pp. 457–458).

Tonry [9] took stock of comparative criminological work and found that the endeavors tended to serve three overt functions: to allow for a frame of reference to understand one’s own legal system, to provide models for law reform emulation, and to enable people to see institutions and practices in their country as they look to outside observers. He notes, “Just as a bit of travel can broaden awareness of cross-national differences, knowledge about crime and justice systems elsewhere can suggest different and sometimes better ways to do things at home” ([9], p. 510). It is impossible to disentangle a country’s history from its justice system, so any comparison is with limitation, but lessons may yet be learned when comparing the world’s two remaining super powers.

The analysis that follows uses a comparative perspective to identify forces affecting modalities of corruption and official responses in the U.S. and China. First, it considers factors that have been identified as responsible for corruption in the U.S., and discusses general issues related to political and organizational corruption and white-collar crime. It then considers corporate codes of conduct in the U.S. as they relate to the prevention of corruption and corporate crime, including foreign bribery. Following this, it examines the problem of white-collar crime and corruption in China, focusing on general issues and patterns. The paper then considers the theoretical and practical issues of system capacity and non-issue making in relation to corruption and other white-collar crimes and compares enforcement and detection issues in China and the US. Finally, the paper examines the utility of enforcement campaigns designed to deter corrupt practices and offers ideas for future research.

Defining corruption

Just as Braithwaite [10] attempted to put the term “white-collar crime” on “sounder conceptual footing” by invoking the definitions of Edelhertz [11], Bloch and Geis [12], and Clinard and Quinney [13] before eventually settling on Sutherland’s [14, 15] original definition, so too does defining “corruption” become an almost Sisyphean task. At the most basic level, corruption may be defined in relation to the authority of public office and an element of private gain (usually financial, although power and prestige also are factors) through an illegal use of authority. Some definitions of corruption center on public office, while others rely on market situations or conceptions of the public interest.

As far back as Ross’s [16] “The Criminaloid,” pro-social offenders are described as committing offenses such as bribery and, while guilty under the law, remain steadfast in the conviction that they are not culpable. These crimes are frequently included under the banner of white-collar crime [14, 15, 17], but also include low-level corruption, such as the corruption of police officers in Chambliss’s “On The Take,” [18] which described the intersection of organized crime and police corruption.

In this work, we focus on political corruption which comprises “public officials acting in the best interest of private concerns, regardless of, or against, the public interest. Therefore, corruption can be defined as the covert privatization of government functions” ([19], pp. 44–45). This type of corruption has been attributed variously to ambivalence toward behavioral norms [20], the existence of wealthy elites denied direct formal influence on political policy, and the intrinsic flaws in organizational arrangements and bureaucratic procedures [21].

In this respect, we further focus on the narrower legalistic definitions of political corruption: behaviors that are defined as criminal under their respective legal systems. This is different from the many forms of normative political corruption that remain unpunished simply because the behaviors described are legal within the U.S. (lobbying) or Chinese (guanxi) context.

U.S. political corruption

In the United States, legalistic political corruption entails access to power and resources which permits incumbents to buy political support by selling political favors. This is frequently unpunished and is further perpetuated because elected officials “can often engage in illegal activities without being reprimanded at the polls” [22].

Political Scientist Lowi [23] distinguishes between Big Corruption, “corruption that contributes to the decomposition, dissolution, or disorientation of the constitution,” and Little Corruption, “that reflects or contributes to individual moral depravity,” a useful definitional split. For example, despite occasional anomalies like former Vice President Spiro Agnew, who was convicted on bribery charges for acts committed while serving in his previous role as Governor of Maryland, known instances of “Little” corruption – or simply providing favors for money – at this highest level of elective office have been relatively rare. More typically, when presidential (or vice-presidential) malfeasance has occurred, it has taken the form of “Big” corruption aimed at promoting an administration’s organizational goals, as was the case with Watergate, the Iran-Contra affair, and other such abuses of executive power. Each of these cases of major corruption were brought to light through the efforts of investigative journalists, and not the efforts of the government itself. “Big” corruption (systemic) is a very different and more difficult matter for governments to handle than is “Little” corruption (scandal) and because of that, it is more likely to remain hidden and unreported when it occurs.

This state of “Big” political corruption in American politics remains pervasive, and there are numerous cases of wayward politicians and officials at almost all levels of government. One veteran political reporter observed:

Indisputably, the greatest change in Washington over the past twenty-five years… has been the preoccupation with money. …The culture of money dominates Washington as never before; money now rivals or even exceeds power as the preeminent goal ([24], p. 61).

This “culture of money” has reached all levels of government, culminating in the [25] Supreme Court decision which paved the way for the creation of “Super PACs (political action committees),” which make no financial contributions to candidates or parties, and so can accept unlimited contributions from individuals, corporations and unions. The holding in Citizens United helped affirm the legal basis for Super PACs by deciding that, for purposes of establishing a “compelling government interest” of corruption sufficient to justify government limitations on political speech, “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.” The decision represents the rare case of legalistic corruption becoming normative corruption.

“Little” corruption, too, has never been a stranger to the myriad federal agencies which comprise the executive branch. Unelected administrators and government agents often have the same value to the buyers of influence and special favors as do elected officials [26]. Bureaucrats cannot make laws, but they can determine the way laws are carried out through their administrative authority and regulatory powers. “The mere structural availability of the opportunity for illicit gain is sufficient motivation for some corrupt employees” ([26], p. 87).

At this point, it is important to note two key differences between the U.S. and China. First, though corporations and the government do interact in the U.S., they tend remain wholly separate entities, which may cooperate time to time. In China, however, the existence of State-Owned Enterprises (SOEs), government-corporate entities such as the China National Petroleum Corporation, necessitate a further discussion of U.S. corporate codes of conduct, which regulate American corporations similarly to Chinese law.

Second, the American political system is comprised of two competing political parties, while the Chinese system consists of one-party rule through the Communist Party of China (CPC). Thus, while a large amount of U.S. political corruption boils down to winning a political campaign against an adversary in order to make a profit from office, Chinese corruption focuses more on politically-threatening individuals, who may stand in the way of office.

The differences mentioned above mean that any comparison of corruption between the U.S. government and the Chinese government must also include U.S. and Chinese corporations.

Corruption in the U.S. and corporate codes of conduct

Corporate codes of conduct in the United States have played a role, albeit sometimes an uncertain one, in preventing legalistic corrupt business practices both domestically and internationally. The Sherman Antitrust Law of 1890 represented an attempt by the United States to combat the increasing monopolistic trend in the business world. The eminent economist Adam Smith as far back as 1776 had written about the desire of businesses to eliminate competition by conspiring to fix prices; “People of the same trade seldom meet together, even for merriment and diversion,” Smith wrote, “but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices” ([27], p. 82).

The 1961 “Heavy Electrical Antitrust Conspiracy,” studied by the pre-eminent social scientist Gilbert Geis in one of the most important pieces of criminological scholarship of the twentieth Century, led to the production of the first wave of corporate codes of conduct in the United States. These codes largely dealt with price-fixing [28]. The case involved 29 corporations and 45 individuals, including vice presidents of the industry giants Westinghouse and General Electric. Seven of the defendants received 30-day jail sentences, an outcome that, at the time, was considered draconian.

One General Electric conspirator said: “Every direct supervisor I had directed me to meet with competition. It had become so common and gone on for so many years, I think we lost sight of the fact that it was illegal” ([29], p. 144). Yet, General Electric in 1946 had issued a directive, number 20.5, that spelled out the company’s policy against price-fixing in terms stronger than those found in the federal law. It read:

It is the policy of the company to comply strictly in all respects with the antitrust laws. There shall be no exception to this policy, nor shall it be compromised or qualified by an employee acting for or on behalf of the company. No employee shall enter into any understanding, agreement, plan or scheme, express or implied, formal or informal, with any competitor, in regard to prices, terms or conditions of sale, production, distribution, territories, or customers; nor exchange or discuss with a competitor prices, terms, or conditions of sale, or any other competitive information; nor engage in any other conduct that in the opinion of the company’s counsel violates any of the antitrust laws [30].

Each manager periodically was asked to indicate in writing that he/she was adhering to this policy, specifying that: “I am observing it and will observe it in the future.” But most employees presumed that the directive was window-dressing, meant to lull the public and the regulatory authorities. One GE employee, however, refused to engage in price-fixing after he initialed the document. A witness before a U.S. Senate committee investigating the price-fixing crimes explained what happened:

[My superior] told me, “This fellow is a fine fellow, he is capable in every respect except he was not broad enough for his job, that he was so religious that he thought, in spite of what his superiors said, he thought that having signed that, that he should not do any of this and he is getting us in trouble with competition” ([29], p. 144).

The consequences for the convicted violators, in part, reflected the existence of the code at General Electric. The company fired all those implicated in the conspiracy. The other charged companies, without internal directives, retained the malefactors.

What do the codes contain?

Corporate codes of conduct have become more widespread and somewhat more complex with the passage of time and with the federal mandates discussed below, but their essential nature does not differ much today from the codes put in place during the half century that followed the end of the second World War. The pioneer survey of corporate codes of conduct was undertaken in 1984 by Fried Frank, an international corporate law firm headquartered in New York and with offices in, among other places, London, Hong Kong, and Shanghai. The survey was updated three years later with about one-third of the companies responding. Subjects were companies listed by Fortune magazine as the largest five hundred in the United States. Presumably, those who responded were the most likely to have codes in place (90% of them did), although organizational privacy and secrecy concerns may have limited the response somewhat.

A common thread in the codes was the desire to protect the company from liability. Table 1, from the second Fried Frank survey, indicates the categories reported by the companies.

Table 1 Issues addressed in corporate codes of conduct
Full size table

Cressey and Moore also found what they called “a disproportionate degree of attention” accorded to conflicts of interest in the corporate codes. They note that this discrepancy is particularly pronounced regarding nonindustrial firms. They believe that a traditional emphasis had been placed on preventing acts directly harming the company and that only recently had concerns about public interests come to the fore [32].

Bribery to secure foreign contracts

Two developments prompted further activity in the development of internal codes of conduct in American companies. The first was the Watergate break-in by thugs working on behalf of the re-election of President Richard M. Nixon. The investigation of the botched burglary uncovered numerous illegal donations of corporate moneys to the President’s election campaigns. These contributions tended to be disguised by accounting tactics that broke them into small amounts unlikely to be discovered by external auditors who rarely did more than a cursory sampling of such transactions.

The second situation was the discovery that American companies were paying huge bribes to overseas corporations, politicians, and political parties to obtain contracts. An amnesty approach saw more than 400 companies, including 117 of those on the Fortune 500 List, admit to having paid out more than $300 million to foreign sources. In 1977, Congress enacted the Foreign Corrupt Practices Act that criminalized such actions. Corporations responded to both scandals by creating internal governance rules that prohibited overseas bribery [33, 34]. Specifically, offending companies had to assure the Securities and Exchange Commission that they had taken steps to see that such activities did not recur.

In addition, in 1988, the Insider Trading and Securities Fraud Enforcement Act mandated that broker-dealers and investment advisers had to establish, maintain, and enforce reasonably designed written policies and procedures, taking into consideration details of their operations in order to prevent the misuse of material, nonpublic information. It is telling that, despite these guidelines, prosecutions for insider trading often rely not on the core law but on auxiliary violations such as perjury. The reason is that mens rea, or criminal intent, is often particularly difficult to establish, because the accused can often claim that he/she always intended to engage in the transaction and that it was coincidental that the move was made prior to internal awareness of, as yet, nonpublic information about an anticipated large gain or loss in the stock.

Corruption in China

Corruption, a universal institutional phenomenon, is generally accepted to be especially pervasive in developing and transitional societies [7, 35]. China, the most populous country in the world and a new superpower, has experienced both unprecedented economic development during the past three decades and attendant rampant corruption at all levels in the government and in the private sector [35]. Zhang et al. [36] have pointed out that, “White-collar crime and official corruption in particular have been a serious concern in China and have attracted wide attention during the nation’s economic reform.” Campaigns to control corruption are a feature of Chinese life and often involve draconian penalties. In recent years, there have even been reports that death sentences for commercial fraud have increased because of a burgeoning trade in body parts that can be harvested under controlled conditions from offenders who are executed [37].

Yu [35] has reviewed theories offered to explain the causes of Chinese corruption and economic criminality and suggests that the escalation in the number of these problems is an unintended consequence of reform policies. The phenomenon can be interpreted in terms of a number of prevalent criminological perspectives, including: (1) social control theory which emphasizes the importance of conditions such as attachment to parental values in preventing individuals from engaging in illegal activities; (2) anomie theories which view crime as resulting from normative deregulation, social structural strain, and lack of legitimate opportunities combined with an overriding cultural ethos that stresses the need for wealth and its associated acquisitions; (3) rational choice models which consider the role of criminal opportunities in motivating and enabling particular forms of crime; and (4) cultural explanations that focus on traditions or values among persons from different backgrounds and varying experiences ([35], p. 167).

Research in China about financial fraud, as in most countries, has been sparse due to the lack of large and systematic data sources and a related political unwillingness to fund major studies. The occurrence of white-collar crime often remains under a cloak of official secrecy for at least two reasons: First, governments do not like to broadcast an image of their country as riddled with upper-class law-breaking, and second, the very officials themselves may well be involved in illegal schemes and they do not desire to alert the public to wrongdoing in other high places.

Nonetheless, some statistics and case reports meant to show diligent law enforcement and offer lessons in the danger of defying regulations are sometimes issues. A sampling of offenses reported by the Chinese government depicts the broad nature of current problems and the inherent dangers underlying continued economic growth and reforms. In 2004, for example, it was reported that Chinese prosecutors investigated 43,757 government officials for job-related crimes in the previous year alone. Over 35,000 of them involved some form of corruption, bribe-taking or embezzlement of public funds, while a little over 8700 of them entailed abuse of power. About 31,000 cases were prosecuted in the same year, with the government retrieving 4.56 billion yuan (about $555 million US) from purloined funds [38].

In 2015, Chinese prosecutors began investigations into 54,249 officials, including both high-ranking “tigers” and low-level “flies,” for suspected involvement in 40,834 graft cases, while a little over 13,000 of them entailed abuse of power. Focusing on major cases in China, ProcuratoratesFootnote 1 investigated 4490 cases involving corruption, bribes-taking and embezzlement of public funds worth more than one million yuan, up 22.5% from the year before. A total of 22 Chinese ex-officials at the ministerial level or above, including former leader Zhou Yongkang, were prosecuted in 2015 while 41 were subject to formal investigation. Moreover, prosecutors investigated 8217 criminals suspected of bribing officials. Total of 33. Over 30 people in southwest China’s Sichuan Province were convicted of offenses related to electoral fraud (Annual Work report 2016 of the Supreme People’s Procuratorate of the People’s Republic of China).

These numbers are similar to those from the decade prior, when the Chinese government previously reported that 4414 state officials were investigated for corruption or bribe-taking in road construction, urban reconstruction, medicine purchase and land requisition, and 10,407 employees of state-owned enterprises (SOEs) were suspected of embezzling public funds. This is in addition to 9476 administrative and judicial personnel whom were under investigation for charges of power abuse, dereliction of duties, and taking bribes, and almost 3000 high-level officials were reprimanded for major malpractice and negligence leading to grim traffic, coal mine, and environmental pollution accidents [38].

Underlining the increasing impact of white-collar law breaking in the world’s largest country are statistics such as the Ministry of Public Security reporting that the number of violent crimes had declined while economic crimes - especially those involving fake products and smuggling - rose in the first six months of 2007. Murder, rape, arson, and bomb attacks decreased 9.1%, 2.9%, 7.9% and 27% respectively from the previous year, while the number of known economic crimes increased by 10%. “Cases involving the production and selling of fake or substandard products, smuggling and disruption of market order saw the biggest increases” [39]. The rise in economic crimes had shown a steady increase in recent times, and some have speculated that they will increase as China continues to transition from a planned to a free market economy [39].

China’s financial system has also been subject to scandal. Transparency in accounting – as is the case in the rest of the modern world – remains a key problem. In 2005, the Chinese government reported that there were 240 major criminal violations in China’s state-owned commercial banks in the first half of that year, accounting for one-third of the country’s total bank scandals and a total loss of 1.6 billion yuan ($198 million US). The emergence of the scandals was reportedly due to reform of the country’s banking system and correspondingly intensified government oversight and policing [40].

Many major suspects escape the country and China reports great difficulty in locating and returning fugitives to the nation even with concentrated efforts. Beijing has estimated that in the past two decades, 16,000 to 18,000 corrupt officials and employees of state-owned enterprises have fled China or gone into hiding with pilfered assets totaling more than 800 billion yuan or about $135 billion US [41]. Even when criminal suspects are located, many foreign governments are unwilling to send them back to China because they may face the death penalty, a punishment that in most countries has either been abolished or is inflicted only on murderers. To help ameliorate the problem, China has established agreements with many countries that stipulate that suspects will not be executed if they are returned to the PRC to stand trial [39].

Chinese authorities managed to return to the country 124 corruption suspects previously on the run in a 17-month international manhunt that started in October 2014. The suspected offenders were repatriated or were persuaded to turn themselves in from 34 countries and regions [42]. By 2016, forty out of 100 wanted fugitives listed in an Interpol “red notice” had been netted over the previous three years; of those returned, 15 returnees had already been sentenced to terms of up to life in prison, 9 have been accepted by courts, but no sentence has yet been given, and 13 cases were at the time under investigation or awaiting review [43].

Attempts to return expatriate fugitives have failed so spectacularly in recent years, the national government has instead pivoted to an effort to simply stop the hemorrhaging of Chinese government funds. At the end of 2016, a new set of rules were instigated for Chinese banks, including: all overseas payments under the Shanghai capital account of more than $5 million US would have to be submitted to Beijing for clearance, the People’s Bank of China would no longer approve overseas investments of more than $10 billion US or mergers and acquisitions valued at more than $1 billion US, and credit cards issued in China with Visa or MasterCard be replaced with those issued by the country’s dominant currency clearing company China UnionPay, the state-backed bank card issuer [44].

Pre-2018 corruption crackdowns

In an attempt to reverse the non-issue status of corruption in Chinese society and highlight the issue as a major social problem with potentially catastrophic consequences, the government has made it one of the leading issues in current politics. In a series of speeches in 2012, Chinese President Xi Jinping warned that endemic corruption, could lead to “the collapse of the [Chinese Communist] Party and the downfall of the state” [45]. According to official statistics, China’s latest campaign against corruption has caught and punished about 270,000 officials at various levels of its government and vast bureaucracy. Most of the persons captured have been low to mid-level party members and related bureaucrats, but the reach of current enforcement efforts has included some members of the Politburo as well [45]. As mentioned earlier, it is also estimated that since the mid-1990s, “16,000 to 18,000 corrupt officials and employees of state-owned enterprises have fled China or gone into hiding with pilfered assets totaling more than $135 billion” [41].

Looking for the help of foreign governments in tracking down fugitives and pilfered funds, China initiated “Operation Fox Hunt” in 2014. The government reported that about 180 suspects had been returned to the country, mostly from Asia, South America and Africa. However, the U.S., Canada, and Australia are likely to have the highest numbers of corrupt Chinese officials according to experts. These countries are relatively safe havens for corrupt officials for geo-political reasons. Their robust legal systems and concerns over possible judicial abuses in China have made their governments hesitant to repatriate Chinese citizens, or those who have gained residency or citizenship. The countries have collaborated with China in the past, but only on a case-by-case basis. Continued cooperation and more systematic agreements are being sought by the Chinese government in order to help contain the corruption problem and return criminals to the country. This brings a distinct and important international element to China’s attempts to deal with its corruption problem that presents both major legal and political challenges. John Ciorciari notes, “The challenges China faced getting U.S. help for the ‘fox hunt’ have at least as much to do with a political trust deficit as a lack of legal mechanisms for repatriation” [41].

Corruption in many forms and from many places

Studies have painted a picture of the Chinese white-collar criminal that looks quite similar to their American and European counterparts; more likely to be older, more likely to hold a high-status occupation, and less likely to have a prior criminal record [46]. Also, like the United States, white-collar offenders in China are more likely than street offenders to be acquitted. However, unlike the U.S., those who are convicted tend to receive more severe sentences. Lu and Gunnison [46] attribute the high rates of acquittal to the state of “anomie” China still finds itself in from the “plural value systems and economic systems” struggling to coexist. They further argue that this anomic context and the consequential high rates of acquittal demonstrate the difficulties inherent in enforcing laws against corruption.

More recent studies begin to move away from anomie and present institutional arguments for criminality [35, 47, 48]. Yu’s [35] study of the continued corruption of government officials concluded, “The lack of supervision of the ruling Party has not only created opportunities for Party officials to abuse power, it raises the question about the limitation of the Party’s leadership in the prevention of official corruption.” This “lack of supervision” is supported by Ma and Ni’s [49] earlier findings as well.

Corruption in China goes far beyond the standard cases of bribery usually covered in western literature, and it has major consequences for the official recording of white-collar offenses. For example, Cheng and Ma [47] found that 80% of bank fraud in China stems from some form of corruption. These criminals not only utilized “guanxi wang” (informal connection networks), but also “baohu san” (protective umbrellas) that exist between corporate actors and the government. The connection between local government interests and the personal profit of high-ranking officials currently make both detection and prosecution of these crimes extremely difficult. Beyond the issues of local protectionism (“difang baohu zhuyi”) is the fact that bank fraud cases can be extremely complex and are difficult to ferret out more generally, similar to western cases documented by studies in the U.S. [50]. “Despite the establishment of nation-wide specialist units, which vary significantly in the level of resources and expertise, it has been suggested that the complexity of bank fraud cases is exceeding the ability of law enforcement agencies to investigate them, and that regulators are lagging behind criminals in keeping up with new advanced technologies” [47]. Cheng and Ma [47] cite two major problems related to the current capacity of the judicial system to bring such cases: in 2008 only 70% of Chinese prosecutors had university degrees (and not necessarily in law) and lawyers tend to find much higher-paying jobs in private, rather than public, practice. Thus, detecting bank fraud is difficult due to both interferences from local authorities and inadequately trained prosecutors [47].

Problems also exist with regulatory structures and personnel. van Rooij [48] describes environmental crimes as the result of a “vicious circle where weak enforcement and low compliance reinforce one another.” The weak enforcement, he argues, is due to two factors: difficulties in detecting violations and weak sanctions. “Weak detection capacity” is mainly due to workload; van Rooij documents that China has 40,000 labor inspectors for an estimated 30 million businesses or approximately 750 businesses per inspector. He argues that while inspection forces are clearly overworked, that even properly staffed regulators would still be unlikely to detect violations from companies that are “yangfeng yinwei” or “respectful by day, in violation at night” [48]. The few who are caught face underwhelming sanctions for their illegal activities. For example, while the law allows up to 1000,000 RMB ($160,000 U.S.) in fines for environmental crimes, the average fine in 2006 was only 10,000 RMB ($1600 U.S.) [48]. This is not unlike the penchant of U.S. attorneys to settle criminal and civil cases of major white-collar cases for substantially less sums than the maximums allowed by law.

These same weaknesses are also seen in the handling of corporate crimes. In 1979, China attempted to move against corporate crime by adding an amendment to the Criminal Law entitled “Crimes of Undermining the Socialist Economic Order” [47]. The amendment included 16 illegal acts punishable with the death penalty; however, the enforcement of the law has been neither certain nor severe. Few companies suspected of criminal activities receive legal and administrative penalties, especially those controlled by persons with political ties. Moreover, local protectionism hinders enforcement and minority shareholders are still often victimized [51]. In May 2004, the Chinese government created its first Financial Crime Prosecution Unit (FCPU) to fight serious and complex fraud. This institution was created under the Party Disciplinary Inspection Commission (DIC) supervision and if DIC did not approve the investigation, the FCPU could not move forward with the case [47].

Chinese corporations will not be punished under all circumstances. Article 135 (concerning the violation of labor safety involving serious accidents) and Article 161 (providing false financial and accounting statements), for example, only call for the punishment of the person directly involved in the illegal situation, and not the company. When the corporation commits a crime, as noted in Articles 181 (securities fraud), 153 (smuggling), 192 (the possession of money gained through fraud) and 194 (using forged checks or promissory notes) there is no fine for the chief executive. Ambiguity of legal terms further complicates matters. For example, terms such as “light,” “serious,” and “very serious” are widely used when defining the seriousness of corporate crimes and different courts have set different standards as to the meaning of “seriousness,” which leaves determination up to rule enforcers in legal proceedings [47].

Other types of sanctions such as victim compensation, public apology, confiscation of illegal gains, cancellation of licenses, dissolving and disbanding the corporation, or a forced stoppage of business can be found in economic laws, the corporate law, and administrative regulations [52]. The connection between Criminal Law punishment and other types of sanctions, however, is weak. Due to priorities within the Criminal Law, when the prosecutor accuses a corporation of certain illegalities there is no guarantee that government officials will charge the corporation and impose other penalties. The loose relationship among the judicial and administrative departments makes the punishment system problematic regarding corporate crime.

Similar to the U.S., the complexity of fraud exceeds the ability of law enforcement agencies to investigate it. Like anti-corruption campaigns, crackdowns on corporate crime tend to ensnare unsophisticated criminals who are not covered by the “protective umbrellas” of government officials, and inadequate legal protections for whistleblowers ensures that the discovery of high-status individuals or organizations who commit corporate crimes will remain difficult if not impossible in most cases [47]. Moreover, the resulting official statistics on corruption and other white-collar offenders do not paint an accurate picture of the true distribution of such offending, thus “trivializing” the social reality of white-collar crime in terms of actual costs, types, and pervasiveness [53]. This same phenomenon of the massive “dark figure” regarding undiscovered white-collar and corporate offenses has been noted in the U.S., and it is especially problematic given that policies are almost always formulated based on these necessarily incomplete official figures.

Deterring corruption: problems of system capacity and non-issue making

A general lack of deterrence generated by law enforcement and the regulatory apparatus despite the use of “crackdowns” has been reported by several researchers [35, 47, 48]. For example, Yu [35] describes “audit storms” designed to find the misappropriation of state funds but claims “the chance of getting caught is so slim and the misuse of power is so easy, the periodical intense enforcement is not likely to produce long-term deterrence.” Other researchers [47] present a similar case in relation to major financial crimes where such crimes are “perceived as threats to the nation’s economic stability and thus a challenge to the party’s political order,” which result in a “strategy of hard strikes” where “each strike hard campaign creates a wave of arrests, convictions and severe penalties [but] when it is over, another crime wave is soon recorded, causing another campaign.” This inconsistent application of enforcement, they argue, is counter-productive when attempting to deter crime. Another highly respected international researcher [48] notes that such official actions can lead to short term “stop-gap effects” in campaigns against fake products, unsafe food, forced labor, illegal land usage and industrial pollution, but that such responses have “become ritualized shows of effort rather than achieving a sustained impact.”

These studies attest to the lack of current enforcement capacity as a major structural problem facing official efforts to both prevent and deter corruption and white-collar crimes. Two theoretical models appear to fit these historical descriptions and can be used to help explain the prevalence of corruption and other white-collar offenses in China; system capacity and non-issue making. The aforementioned research shows that China frequently is unable to halt white-collar crime and that these issues are not unique. Rather they follow a similar pattern in varying degrees with the U.S. and other countries regarding a general inability to effectively control and prevent such offenses. Given China’s recent rapid economic growth, such issues are likely to be exacerbated as the legal machinery struggles to keep pace. System capacity issues are frequently cited as major problems in the U.S. regarding the lack of deterrence and government inability to respond to crime overall [50, 54, 55]. For example, Tillman and his colleagues [56] found that a system capacity model based on criminal justice workloads was more predictive of prosecution and punishment of offenders in the savings and loan crisis than either an alternate sanctions explanation, which argues that the availability of civil sanctions could replace criminal punishment, or an organizational advantage argument in which offenders in “shielded” positions received more lenient treatment. Similarly, another study by the same researchers [50] found that criminal justice capacity issues were useful in explaining government responses to financial fraud in the U.S. and were simultaneously responsible for the official recording of such crimes.

One element determining such capacity is the amount of work to be processed relative to existing legal machinery including both fiscal and physical resources. The inherent difficulties in the detection, apprehension, and sanctioning of white-collar and corporate offenders brought to light by the current literature on white-collar crime in China may be better understood through a system capacity model. Enforcement resources and obstacles, in addition to existing law and practice, need to be examined in order to more accurately assess the nature of white-collar crime in China. Addressing these issues directly through in-depth case studies can lead to further useful information with which to inform the comparative study of white-collar and corporate crime and provide useful guidelines for policies of control and prevention.

While white-collar crime is difficult to detect due to the absence of “clear-cut ‘villains’ and ‘victims’ the way that street crimes [have villains and victims],” enforcement agencies also frequently ignore readily apparent white-collar crimes, such as air pollution or arson-for-profit, if such crimes provide economic benefits. This, in effect, makes white-collar crime a “non-issue.” Crenson [57] first introduced the concept of “non-issue making” in 1971 when he found that state officials chose to not enforce air quality standards since doing so would inhibit profits of local steel factories. Likewise, Goetz [55] showed fire departments were more likely to investigate “spite-revenge” arsons than “arson-for-profit” as the former had no economic benefit, but the latter frequently led to new “urban renewal and gentrification.”

This discussion above demonstrates the value of a comparative framework to the study of corruption and will help bridge a current gap in criminological theorizing on the subject. For example, while Yu demonstrates corruption in China stems from a lack of supervision and problems within the structure of enforcement, the study is not grounded within a comparative criminological framework. Cheng and Ma begin such a task, but only within the realm of bank fraud. Examining common elements throughout China’s regulatory and law enforcement apparatus related to system capacity and non-issue making may allow for a better understanding and response to existing problems.

Conclusion

In the U.S., the lesson seems to be that corruption, both big and little, including offenses such as bribery, represent an ordinary event; after all, lobbyists engage in it constantly, albeit typically staying just inside the laws which they themselves have had a significant hand in formulating. That a code of conduct and strict supervision of the wrongdoing company can be a consequence of bribery is perhaps the best that can be expected, given the very tight link between corporate contributions and the survival of politicians in office.

Likewise, China’s three decades of unprecedented economic growth might not have occurred despite increasing levels of corruption and white-collar crime, but rather in conjunction with them. The growth targets set since the Ninth Five-Year Plan may be “incompatible with the enforcement of economic, health, and environmental regulations” [48]. If this is correct, then the necessity of reaching such growth targets without corresponding increases in regulatory capacity could only foster criminogenic environments where corruption and fraud would flourish undiscovered, and be relegated to non-issue status.

While China and the U.S. clearly have different legal, economic and political structures, factors common to the production of corruption exist in both countries. More detailed comparative studies may better disentangle the various relationships that encourage corrupt practices, and what mechanisms might best prevent them. For example, Shichor and Geis [58] have offered a research agenda to best understand bribery and extortion in the U.S. using taxonomies, case studies, interviews, and application of theoretical constructs, that could be applied to the comparative criminological analysis of corruption (as well as other forms of white-collar and corporate criminality).

Some have argued that the traditional Chinese reliance on the deeply rooted cultural phenomenon of guanxi, a socially acceptable form of gift-giving in return for consideration in later transactions, is a major factor in explaining the persistence and scope of corruption. The general acceptance many Chinese citizens have with the guanxi system might help explain why it took so long for public outrage to build up to the point where the leadership was forced to respond. Moreover, it could reasonably be argued that all cultures and societies produce a form of guanxi, and that China’s version is not different enough to explain the depth and severity of corruption in China today. More generally, local customs and mores may also fail to condemn some acts of corruption because an obviously harmed individual victim is not present. Thus, even when local law makes the criminality of conduct clear, local morals may all but excuse it.

Furthermore, the guanxi explanation may be waning in recent years. The use of gift-giving has spread so far that it has become the norm, and thus, not enough to curry favor any longer. Osburg [59, 60] notes that as the first generation of post-Mao nouveau riche has given rise to the second generation, and that this once rather permeable field of alliance building (guanxi) is becoming increasingly closed to the non-elite. In this way, the Chinese system is beginning to resemble the American one; small-scale bribery is being subsumed by large-scale donations which establish connections deeper than money can buy. If everyone is willing to bribe, then the connections themselves are what become valuable as reputation becomes currency.

Over a half century ago, one of the most prominent American sociologists and social deviance theorists, Edwin Lemert, made a seminal point regarding what he termed the “unstable equilibrium in the societal reaction to deviance” which relates well to such cultural explanations of corruption, and what some may consider to be widespread ambivalent attitudes of individuals towards it. He noted the “generalized culture conflict which affects such a large majority of the population that little consistent action is possible” ([61], p. 34). This pattern, he argued, is the case for at least two reasons. First, there may be disinterest or ignorance on the part of many persons who may not have the necessary skills or background to make informed judgments. Second, as Lemert suggests in regard to gambling, many persons may have engaged in some form of deviance themselves. This, Lemert suggests, may result in a situation “in which community tolerance is precariously stabilized just short of a critical point in the tolerance quotient at which collective action is taken” ([61], p. 34).

Lemert’s point suggests that community tolerance is central to the amount of corruption or any other potentially unwanted forms of behavior a society may experience more generally. Reducing that tolerance is a basic first step that must be taken. Changes in law and various enforcement campaigns designed to threaten the population into conformity through deterrence are but one mechanism by which to potentially change community tolerance levels regarding corruption. Another less costly, and perhaps more socially beneficial means, may be to change the popular long-standing narrative of corruption as a socially acceptable way of exchanging favors and enhancing the conduct and profits of business and politics. Narrative is a very powerful force in societies as it provides a manner in which stories are told and can thus influence more substantive changes in customs and cultures. Through a series of case studies in varying countries which included China, Black [62] has effectively argued that “corruption kills.” This narrative is very different than the one which is invoked by those who defend or actually engage in corruption and needs to be highlighted in the current discourse in anti-corruption campaigns and educational programs.

Finally, regarding further research, it needs to be recognized that enforcement of the laws against bribery and other corrupt practices are almost an exclusively reactive enterprise. Typically, a lead is brought to the attention of authorities who then investigate the case. The process is rather haphazard, and neither especially efficient of effective. It forces researchers to try to generate independent data that will be more responsive to sophisticated analytical questions. Little can be said about the “dark figure” of corruption cases that never come to light, and where known cases, as with white-collar and corporate crime more generally, represent but the tip of the iceberg. Agency enforcement practices may vary year-to year and country to country making accurate cross-national and in-country comparisons difficult if not impossible. Given common organizational and political exigencies, enforcement agencies choose to obtain a larger number of convictions against easier targets, usually small-time violators, rather than to expend a disproportionate amount of limited resources on larger cases.

Yet as most modern theorists would agree, proactive enforcement and creating systems of compliance provide more effective methods of controlling crime in general. Reactive models are less efficient for no other reason that the process itself is expensive and the damage has already been done. Responding to white-collar crimes can easily overburdens state resources, especially when dealing with large corporate violators. In China, the situation is different as corporate actors in most cases are also government actors in state-owned enterprises. Enforcing laws against such businesses is problematic in the usual sense of enforcement, as monetary fines against such entities may amount to simply moving money from one government account to another.

In sum, we return to Tonry [9] and his view that comparative work can “allow for a frame of reference to understand one’s own legal system.” The U.S. chose to reply to the Heavy Electric case, and ones similar to it, with internal Corporate Codes of Conduct that were marginally successful in preventing corruption paired with a largely ineffective and neutered federal response to most corporate crimes. The most likely explanations for this being the mixed effects of system capacity and non-issue making. This, coupled with a lot of legalistic corruption becoming normalistic corruption via SuperPACs and lobbying, means corruptions enforcement in the U.S. is at an all-time low.

As demonstrated above, China had largely addressed its issues of corruption not internally through corporate codes, but through government-led anti-corruption crackdowns that target large swathes of private industry, public office, and the mixed SOEs. This may have changed in the future due to an event in early 2018, however. In mid-March 2018, the Chinese parliament voted to create a new “National Supervision Commission” meant to deal specifically with corruption. This constitutionally-appointed group sits above the Chinese judiciary, meaning it can both arrest members of the court and operate in, perhaps dubious, extra-legal ways.

In announcing the creation of the NSC, the Party also released updated anti-corruption statistics:

Since Xi started the push in 2012, authorities have investigated more than 2.7 million officials and punished more than 1.5 million people. They include seven national-level leaders and two dozen high-ranking generals. Prosecutors have tried about 58,000 officials and sentenced two to death [63].

The new law also includes some suggested reforms; The anti-corruption campaign often extracted confessions through shuanggui, a system of detention outside the legal process in which suspects were held incommunicado, and sometimes tortured, in secret locations for months. The new law replaces shuanggui with a new system called liuzhi, which is supposed to be subject to stricter controls, promising detainees adequate food and rest, for example. Given the rather lax punishments in the U.S., these punishments for known violators are extreme in comparison. Efforts to increasing public access to government budgets and decision-making (i.e. transparency from the bottom-up) may be more successful at fighting graft. Top-down systems are “vulnerable to political currents and manipulation” [64] and can dampen public participation in the fight against corruption. As argued here, they are likely to have but limited deterrent utility in the absence of other more basic societal reforms.