Wade Shepard
Forbes
Oct. 24, 2016
China is a country that rose to the top on the back of vibrant markets with weak institutions, and the lack of enforced regulations led to a very dynamic business climate where deals were not hamstrung by red tape and money feverishly cycled between both the white and black spheres of the economy.
“The first step of development is always to build markets with weak institutions,” said Yuen Yuen Ang, the author of How China Escaped the Poverty Trap, a book which flipped the conventional wisdom about emerging markets on its head. “Meaning, it may look corrupt, it may look like you have the wrong types of practices and the wrong types of property rights, but it’s all about people making use of the existing institutions they have to stimulate market activities.”
Ang related how in the early 80s, when China was searching for ways to initially spark its economic renaissance, virtual armies of bureaucrats were directed to use their personal relationships to find investors for development-related projects.
“They make use of expenses that would strike us as kind of a corrupt system, because these bureaucrats are unleashed to go out to do development, look for investors, and they are given very powerful monetary incentives. . . There are explicit rules, sometimes even written down in documents, where as a bureaucrat you can collect five percent of the value of investments that you bring in, for example.” Continue reading “Why China Is Cannibalizing Its Own Economy To Combat Corruption”