Holiday gifts take wraps off China graft challenge

SHANGHAI Sat Sep 29, 2012 10:18pm EDT

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SHANGHAI (Reuters) - The pre-holiday procession of Chinese entrepreneurs bearing gifts for the officials who hold sway over their businesses highlights the ubiquity of corruption in China and the difficulty the government will have in stamping it out.

For the past few weeks, business people across the country have been preoccupied not with their companies' operations, but with delivering thinly veiled bribes to the officials who grant them permits, sign off on the quality of their products or validate their tax bills.

The gift-giving ahead of the traditional Mid-Autumn Festival and National Day holiday, for which the country will virtually shut down for the week beginning on Monday, has created traffic jams and parking chaos outside many government agencies' offices, according to residents of several cities.

Bearing gift cards, premium liquor, luxury products and even airline tickets, entrepreneurs visit the officials they need to maintain good relations with or expect to receive favors from, perpetuating a culture of corruption about which foreign businesses frequently complain.

"It's the small potatoes that have the biggest appetites," said Li, a woman who runs a retail business in Jinan, capital of the eastern province of Shandong. She declined to give her full name.

KEEPING SCORE

Since early September, Li has been busy delivering gift cards, in particular to the district-level officials who sign off on the permits she needs to stay in business.

For this year's festival, she has had to hand out cards worth at least 5,000 yuan ($800) to each official she needs to keep happy. Before the Lunar New Year in the spring of each year, district officials expect double that, she said. Some also demand regular smaller gifts throughout the year.

"They all keep a record book of the reputations of gift-giving by people. If you're not generous enough or didn't perform well during a specific holiday, then word will spread fast," said Li.

Such widespread corruption is nothing new; it has long been recognized as a problem, and the government has taken steps to crack down, especially on officials who are caught red-handed.

But the prevalence of holiday bribe-taking on the eve of the early-November Communist Party Congress - at which a new generation of top leaders will be anointed and ahead of which Beijing is particularly sensitive about issues like corruption - underscores the degree to which it is entrenched.

While the downfall of Bo Xilai - a one-time rising political star who was expelled from the Party on Friday on allegations including taking huge bribes - has embarrassed the Party and government, business people say such behavior is just the tip of the iceberg, with corruption extending down to country townships and city districts.

WATCHES A NO-NO

Beijing's anti-corruption fight has had some impact.

With the Party's reputation singed by a series of corruption scandals and rising public ire over them, it has imposed a "frugal working style" rule on civil servants effective October 1, barring them from spending public money on banquets or fancy cars, and from accepting expensive gifts.

But rather than stamp out bribe-taking, the main result has been a shift in the types of gifts given, away from luxury watches and flashy handbags and towards things like gift cards that can be passed on with a handshake or left discreetly in an office, according to several business people.

Those sensitivities were heightened when an official in Shaanxi province was fired a week ago for discipline violations after internet users collated photos of him wearing a number of luxury watches on various occasions, prompting a flurry of criticism online.

"Watches are not popular now, they're too dangerous to wear," said a businessman named Zhuang, an entrepreneur in Nantong in the eastern province of Jiangsu.

To get around that, in addition to gift cards, many people give gifts together with their receipts, so officials can return the gift for cash, he said.

But there is no option but to keep on giving.

"If I don't make them happy, they will cause trouble for my company," Zhuang said.

($1 = 6.2849 yuan)

(Additional reporting by Shanghai Newsroom; Editing by Robert Birsel)

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