Effects of Corruption on Social Inequality and Unrest in China’s Transitional Economy        

                      Xiaogang Deng                                    Yiping Wu

                (University of Massachusetts          Zhejiang University of Finance and Economics  China)

In the past three decades China has become the 2nd economic powerhouse in the world by its dual track economy system. The state has accumulated trillions of dollars of state assets controlled by the bureaucrats who often receive bribes, and abuse power for personal benefits.  China's dual track economic structure allows officials to utilize their powers to seek rent for substantial personal gains with little risk of being caught.   When private firms get patronage from public officials, they can easily avoid competition and strengthen their market dominance and become instantly rich.  The pervasiveness of corruption contributed to the widening gap between the super rich and the urban poor and social poor. The polarization of Chinese society has caused institutional crisis and wide spread social unrests. The paper will first examine the causes of and patterns of corruption by high level officials and local officials. Then it will assess social and economic consequences of corruption on society by using empirical findings from various sources.  It will focus on declining social cohesiveness, escalating social inequality and wide spread social unrests, especially those unrests related to land and housing compensation.   In the final section it will examine how the Chinese government has responded to the rising social unrests to ensure its survival but avoid any comprehensive political reform that can deal with the real underlying causes of social unrests.

The paper is prepared for “100 Years after the 1911 Chinese Revolution: Reflections and Forecasts”  at King’s College London held on June 17-19, 2011.The conference is organized bythe Association of Chinese Political Studies (ACPS)and King’s College of London, in UK.   The authors would like to express their appreciation for the ACPS’s support

Acknowledgement: The first author would like to express his appreciation for Dr. Lening Zhang of St. Francis University in US and Mr. Yuchuan Deng of John Hopkins University’s help.