Corruption in China (additional notes)

Further to my musings on how westerners tend to think the worst about China before they think well, after more conversations in Shanghai, Nanjing and Beijing with Chinese and non-Chinese friends alike, I have to admit that corruption in China does affect even the largest projects such as the Three Gorges Dam.

Someone explained to me how some of the decisions are made specifically with a view of enrichening local suppliers who in turn have to bribe their way to get projects and so on.

Almost all the other infrastructure projects in China are sub-standard in their construction not because the people are bad at it, but because the projects go to the wrong people who have the connections but not the skills. This is especially evident in the airport projects, where even a brand new airport like Shanghai Pudong, can be besetted by so many problems.

Is there an attempt to stamp out corruption? Well, in the case of China, corruption is augmented by nationalism and ethnic pride. I see this in the core banking replacement rojects amongst the big four banks.

China’s largest four banks have to desperately throw out their existing IT systems and replace them with current technology. But if you see how they make their decisions, the banks pick a little but from each of the different vendors to be nice to all of them, keep the most important aspects in-house (to keep the jobs of their 10,000 IT staff, and have projects that go on forever with completely untenable architectures.

These guys are mucking around with something very central to the running of a modern bank – and this after having raised billions of dollars in new capital from the international investors community.

The reasons they behave that way is because (1) thy are spolit for choice as every vendor and his dog queues up in front of their doors to sell or give away software (2) management consultants give them free in-house training, the powerpoint slides of which finds its way into internal strategy sessions (a little knowledge is a bad thing) (3) they really do want to create something Chinese even if some US company can give them something cost effective or worse, an Indian company can give them a solution that is 10 times cheaper. There is a gravy train of local system integrators and intermediaries and the bankers themselves who are on the take.

So, the inability to make sound decisions on their infrastructure needs is corporate China’s single largest falling. All of this will become evident in the next few years, when no matter what the Chinese banks do, they don’t seem to be able to compete on product or price. The problem will be because of the decisions they made a long time before. Bad decisions.

See my editorial on corruption.

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