05.20.07
Corruption in the Barbershop
A few days ago a Chinese friend (let’s call him Xiao He) came into the barber shop for a hair wash. Xiao He is only in his mid-twenties, but was born into a rich, powerful family and now is a high ranking official in the Fuzhou city government. As his scalp was being massaged by Johnny, Xiao He mentioned to me (in English so nobody else could understand) “You know, Ben if I wanted to, I could show your boss my government ID badge and insist on not paying the 12 RMB for this hair wash. Your boss would not object, and I would be able to get a free wash.” This is not what Xiao He was planning on doing. Instead he was bringing it up to me to illustrate an example of the extent to which his power could go if he so chose.
The topic of corruption came up again yesterday as I was chatting with Jiang (the barber) outside of the shop. “You see that guy in there?” he said pointing to a man inside the shop. “He is 当官的.”
当官的 (dang1 guan1) refers to those leaders who are of a high enough position to use their authority to obtain discounts on everything from KTV rooms and prostitutes to haircuts and parking tickets.
“Whenever the 当官的 come in the shop, they get everything for free…haircuts, dyes, perms, nothing is charged.” Jiang continued. “Especially for the tax collection bureau. It works like this. If Mr. Zheng doesn’t give the tax collectors free haircuts, then when it is time to pay taxes, he will have to pay the full tax. However, if he gives them free haircuts and dyes, then they will give him a discount. Say he owes 1000 RMB in taxes. They will only make him pay 600 RMB. This is the only way to do business in China. If he were to pay the full tax, there is no chance his business could be successful.”
I had been aware this system applied to bars and brothels, but did not know that it trickles down to small businesses as well. Next time a 45 year old man wearing Giorgio Armani and driving a Buick comes in for a 500 RMB perm and doesn’t pay, I’ll know why.
FYI: I also asked Jiang if Mr. Zheng has to pay off the mob. To this he answered, “No, that’s only for the bars and brothels.”
Chris
said,
May 20, 2007 at 11:07 am
Wow, everything that you wanted to know about corruption but were afraid to ask. Thanks Ben!
So what is the total savings that your boss makes by giving the tax collectors free haircuts and getting a discount on his taxes? Factoring in whatever money he loses by giving the officials free services, and I am assuming here they get the full treatment, he must still come out quite a bit ahead right?
Benjamin Ross
said,
May 20, 2007 at 11:21 am
Chris-
I have not yet asked my boss directly about this, but I am sure he comes out pretty far ahead. Afterall, his only real expense is the chemicals for dyes. Labor is paid on a per job basis, but even if he still pays his employees for these free jobs, it probably doesn’t come out to much. For example, on a dye or perm (the most expensive services) the employee who does it gets paid only 6% of the total cost to the customer. The hairstyling industry in China is extremely competitive and as Jiang put it to me, if you pay all your taxes, you will not be able to turn a viable profit.
Xiao Zhu
said,
May 20, 2007 at 4:30 pm
I would have thought that factories in Fujian need to pay off the mob as well.
Barber Shop Antics | Sinosplice: Life in China
said,
May 21, 2007 at 12:18 am
[...] Corruption in the Barber Shop [...]
dezza
said,
May 21, 2007 at 8:40 am
oh this is a juicy topic. you forgot to add that the water department, police, health and safety dept, and a many other depts also get free stuff from businesses.
a hong kong tycoon once told reporters here that in order to start a hotel in mainland china one has to apply for 200 different permits with various departments.
as far as i’m concerned, in china, the government IS the mob.
James Chiang
said,
May 21, 2007 at 10:19 am
Quite agree with Dezza!
Alan
said,
May 21, 2007 at 10:38 pm
Corruption is nothing new in China. A local software engineer in Fuzhou told me that the municipal police department threatened to jail him after he had worked hard for 2 years to build up some software applications for Internet Cafes in Fuzhou. The reason? The police said his software applications downloaded lots of porn flicks, which is against the law. But according to this Chinese software engineer, some relative of the an official in the police department was in the same software business and wanted drive his competitor out of business. As a result, this Chinese software engineer had to pay a hefty fine and shut down his service to Internet Cafes. What a corrupt place that is.
Lawrence
said,
May 22, 2007 at 12:08 am
The current reality in Chinese society is that if one exactly follows the rules (pay the full tax, buy fire extinguishers and replace them every two years, offer social and medical insurance to the employees), he definitely is not able to make money whatever business he is running. Such situation forces those private employers to kiss government officials’ ass with small benefit to exchange for bigger ones.
Why everyone in China today so eager to be a civil servant which only pays $ 250 per month, rather than a barbershop owner, who might make about $ 500 a month? Simply because the former position is at the top (or high level at least) of the social food chain. It is unnecessary for him to kiss others’ ass, except for a higher level official. Even if he must do so occasionally, he can use his social and public resource with his privilege, instead of his own money.
The worst thing ever happens to the barbershop owner, who represents the whole worker class, is neither the endless working hours nor the poor income. They are at the bottom of the society, having to kiss someone else’s ass to protect themselves and there is no way for them to change it. That’s the most pathetic thing.
Jenn
said,
May 22, 2007 at 10:48 pm
From the research I’ve been doing a lot of new business creators are faced with two options – 1) try to run a business by the law or 2)pay off and/or give bribes to officials in various forms. This can include things as small as free haircuts, free meals, free drinks, so on. Up to outright bribes so that they do not have to apply for/buy licenses and permits or pay full tax fees.
Option #1 nearly always results in the business failing because the new business owners cannot afford all of the taxes and fees levied on them. Or they cannot afford all the various permits and licenses (or bribes to secure them). A lot of them can barely keep the business going even if they didn’t have to go through all of these extra processes.
The crazy part is that the government is very aware of the toll that the bureaucracy takes on successful business and even on rule of law in regards to business practices in China. Many of the documents that I have detailing these failed businesses are from a government department which profiled why women using one of their education programs succeeded or failed!
However, I have to wonder how many go under because they end up giving away too much to too many people.
Aley
said,
May 24, 2007 at 8:16 am
Great Blog Ben and thanks for a fantastic insight into this completely corrupt country, a country where the doctor has to be bribed to deliver your baby with some kind of standard and Ben’s writings shall be another message to everyone reading that this is why China will still be behind in another fifty years. Yes i’m well aware we have corruption and misuse of power in the west but it is less … how shall i put it , crude i think and arrogent.
Maybe because where i come from you just can’t do or say that without getting your head kicked in even if you are from the government, and as i’m sure you know goverment officials are not there to show off and abuse the power they may claim to have, a proper statesman would surely have err.. 正直的人 (moral integrity) ? and perhaps some kind of prowess in their government abilties, instead of lording it around his/her city with their big head and no brains.
Jeremy
said,
May 27, 2007 at 12:20 am
do u have this kinda thing in the west like in the united states? i knew some kinda similar things from hollywood movies and american series like prison break.but im not sure whether its true in american real society.
tony
said,
May 30, 2007 at 11:49 am
You know the old saying ” 当官的.” The word 官 has 2 mouths. “口口” For Corruption, Greed and Bribery. eating.. 吃 的.
Wen
said,
July 22, 2007 at 1:59 am
Great blog Ben! Now i’m convinced that you are having a true China experience as corruption conducted in the most direct, un-concealed ways is just part and parcel of daily life in China not even worthy of an eye’s blink (a Chinese saying or curious English? I’ll let you decide)
Perhaps, its worth mentioning that most of the 当官的 in China have descended from another 当官的 and if thats not the case, you may want to bribe a 当官的 as a referee. Also there are all sorts of bureaus/government offices in China, some are more ‘profitable’ than others but most offer cushy jobs that pay well by local standards. For example, my uncle in law works for 文明办 which translates directly into the Office of Civilised Behaviour – what do they actually do is a complete mystery. While the existence of a 文明办 may demonstrate lack of accountability of tax payer’s money and gross inefficiency, its actually considered a 清水衙门 meaning that it is a department where corruptive opportunities are rare. As a general rule, jobs at 清水衙门 departments are not as desirable as those that present their employees with lots of oppotunities to extract that extra penny. Other desirable governments jobs are with natural monopolies such as electricity / water suppliers.