2:37pm

Thu January 2, 2014
Asia

Lure Of China's Gray Economy Reaches Rich And Poor

Originally published on Thu January 2, 2014 6:27 pm

The income gap is growing dramatically in China and the rich are getting exponentially richer — the richest 10 percent of China's population are more than three times wealthier than the official figures.

Much of that undeclared wealth is what Chinese people call "gray income," including proceeds from corruption and other ethically "gray" areas of the economy.

Living on the margins of the "gray economy" are people like migrant laborer Wang Haichuan. He rents a room far below street level in a dark, former air-raid shelter inhabited by other migrants.

Wang receives a call from a customer and goes to meet her at a local supermarket. He buys a gift card off the woman, who wants to unload it for cash. He charges her 10 percent for his trouble.

In China, gift cards are often given as small bribes, or as bonuses that companies give their employees. Wang says he was recently ripped off by con men who sold him worthless cards. But he says he will continue buying and selling the cards to supplement his low-paying job at a gas station.

"I know there's risk in this work, but I've got to do it," he says stoically. "The way I see it, I'm not stealing or robbing, so I don't feel like I'm breaking the law."

'Gray Income' Stretching Into Middle Class

Wang Xiaolu, the deputy director of a nongovernmental organization called the National Economic Research Institute, conducted the survey on gray income. He says that while gray income includes the proceeds from corruption, a lot of it is "income whose origin is not clear, or whose legality cannot be confirmed."

His study found that the wealthier Chinese people are, the more gray income they earn as a proportion of the total.

A survey completed in 2012 by the China Society of Economic Reform estimates that gray income accounts for $1 trillion, or 12 percent of China's economy.

While the richest 20 percent in China rake in 70 percent of all gray income, Wang says that the trend is extending into China's middle class. And he says that could make the middle class less independent, and less enthusiastic about political reform.

"Those people with power have vested interests," he says. "They get benefits through this power, so they may oppose and obstruct further reforms."

Here's another example: a journalist in southern China, who asked that we only use his last name, Zhang. It's a common practice for journalists to receive small cash payments for attending press conferences. For that, Zhang says, he takes in about $175 a month — or about one-third his regular pay.

"My attitude toward gray income is that I oppose it, but I don't refuse it," he explains. "I oppose it because when I take someone's money, it puts pressure on me. I think: 'Can I write an article for the people that paid me? Can I fulfill their expectations?' "

Zhang says he doesn't refuse the payments because this is how the system works, and he doesn't think he can't change it all by himself.

"Realistically speaking, I've got to make a living," he says. "Secondly, if you want to work in this circle, and everyone else is taking the payments, but you don't, then it will be hard to get into this business."

Moral Dilemma That Is A Daily Fact Of Life

Farther up the food chain is a Beijing-based investigative reporter named Pang Jiaoming.

A few years ago, Pang reported on local officials who bribed anti-graft investigators to look the other way. Pang says those same officials then offered him 1 million yuan, or $165,000, not to publish his story. Pang says he was not tempted.

"I thought, 'I've got to publish this news.' Spending this kind of money is not enough to buy me," Pang says. "Even a bigger sum couldn't make me violate my journalistic ethics."

Pang adds that if a bribe is not enough to make journalists do what they're told, the threat of punishment can be even more persuasive.

But Beijing-based magazine editor Wu Si says the phenomenon of gray income does not necessarily increase the government's control over society. After all, he says, corruption eats away at institutions such as the press and the judiciary, and that can affect rulers' credibility.

"In the end, people will ask: 'What kind of contemporary morals are these? Who's presiding over all this?' " Wu says. "We know who is presiding. At this point, all this anger is directed at them. People say they're no good and have to be replaced."

In the end, Wu says, gray income is just a fact of daily life in China. Teachers take it to admit kids to schools. Doctors take it to operate on patients. Officials take it to award contracts.

Whether to take it, Wu says, is an ethical dilemma that everyone has to grapple with, and for many, it produces a feeling of insecurity or unease.

"The thing you're being asked to do, how do you feel about it, and the moral conflict it involves," Wu asks. "How serious is it? How intolerable is it? It's a very concrete sort of weighing of options that each individual must make."

Wu notes that the phenomenon of gray income has been around throughout China's history. Ancient texts record that a contemporary of Confucius complained about the problem of gray income 2,500 years ago.

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