China D-

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China is placed in Band D-.  China’s highly centralised structures ensure a wealth of regulation in the defence sector, but the concentration of power itself creates corruption risk arising from the lack of checks and balances.

In political corruption risk, there is no dedicated Defence Committee, and the  National People’s Congress’s (NPC’s) formal ability to carry a veto is not evident in practice. With regard to the defence budget, only basic budget figures are disclosed. The intelligence services are a major source of secrecy and are recognised as highly politicised and party-centric. The People’s Liberation Army’s (PLA’s) commercial activities in natural resources, which were previously extensive, have declined, following an earlier anti-corruption drive, though the potential for control and misuse still exists. Meanwhile, China has ratified UNCAC and sought to harmonise Chinese law with its obligations. The Central Military Commission’s (CMC’s) work has led to increased transparency, although only a few of its specific implementation plans are known publicly.

In terms of finance corruption risk, the official budget, which is submitted by the CMC to the NPC, excludes many expenses which are only reported internally; the exact system is unknown. There is no provision for the scrutiny of information deemed to be classified by the National Administration for the Protection of State Secrets. The PLA budget could be, reportedly, double than what is known to be due to commercial activity of the military. On that matter, the details of such commerce are not transparent. Nonetheless, there are many rules in place regarding PLA asset management and disposal and, although transparency is still inadequate, measures to address corruption risks have been attempted.

In the area of personnel corruption risk, there is considerable leadership rhetoric on the matter of anti-corruption. There are also comprehensive penalties for corruption, though its effectiveness is potentially undermined by politicisation. Article 41 in the constitution provides for whistle-blower protection, but it is weakly enforced. Fairly strong payment systems (though they are not separate from the chain of command) along with well-established recruitment procedures are in place, but party loyalty is adjudged to be very influential. Additionally, facilitation payments have been a customary way of building political relationships and they continue to do so, in the absence of an independent mechanism to monitor and audit officers.

In operations corruption risk, ‘training’ for officials constitutes political and moral education rather than practical anti-corruption knowledge for application on the field. There is also no evidence of corruption monitors on operations, nor guidelines in contracting while in the field. While Private Military Companies (PMCs) rarely provide services for military operations, there is no relevant law for their regulation.

Procurement is controlled by the CMC structure with almost no scrutiny and little transparency; purchases of weapons are particularly closed, exposed sporadically through the media. While close supervision of suppliers is undertaken by the state, extending to stringent inspection requirements, there is no indication of related independent oversight. There is highly centralised reward of contracts; whether announcements from 2011 of increasing competition will be borne out is yet to be seen. While collusion is reported to be a problem with defence procurement, the existence of political influence on supplier selection is not supported by evidence. Personnel overseeing procurement are well-trained, though a lack of transparency in this area creates uncertainty. Finally, there is no evidence of a formal policy specific to the use of offset contracts, and transparency is inadequate.

 

Research finalised: April 2012

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