Home > Uncategorized > How a High-Speed Rail Disaster Exposed China’s Corruption : The New Yorker

How a High-Speed Rail Disaster Exposed China’s Corruption : The New Yorker

October 17, 2012 Leave a comment Go to comments

How a High-Speed Rail Disaster Exposed China’s Corruption : The New Yorker.

When the crash occurred, Great Leap Liu was no longer running the Railway Ministry. In August, 2010, the National Audit Office reviewed the books of a big state-owned company and came upon a sixteen-million-dollar “commission” to an intermediary in return for contracts on the high-speed rail. The intermediary turned out to be a woman named Ding Shumiao, who, perhaps more than anyone else, embodied the runaway riches created by China’s railway boom. Ding was an illiterate egg farmer in rural Shanxi—five feet ten, with broad shoulders and a foghorn of a voice. In the nineteen-eighties, after Deng Xiaoping launched the country toward the free market, she collected eggs from neighbors to sell in the county seat. That was illegal without a permit. The eggs were confiscated, and years later she still talked of her embarrassment. In time, she came to run a small, thriving restaurant, where she gave away food to powerful customers and exaggerated her own success. “If she has one yuan, she’ll say she has ten,” one of Ding’s longtime colleagues told me. “It makes her look more influential, and bit by bit people began to think that they could benefit from their friendship with her.”

Ding’s restaurant became a favorite with coal bosses and officials, and soon she was involved in coal trucking. Then she was “flipping carriages,” as it’s known in the railway business: working her connections to get cheap access to coveted freight routes and, according to Wang, the investigator, reselling the rights “for ten times what she paid.” She became friendly with Great Leap Liu around 2003, and, with her ties to the railway business, she prospered. Her company, Broad Union, signed joint ventures and supplied the ministry with train wheels, sound barriers, and more. In two years, Broad Union’s assets grew tenfold, to the equivalent of six hundred and eighty million dollars in 2010, according to China’s Xinhua news service.

Ding’s given name, Shumiao, betrayed her rural roots, so she changed it to Yuxin, at the suggestion of her feng-shui adviser. She was easy to lampoon—Daft Mrs. Ding, people called her—but she had a genius for cultivating business relationships. A longtime colleague told me, “When I tried to teach her how to analyze the market, how to run the company, she said, ‘I don’t need to understand this.’ ” Caixinchronicled her audacious social ascent. To gain foreign contacts, she backed a club “for international diplomats,” which managed to attract a visit in 2010 by Britain’s former Prime Minister Tony Blair. Her lavish receptions drew members of the Politburo. She joined the lower house of the provincial legislature, and made so many charitable gifts that in 2010 she ranked No. 6 on the Forbes China list of philanthropists.

Ding was detained in January, 2011, suspected of taking kickbacks totalling sixty-seven million dollars, according to the Global Times. (The ministry also accused her of working her connections to get Liu’s brother transferred from jail to a hospital.)

Like many others, Ding knew something that government auditors uncovered only later: China’s most famous public-works project was an ecosystem almost perfectly hospitable to corruption—opaque, unsupervised, and overflowing with cash, especially after the government announced a stimulus to mitigate the effects of the 2008 global financial crisis. It boosted funding for railway projects to more than a hundred billion dollars in 2010. In some cases, the bidding period was truncated from five days to thirteen hours. In others, the bids were mere theatre, because construction had already begun. Cash was known to vanish: in one instance, seventy-eight million dollars that had been set aside to compensate people whose homes had been demolished to make way for railroad tracks disappeared. Middlemen expected cuts of between one and six per cent. “If a project is four and a half billion, the middleman is taking home two hundred million,” Wang said. “And, of course, nobody says a word.”

One of the most common rackets was illegal subcontracting. A single contract could be divvied up and sold for kickbacks, then sold again and again, until it reached the bottom of a food chain of labor, where the workers were cheap and unskilled. (The practice is hardly unique to the railways: in 2010, a rookie welder employed by an illegal subcontractor was working on a dormitory in Shanghai when he dropped his torch and set the building on fire; fifty-eight people died.) In November, 2011, a former cook with no engineering experience was found to be building a high-speed railway bridge using a crew of unskilled migrant laborers who substituted crushed stones for cement in the foundation. In railway circles, the practice of substituting cheap materials for real ones was common enough to rate its own expression:touliang huanzhu—robbing the beams to put in the pillars.

With so many kickbacks changing hands, it isn’t surprising that parts of the railway went wildly over budget. A station in Guangzhou slated to be built for three hundred and sixteen million dollars ended up costing seven times that. The ministry was so large that bureaucrats would create fictional departments and run up expenses for them. Procurement was a prime opportunity for graft. The ministry spent nearly three million dollars on a five-minute promotional video that went largely unseen. The video led investigators to the ministry’s deputy propaganda chief, a woman whose home contained a million and a half dollars in cash and the deeds to nine houses; her husband, who also worked for the ministry, was found to have a collection of gift cards—a discreet alternative to cash bribes. Other government agencies also had serious financial problems—out of fifty, auditors found problems with forty-nine—but the scale of plunder in the railway world was in a class by itself. Liao Ran, an Asia specialist at Transparency International, told the International Herald Tribune that China’s high-speed railway was shaping up to be “the biggest single financial scandal not just in China, but perhaps in the world.”

 

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