Corruption in the US and China – a comparative analysis

China’s corruption problem is well known and widely acknowledged by the government. In the last year, China arrested multiple senior military officials including 2 defence ministers and 9 generals in the PLA Rocket Force. Just this week, a senior political officer with a general’s rank in the PLA was arrested for corruption.

Also in the past week came news of corrupt behavior by the sitting US president Joe Biden, who gave an unconditional and blanket pardon to his son Hunter Biden for illegal gun ownership and drug possession. The language used in the pardon is so broadly that it is laughable – Hunter Biden was “pardoned for all crimes he committed or may have committed or may have taken part in between 2014 and 2024”.

Interestingly, Hunter Biden wasn’t even charged with his real crimes including using his father’s position for gains in Ukraine (Burisma board seat for a cool $1 million a year) and even acting as bagman for outright bribes on behalf of his father, the “big man”.

Another news from the US this week came from the president-elect Donald Trump who just named his in-law Charles Kushner to be the next US ambassador to France. Very interestingly, Trump pardoned Kushner when leaving office in 2020 for his crimes which carried a 14-year prison sentence. This real estate felon and convicted criminal will have to be addressed as “your excellency” by the French starting next January.

More on Trump, it is widely reported in the US media that Trump took a $100 million donation from Jewish gambling kingpin Sheldon Edelson, now dead, in his first presidential campaign in 2016. As a quid pro quo, Trump moved the US embassy from Tel Aviv to Jerusalem against international law. In this election cycle, it is reported Miriam Edelson, the widow, gave Trump another $100 million for backing Israel to annex Gaza and West Bank.

Another outright corruption involves the octogenarian former Speaker of the House, Nancy Pelosi, who has the dubious distinction of an EFT fund named after her (Nancy Pelosi Portfolio with ticker BK20883) for her prowess as an insider trader of US securities in the stock market. The Pelosi portfolio returned 65% in 2023, vastly outperforming the S&P500. According to Quiver Quantitative, Pelosi’s stock picks returned 775% vs. market index of 221% between 2014 and 2024. The “democracy” touting old witch is a super star stock picker, handily beating the most high-powered hedge fund managers on Wall Street.

So how should we understand and make sense of corruption in the world’s two major powers? Here is my take –

- Chinese corruption is retail, individual, punishable. Xi made the issue his No. 1 domestic policy priority when he took power in 2013 and hasn’t taken his foot off the brake to date.

Xi’s corruption drive took down hundreds of thousands of officials at national and local government level, including members of Politburo, defence ministers, foreign minister, railroad minister, provincial governors, mayors of major cities, bank CEOs, state owned company executives, military procurement officials, hospital administrators and countless others.

- Chinese corruption is about corrupt individuals. Corruption is illegal and heavily punishable. It may never go away as human defects won’t go away but it is risky for the corrupt individuals. Corrupt officials can steal lots of money, but they run a very real risk of being shamed and losing everything including literally their lives (the railroad minister was executed).

- On the other hand, US corruption is wholesale and institutionalized. Such corruption is legalized and therefore protected. Such corruption is not even recognized as prima facie corruption. This is done through legislations like Citizen United which legalizes money in politics by treating political donations as freedom of speech.

This is done through institutionalized evolving doors between Pentagon and military industrial complexes (e.g. Lloyd Austin and Raytheon, David Petraeus and KKR), between government offices and lobby firms (Tony Blinken and WestExec Advisors), between regulators and those they are supposed to regulate (e.g. Tim Geithner working as CEO of Warburg Pincus after his stint as Treasury Secretary to bail out Wall Street at the expense of the main street).

This is done through codified patronage systems like the presidential right to nominate campaign donors to posts like ambassadors.

As a result, American corruption is systemic, wholesale, and unreformable. It is large scale, open, risk free, and unaccountable. There is no shame involved. In the US, corruption carries very high rewards and a strange sort of “honor” (like having an EFT fund named after your insider trading prowess).