CAPITALISM'S ACHILLES HEEL Dirty Money and How to

150 CAPITALISM’S ACHILLES HEEL
facility used internally by the bank to deal with discrepancies or pending
clearances. In due course, balances would be transferred to Guardecade’s Po
Sang bank account. From there, distributions were made to some 1,300
other bank accounts in Hong Kong and around the world, belonging to the
mainland criminals and embezzlers. 205
Authorities got wind of the operation and arrested 39 people, including
Lam, two other bank officers, 14 owners and employees of Guardecade, and
others. Detailed examination of records of only 35 days of activity revealed
that HK$3.2 billion (US$410 million) had been handled. And the operation
had been going on for more than five years!
Lam and five others were indicted, and in July 2004 Lam alone was convicted
of corruption and given a light sentence of one year in prison. Po
Sang in the meantime merged as a unit into the Bank of China (Hong
Kong). China’s relationship with Hong Kong—“one nation, two systems”—
well serves every criminal and embezzler on both sides of the borders.
There are hundreds of additional stories that can be told about assorted
perversities in the Chinese economy. Bruce Gilley writing in the Far Eastern
Economic Review summarized officially published figures as follows:
• Fifty percent of the contracts signed in China are fraudulent in some
respect.
• Economic corruption costs up to 17 percent of the country’s annual
GDP.
• Tax evasion accounts for 50 percent of taxes due in the private
economy.
• Counterfeit goods and substandard goods account for 40 percent of
all products made in China.
• Two-thirds of the biggest state firms produce false accounts. 206
He Qinglian, author of the book China’s Pitfall, says: “The emergence
of the ‘government-underworld alliance’ shows that progress toward a civil
society ruled by law is no more likely an outcome for our country than a descent
into a ‘mafia model.’ . . . The systemic corruption in which pursuit of
private interest undermines society’s legal system and public morality will inevitably
kill [China’s] reform before it matures. ... When you have develop-