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6 March 2014

China’s billionaire politicians quadruple their wealth

Despite their low official government salaries, at this week’s National People’s Congress annual meeting, there will be 86 renminbi billionaires and China’s richest politicians have quadrupled their wealth in the past eight years. But is there a right level to set politicians’ pay?

By Sophie McBain

On paper, Chinese politicians are pretty hard up compared to their US counterparts: China’s president, Xi Jinping, earns $19,000, compared to Barack Obama’s $400,000 salary, according to the International Business Times. And yet, while most Chinese politicians are at pains to hide their real incomes, the Financial Times reported that this week’s annual meeting of the National People’s Congress, the country’s legislature, will include 86 renminbi billionaires (equivalent to being worth over £97,725). According to the FT’s calculations, the country’s wealthiest politicians saw their wealth quadruple over the past eight years, while the richest 1000 people in the country saw their wealth triple – suggesting that most ordinary people in China are right that the best way to get rich is via political connections. The Chinese government’s high-profile anti-graft campaign doesn’t seem to be having much effect.

In 2012, it was estimated that the richest 70 members of China’s NPC have a larger combined wealth ($89.8bn in 2011) than that of all 535 members of the US congress, the president and his Cabinet and the nine Supreme Court judges. US politicians are not exactly poor, and according to World Bank estimates GDP per capita in the US is $51,749 compared to $6,091 in China. And, on paper at least, China’s billionaire politicians are communist officials. 

This raises some interesting questions about how much politicians ought to be paid. The most important defence against corruption is strong and well-enforced anti-graft laws combined with a much harder-to-define shift in social norms: in too many countries public officials believe themselves entitled to bribes and sweeteners and when corruption is pervasive, it becomes normal.

But there is an argument to be made that if you pay officials too little – and $19,000 to head up a country of over a billion is probably too little – this only encourages them to seek extra incomes elsewhere.

Some argue that high civil servant and politician salaries also promotes professionalism – Singapore is often held up as an example of a country that has managed to attract the brightest talent into government by offering salaries that compete with the top private-sector jobs. The counter-argument is that you want to attract people into politics who aren’t especially motivated by money.

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The Economist published interesting data comparing MPs salaries to GDP per capita across various countries. Nigeria comes up top, because MPs are paid over 116 times more than the country’s per capita GDP – suggesting that high official income alone isn’t a strong disincentive against corruption. Kenya and Ghana are next on the list, with a ratio of 76 and 30 respectively. In Britain, politicians are paid around 2.7 times GDP per capita, while in the US it’s almost quadruple.

But, if Nigerian, Kenyan and Ghanaian officials were paid, say just triple per capita GDP, they’d be earning $4,655, $2,829 and $4,815 respectively. Should we also consider levelling the playing field so that officials of low-income countries aren’t the paupers at the tables of international summits?

Setting the right level for official government salaries is a complex issue, but China is clearly getting it very wrong indeed.