Off the books and often taking the form of bribes or kickbacks, what the Chinese call “gray income” represents an increasing percentage of total individual income—particularly in certain professions.
According to the results of a team working under Wang Xiaolu, the deputy director of China’s National Economic Research Institute, in 2008 undisclosed income in China amounted to 9.26 trillion yuan (approximately US$ 1.4 trillion), which is approximately 30 percent of China’s GDP in 2008.
About 5.4 trillion yuan (approximately US$810 billion) is estimated to be gray income earned by the high income sector. This number changes dramatically the calculation of income inequality in China.
Previously, the top 10 percent of family incomes were thought to be 9 times greater than the bottom 10 percent. According to Wang’s data, that gap is in fact much wider, as the top 10 percent are said to earn 26 times that of the bottom 10 percent.
Aside from state officials at different levels, teachers, physicians, travel guides and funeral service directors have been listed as the top four job categories with the highest gray income.
Teachers and physicians have traditionally been regarded as exemplary professions in Chinese society. In today’s mainland China, however, esteem for these professions is eroding, with the amount of gray income in these two professions drawing significant attention.
Teaching Gray
Ms. Jing is a former primary school teacher from northeastern China’s Fushun City, Shenyang Province. Due to her lengthy experience as a head teacher, she is all too familiar with gray income and the teaching profession in China.
She said that for school principals and school cadres, gray income amounts to a very large sum of money.
For example, when a student with sub-standard qualifications wants to be admitted to a school, the student’s parents usually have to pay a school principal anywhere from a few thousand to tens of thousands of yuan for a bribe (one thousand yuan is approximately US$150).
When teachers want to be chosen for teaching awards, it is customary to bribe the principal.
Teachers wanting to use school classrooms to give private instruction or people from other schools wanting to use classrooms for training sessions are also occasions to bribe the principal, as well as when cafeteria, snackshop, and printing contracts need to be decided upon.
For teachers, holding private instruction sessions is their main source of gray income. Ms. Jing pointed out that such private lessons are very lucrative. A day’s gray income could amount to 2,000 yuan (Approximately US$300). Income for private lessons in the summer session can range from tens of thousands of yuan to hundreds of thousands of yuan. In contrast, the normal teacher’s monthly salary is only 1,000 to 2,000 yuan (Approximately US$150-300).
Teachers frequently “recommend” that students choose private instruction, or buy extra textbooks, for which teachers may receive a kickback.
According to a report (Aug. 3, 2009) by China’s state-run People’s Daily, teachers in central China’s Hengyang City, Hunan Province, can also receive a kickback, when they recommend that a student enroll in a private school for advanced classes or special instruction. In an attempt to assuage widespread public resentment over the practice, the local municipal education department had to issue a warning notice, stating that such income from private lessons or kickback would be dealt with as a bribery offense.
Si Ming is a lecturer from a foreign language university in southern China’s Guangzhou City. He said that university lecturers often have some personal projects or a second teaching position at an external training institution. This is done for extra income outside of working hours, which he thinks is justified, since the lecturers work for the extra income.
Other kinds of income for University faculty may be less justifiable.
According to Mr. Si, Master or Ph.D mentors in China earn a large sum of “gray” or even so-called “dark” income. Aside from graduate students bribing advisors to graduate early, applying for grants is also a “gray” area.
Mentors apply for grants from various agencies in amounts totaling hundreds of thousands to millions of yuan (one hundred thousand yuan is approximately US$15,000, one million yuan approximately US$150,000). Once the grants are obtained, usually only students do the work on the projects.
In reality, not every advisor receives a grant. Success has a lot to do with reputation and how many projects have been completed by the advisor in the past. Some professors have become famous for applying for grants, becoming professionals at it, perhaps even subcontracting their grant projects to others, while personally receiving recognition for the work.
Practicing Gray
Ordinary people have come to realize that they cannot afford to go to the hospital and often resist doing so. The more drugs that are prescribed and the more medical examinations that are performed, the greater the commission for the physicians. A minor disease may be exaggerated as a big deal, enabling doctors to obtain a greater commission.
One college graduate who was hired as a physician at Beihua University Hospital in northern China’s Jilin City revealed his gray income on the Internet, stating that bonuses and commission are his main source of income. The recent college graduate cited the following gray earnings:
“Bonus: 4,270 yuan (about US$650) last month. The bonus amount of each department is different, but mostly around $4,000 yuan.
“In the past, drug vendors would bring a payment each month. They would usually bring the money to the department office. The money is put in envelopes, which are then handed to each doctor. At present, with the campaign against bribery in the medical field, drug vendors dare not come here. Some nurses in each department are assigned to calculate the commission, and drug vendors transfer money to the chief doctors’ bank accounts.
“My total income last month: 1,746 yuan (about US$250) salary + 4,270 yuan (about US$650) bonus + 4,774 yuan (about US$700) commission equals 10,790 yuan (about US$1,600)—a moderate amount in our hospital. Director-level employees earn about 40,000 to 50,000 yuan (US$6,000–US$7,500) a month. Doctors in the cardiovascular diseases department (with expensive drugs and hence high commissions) earn 30,000 to 40,000 yuan (US$4,500–US$5,000) a month.”
Li Jie is a pharmacist with over 30 years of experience in a large hospital in Hubei Province. The claim made by the physician at Beihua University Hospital does not surprise her. She said it has been an open secret since the mid-90’s: receiving kickbacks and commissions is a normal practice in the medical field. From doctors and pharmacy managers to hospital presidents, everyone shares this understanding.
She related her own experience: the last Thursday of each month, medical representatives will call her to enquire about each department’s drug usage for the month. She then calculates the volume of drugs used, based on doctors’ prescriptions. Medical representatives use the number to calculate commissions for the doctors.
“Doctors from almost every department are involved in drug commission income, ranging from hundreds of yuan, to over ten thousand yuan, with a 20-50 percent commission rate.”
She used penicillin as an example. “Even if first generation penicillin can cure the illness, doctors would still recommend that patients use second generation penicillin: newer products are more expensive, hence doctors will receive a higher commission.
“Patients are thinking about their health and they believe in doctors, so generally they will not refuse, plus they are not informed enough to know the difference. But for those with low incomes, it is a burden.
“Patients feel seeing doctors is expensive. Some may take their prescriptions and go to the drug stores to buy medicine, where the price is relatively cheaper,” she said.
Another kind of gray income in the hospital is referred to as the “red envelope”—giving money directly to doctors. For an operation, a patient gives additional money directly to the surgeon, assisting physicians, anesthetists, and nurses. Such a practice is considered normal. Depending on the scale of the operation, red-envelope money can range from hundreds to thousands of yuan.
Ms. Li also mentioned that for their own personal health care needs and to help insure good care, hospital staff and relatives also give red envelopes to doctors and nurses: “The surgeon only knows money. It does not matter whether he/she knows the patient personally or not.”
In addition, high-profile surgeons have another source of gray income. Many physicians, under the pretext of consultation, carry out operations in other hospitals. Expert-level physicians work at different places. It is said that for a major surgery, city-level expert physicians have a base price of 2,000 yuan (about $300), while a provincial-level expert have a base price of 5,000 yuan (about $750).
According to the Chinese social-economist He Qinglian, the gray phenomena is the result of systematic and systemic corruption in China, where everyone in society is attempting to exchange the upper hand of power for personal financial benefits.
Dr. He explained that the reason Chinese society has devolved to such a point is because contemporary China has become a “Predatory State.”
“The practice of bribery pervades all levels, from top authorities to the middle and lower-level ranked officials; even the lowest ranking official is rent-seeking—seeking opportunities to make the best use of their authority,” Dr. He said.
Such corruption has helped fuel the decline of morality in Chinese society. The general public, having lost hope that issues can be turned around, has learned to tolerate the corruption, and in various instances, has even resorted to contributing to the corruption themselves, seeking in turn for a way to get something for nothing.
Read the original Chinese article.
