Chapter 4 - Profit-Sharing, Chinese-Style

Summary

Chapter 4 explains the little-understood mechanisms of profit-sharing within China’s vast bureaucracy, which are frequently dismissed as “organizational corruption.” Drawing on extensive interviews and an original dataset, I show that in the Chinese bureaucracy, fringe compensation is pegged to financial performance, making it an unusual variant of profit-sharing in the public sector. Furthermore, I demonstrate that the golden goose maxim – restraint today yields long-term benefits – is not just a parable but a reality, thus distinguishing China’s bureaucracy from myopic, predatory states elsewhere. For the global development community, this chapter sheds light on how poor-and-weak countries can escape the vicious cycle of poverty and corruption through what I term “transitional administrative institutions.”