The interests of SOEs and the state are highly intertwined, which goes a long way towards explaining the rapid expansion of SOEs as a result of state aid. But how many corrupt practices lie behind this practice?

First, SOEs are too big to fail, and they can freely invade the political arena and exert great influence over the operation of the political power. This is similar to the influence exerted by Wall Street over the U.S. government.

Second, government officials can easily join SOEs and control the personnel appointment system and misappropriate company assets. Additionally, government officials at various levels can easily get their relatives or friends into SOEs. Many officials join SOEs after they retire from their government posts. SOEs are currently closed shops in China.

Third, corruption within SOEs cannot be ignored. Under the protection of political power and due to the lack of effective supervision, when SOEs are profitable, their bosses can allocate the profits as they wish. However, when they are not profitable, they will ask for money from the state.

China's problem is even more serious with regard to the budget system. Simply speaking, China does not have a basic budget system. As a result, China's budget gives only general figures, rather than specific details. It is hard to be certain where the money has gone.

The ruling party has realized that it is difficult to tackle the problem of corrupt officials without an effective budget system. However, despite certain efforts at local level to make the budget system more open, China still lacks an effective budget system.

In the event that income of officials is insufficient to live a decent life, China's so-called hidden rules will certainly prevail, leading, ultimately, to corruption and the abuse of power.

In many societies, corruption occurs not only in government but also in other areas of society. To fight this, some countries turn to their political elites, which means that such countries must first develop a clean and honest political elite and then the elite group will, in turn, help to build a clean and honest society. This practice is predicated on the moral qualities of the political elite group, such as a spirit of selfless devotion. But this is almost impossible to guarantee, and instead government officials are often highly paid in order to prevent corruption. This practice is very successful in Hong Kong and Singapore. But such salaries should be capped at a socially acceptable level.

Besides ensuring adequate salaries for government officials, it is important to ensure the transparency of officials' personal incomes. Once an official's consumption level noticeably exceeds his salary, it may indicate that the official is taking bribes. Therefore, the salaries of officials at various levels of government should be open to the public.

There is currently no system of income transparency for officials in China and, in addition, officials are not highly paid. In government branches and sectors connected with the government, such as hospitals, schools and other public sector organizations, an employee's basic salary only accounts for a small proportion of his or her actual income, most of which is grey income. China's officials receive low salaries but their grey income, and other benefits, are considerable. Such benefits include cars, free medical care, free old age insurance and travel expenses. From this perspective, ensuring that officials are well paid means that the actual expenditure will be similar. At a similar cost, one system can ensure clean government while the other leads to corruption. We must, then, decide which system we want.

The author is the Director of the East Asian Institute of the National University of Singapore.

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

(The article was written in Chinese and translated by Zhang Ming'ai)