How China is Fighting Corruption with Blockchain
Rampant corruption within China has encouraged President Xi Jinping to make a concerted effort to improve the situation since he first gained power. Originally focusing primarily on intragovernmental wrongdoings, he has since ramped up his anti-corruption policy to focus on all public servants, including those not officially members of the Chinese Communist Party. The bigger challenge however is stemming the flow of corruption outside of the government body, specifically those who manage to evade taxes within the private sector. This issue has been a thorn in Xi’s side since he took office, yet Blockchain technology has risen to become a genuine alternative in combatting the corrupt black market.
The issue’s roots are embedded in the Chinese ‘fapiao’ invoice system, a process with similarities to the way in which we use receipts in Australia. The Chinese Tax Bureau has the responsibility to issue fapiaos out to sellers, who then must provide them to customers for any goods or service purchased in the country. Citizens are required to provide fapiaos when reclaiming business expenses (similar to how we must provide receipts for the same process), while businesses, in accordance with the law, must record all of their transactions on a fapiao.
The system itself has been corrupted however, with replica fapiaos often being sold on the streets. These replicas are either very high quality fakes, or unused legitimate fapiaos being resold. Purchase of a street fapiao enables the buyer the ability to avoid paying taxes. The fake fapiao market is so widespread and common, that often buyers are not linked to any other sector of the black market. Similar to an average Australian citizen illegally downloading movies, the offence is common amongst Chinese citizens who are otherwise crime free. The ease of cheating taxes under the fapiao system is illustrated particularly well in George Ding’s 2015 New York Times article.
Blockchain technology has the capabilities to combat the widespread corruption in the Chinese system, keeping the buyer, seller, and even the Chinese government (who also has been found to embezzle money via the fake fapiao system) accountable. The Blockchain, given its decentralised nature, automatically keeps incorruptible records of every transaction made using its system. This makes it impossible to forge documents or refuse to record transactions. In 2018, the Shenzhen National Tax Bureau collaborated with Tencent, a major Chinese internet company that developed WeChat – China’s most popular messaging app. This collaboration was with the purpose of fighting tax evasion using the Blockchain server, with the potential to organise a payment scheme incorporating digital fapiaos using the WeChat application. If successful, recording transactions will be much quicker and easier than before, while also ruling out the possibility of corruption.
The general manager of Blockchain at Tencent was quoted by EEC, a local news platform, as saying that the new system creates “a frictionless link between consumer scenarios and tax services”. The new system is likely to continue to be rolled out, with Chinese corruption ideally ultimately being thwarted, all thanks to Blockchain technology. We at PLAAK, although not directly involved with Tencent or the Chinese government, are excited to see the technology we are so passionate about being used to combat corruption on a global stage and wish the involved parties the best of luck in the future.