Article

Information Development
2016, Vol. 32(2) 127–141
The impact of information and ª The Author(s) 2014
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communication technology on public DOI: 10.1177/0266666914529293
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governance and corruption in China

Ming-Hsuan Lee and Mon-Chi Lio

National Sun Yat-sen University

Abstract
A large number of studies have examined the impact of information and communication technology on govern-
ance and corruption. However, few studies have explored the situation in China. While the Chinese government
is fully committed to the development of ICT, it has also invested a great amount of resources into controlling the
dissemination of information. Therefore, it is worth exploring whether ICT has had a positive impact on govern-
ance and corruption in China as found in other countries in previous studies. We conducted empirical tests
utilizing provincial data from 2004 to 2010 and a Dynamic Panel Data Model. The results showed that ICT had
a positive impact on the governance of provincial governments in China. ICT had two different effects on
corruption: ICT helped corruption cases come to light and ultimately helped reduce corruption.

Keywords
information and communication technology, governance, corruption, China

ICT has helped to expose cases of corruption and reduce government corruption
in China.

Introduction which helps governments to better adapt to the rap-

Information and communication technology (ICT) is
widely used in today’s society, including by govern-
ment sectors. Many studies have found that ICT
represents a new way to process and disseminate
information and has a positive impact on the perfor-
mance of governments, in terms of either governance
or efficiency. For example, Mahmood (2004)
observed that through the Internet, the databases of
various government departments can be linked. In
this way, the speed of information access and admin-
istrative procedures in South Asia was greatly accel-
erated and the quality of the interactions between the
government and the general public was improved.
Dwivedi et al. (2009) suggested that the role of
e-government has gone from simply providing infor-
mation to conducting transaction-level services with
more added value, thereby making government ser-
vices more convenient, efficient, and transparent.
Hwang and Jiang (2001) stated that the Internet has
a positive impact on information dissemination,
idly changing international economic situation and
enables governments to be more flexible and make
more comprehensive decisions.
In addition to the ‘tangible’ impacts of new technol-
ogies, some scholars have also focused on the ‘intangi-
ble’ impacts of ICT, such as the freedom of speech
produced by new information dissemination methods
(especially the Internet). These scholars believe that
public oversight functions derived from freedom of
speech will enhance the quality of governance.
Through the discussion platforms made possible by
new information technologies, such as bulletin board
systems (BBS), online forums, blogs, and micro-
blogs, the Internet and other information technologies
Corresponding author:
Ming-Hsuan Lee, Department of Political Economy, National Sun
Yat-sen University, 70 Lienhai Rd., Kaohsiung, 804, Taiwan.
Tel: 886-7-5252000 Ext. 5757.
Email: mhlee@mail.nsysu.edu.tw
128
can promote rational discussions about public issues
(Coleman, 1999; Ranerup, 2000; Walker and Akdeniz,
1998; Tjosvold, 2001; Brants and Haan, 2010). More-
over, the anonymous nature of the Internet allows dis-
cussions to be more free, diverse, and sincere (Graddol
and Swann, 1989). The convenience of the Internet and
its ability to transcend space and time could encourage
individuals who were previously unable or unwilling to
participate in politics to become more engaged. With
the participation of a greater number of individuals, the
quality of political discussion will improve (Grossman,
1995; Zuo, 2008).
In addition to the quality of governance, some stud-
ies have also examined the impact of ICT on govern-
ment corruption. Corruption has been attributed as the
consequence of a principal-agent problem between
the government and the public. The public (who are
the constituents of the country and represent the prin-
cipal) delegate state affairs to the government (agent),
but difficulty with regard to supervision results in the
abuse by the government of public resources for pri-
vate use (Klitgaard, 1988; Bardhan 1997; Bhatnagar,
2003; Mahmood, 2004; Lio et al., 2011). On the one
hand, governments hold discretionary power over
administrative affairs, such as approving investment
projects and issuing business licenses, and this power
can be used to seek improper economic rents, such as
through bribery. On the other hand, governments have
law enforcement power and can take advantage of the
selective enforcement of laws to obtain improper eco-
nomic rents. Therefore, scholars argue that if the
administrative decision-making process were to be
standardized, automated, and transparent, and law
enforcement processes were publicized, corruption
could be reduced (Brunetti and Weder, 2001). The
emergence of ICT is minimizing the degree of infor-
mation asymmetry between governments and the
public. Internet tenders, public bidding, online gov-
ernmental disclosures of information, and the capabil-
ity of the public to make inquiries regarding the
progress of a case can all make governance and law
enforcement more transparent and open, thus contri-
buting to clean governance and reduced corruption
(Heeks, 1998; Hwang and Jiang, 2001; Bhatnagar,
2003; Shim and Eom, 2008). In addition, the Internet
makes it easier to expose scandals. The oversight rep-
resented by public opinion, which is derived from
freedom of expression, may also reduce the potential
for official corruption (Coleman, 1999; Ranerup,
2000; Walker and Akdeniz, 1998; Tjosvold, 2001;
Shim and Eom, 2008).
Information Development 32(2)
Some empirical evidence has been provided on this
subject, such as Shim and Eom (2008) and Lio et al.
(2011). Both of these studies used cross-country data
to reach the conclusion that an increase in the number
of Internet users had a positive impact on reducing the
level of government corruption.
However, there is a lack of research focusing on
China in the existing literature. Our study was inter-
ested in whether the penetration of ICT has had an
impact on governance and corruption in China as
found in other countries in previous studies. Com-
pared to other countries, China is unique in that it has
always been very passive in disclosing information.
Due to the absence of the voter supervision mechan-
ism present in representative politics, the Chinese
government’s information disclosure behavior tends
to comply with and follow the wishes of central lead-
ers or decrees from higher government levels while
ignoring the information needs of the general public
(Guo and He, 2009). Meanwhile, to increase the con-
trol of the regime, the Chinese government has
adopted strict measures to control speech and used
various types of media to ensure uniform ideology
(Liang, 2002, 2003). However, the advent of the Inter-
net has revolutionized how information is transmitted.
The Internet allows users to bypass the central media
to disseminate information and have one-to-one, one-
to-many, or many-to-many conversations simultane-
ously or separately (Wang, 2003), which makes it
extremely difficult for the Chinese government to reg-
ulate speech. On the one hand, the Chinese govern-
ment has been promoting ICT projects and enjoying
the benefits to the public and private sectors provided
by the Internet. On the other hand, the Chinese gov-
ernment has also invested countless resources in
developing various types of Internet monitoring and
filtering software and has employed an Internet police
to monitor the activities of Internet users.
Since the launch of the Internet in China, the Internet
penetration rate has been increasing every year. There
are currently more than 500 million Internet users in
China. As argued in previous literature, Internet pene-
tration can have a potentially positive impact on govern-
ance and corruption. However, the development of the
Internet faces strict governmental restrictions in China.
Therefore, it is unclear whether the development of ICT
in China can lead to the supervisory power and positive
impact on governance and corruption that has been
found in studies on other countries.
As a result, this paper intends to examine the
impact of ICT on governance and corruption in China
Lee and Lio: The impact of information and communication technology on public governance and corruption in China
from an empirical aspect. We construct a dynamic
panel dataset using the province-level data of China
between 2004 and 2010 available from the China
Statistical Yearbook and the Procuratorial Yearbook
of China. We then follow Tang and Tang (2004a,
2004b), Cole et al. (2009) and Dong and Torgler
(2012) to construct the scores to measure the per-
formance of governance and the level of corruption
of provincial governments, and empirically test the
impact of ICT on the scores. In order to control for
the possible endogeneity problem stemming from
reverse causality and simultaneity/selection, we adopt
a Dynamic Panel Data Model with system GMM
(Generalized Method of Moments) estimators as our
estimation strategy. The findings of this paper will
add to the existing literature by providing empirical
evidence from one more country regarding the impact of
ICT on governance and corruption, and also improve
our knowledge regarding the factors that influence the
performance of the Chinese government.
The development of information and
communication technology in China
The development of the Internet in China began in
1983 and was initially geared toward use in academic
research. In 1993, the Chinese government con-
structed the ‘‘three golden projects’’ of national infor-
mation infrastructure: the Golden Bridge Project
aimed to construct a modern information infrastruc-
ture; the Golden Gate Project promoted e-customs
declaration; and the Golden Card Project constructed
various card-based application systems with a major
focus on electronic currency, and began building a
national backbone for high-speed Internet. In 1996,
the construction of the national Internet backbone for
a public computer network was complete, represent-
ing China’s full entry into the Internet era. With the
penetration of computers and the Internet, Internet
users in China gradually shifted from academic
researchers to the general public, and the purpose of
Internet use also gradually shifted from academic
research to commercial applications (Ni, 2007).
The construction of e-government in China began
in around 1990. In the mid-1980s, various govern-
ment departments began trying to take advantage of
computer technology to assist in the implementation
of some of the most basic administrative activities,
such as the processing of files. By the 1990s, with the
implementation of the ‘‘three golden projects’’ and
support from the World Bank, e-government started
129
to take shape in China. The Chinese government
determined that the government would go online in
1999 and launched the ‘Government Online’ cam-
paign. Over 3,000 databases were set up in 6 months,
more than 1,560 websites were launched, and conve-
nience services such as online information inquiries
and online offices were established (Yang, 2005). For
example, the Supreme People’s Procuratorate of
China included the informational handling of cases
in its working principles and planned to speed up the
integration of information technology. The purpose
is to improve the capability of uncovering, investi-
gating and convicting corruption cases. In addition,
the Prosecutor telephone hotlines and Internet report
centers have been launched; and interrogation mon-
itoring systems and multimedia systems for evi-
dence in litigation have also been implemented
(The Work Report of the Supreme People’s Procur-
atorate, 2003).
The Chinese government is actively engaged in
Internet development mainly because the Internet is
an important tool for political and economic develop-
ment. For example, during the develop-the-west strat-
egy in China in 2000, one specific measure to reduce
poverty was to provide schools with Internet connec-
tions and computer equipment, turning schools into
e-commerce centers so that villagers could take
advantage of the convenience of e-commerce and the
assistance of the school teachers to sell agricultural
products online. Previously, villagers had been unable
to sell their products and did not have access to mar-
ket information (Wen, 2003). This initiative helped
many poor villagers and quickly improved their eco-
nomic conditions, thereby becoming the new hope
of the Chinese government as a method to bridge the
gap between rich and poor.
However, the dissemination of information on the
Internet that can completely bypass the central media
and enable direct communication between individu-
als and groups has become an unprecedented
challenge for the Chinese government. Leading
Chinese authorities have always believed that the
various types of media (newspapers, magazines,
radio, TV, etc.) serve as political tools for the gov-
ernment. The government firmly believes that
aggressive and strict control and guidance of public
opinion are the only ways to maintain the Chinese
regime (He, 1998; Kou, 2001). The development of
the Internet has subverted these powers and the
‘decentralized’ nature of the Internet has exerted tre-
mendous pressure on the Chinese government.
130
To continue to control public opinion, the Chinese
government has invested a large amount of resources
and manpower into controlling information on the
Internet. Adopted measures include passive regula-
tory control. Since 1994, the Chinese government has
promulgated more than 60 stipulations to regulate the
development of the Internet. In terms of the time
interval, speed, and number of stipulations, there is
no other country like China in the world (Liang,
2004). Passive measures also include comprehensive
attempts to block comments deemed to be improper
by authorities, such as through the development of
sophisticated Internet monitoring software. In addi-
tion, the Chinese government has set up a huge com-
puter monitoring team that includes cyber-police
(full-time personnel) and Internet picketers (sponta-
neous Internet users, also known as ‘‘old aunts’’) to
monitor and delete sensitive comments. Furthermore,
sensitive domestic and overseas websites are blocked,
including YouTube and Facebook.1 In terms of
aggressive measures, the Chinese government has
been actively investing in or subsidizing the establish-
ment of official online media to release officially
recognized news. Moreover, Internet commentators
are being recruited publicly or semi-publicly as ordi-
nary Internet users to guide public opinion in the
‘‘correct direction’’ and to reflect the ‘‘universal prin-
ciples and policies of the party and the government’’
to dominate Internet news, propaganda, and public
opinion.
By the end of 2012, according to the China Internet
survey data released by the China Internet Informa-
tion Center, the number of Internet users in China had
reached 564 million. According to the survey, in addi-
tion to search engines, email, communications func-
tions, and entertainment, the main purpose for using
the Internet also includes reading the news, blogging,
and participating in forum discussions. By the end of
2011, the number of Internet news users in China had
reached 360 million. As an important platform of
user-generated content, the number of bloggers in
China had reached 370 million by the end of 2012 and
the number of BBS forum users had reached 150 mil-
lion. The rapid growth of microblog (weibo) users was
particularly striking; by the second half of 2011, the
number of microblog users had soared to 249 million,
representing a growth rate of more than 296 percent in
just 6 months. By the end of 2012, the number of
microblog users had reached 300 million. These data
show that in China, the Internet has become an impor-
tant mean to exchange ideas and opinions.
Information Development 32(2)
Under all the controls and limitations, did the devel-
opment of ICT still have an impact on governance per-
formance and corruption of the Chinese government,
as found in other countries in previous studies? Moti-
vated by this question, this paper intends to empiri-
cally examine the impact of ICT on governance
and corruption in China. The findings of this paper
can thus add to the existing literature by providing
empirical evidence from one more country regarding
the impact of ICT and also improve our knowledge
regarding the factors that may influence the perfor-
mance of a government.
Estimation methodologies
Governance
We estimate the impact of ICT development on gov-
ernment performance and corruption in China. Most
studies measure government performance using the
weighted average of a variety of soft and hard indica-
tors. Hard indicators refer to economic or social indi-
cators from the Statistical Yearbook or various reports
and measure the objective ‘results’ of governance,
whereas soft indicators are impression scores
obtained from executive surveys of managers who
interact with the government constantly and can thus
provide subjective measures. However, given the lack
of such soft indicator data for the provincial govern-
ments of China, we only use hard indicators to mea-
sure governance quality. To measure the governance
performance of provincial governments, we follow
the indicators and formulas recommended by Tang
and Tang (2004a, 2004b) and Cole et al. (2009), and
choose 38 indicators from the China Statistical Year-
book from 2004 to 2010 to compute the scores for
governance. Among those, 19 indicators are associ-
ated with the government’s public service, 7 indica-
tors are associated with the government provision of
public goods, 5 indicators are associated with govern-
ment size, and 7 indicators are associated with the
economic welfare of residents (detailed indicators are
listed in Table 1)2.
We first standardize the indicators and obtain their
standard deviations as follows:
STDi;j;t ¼ ðXi;j;t  Xj Þ=Sj ,
where i represents the province, j represents the indi-
vidual indicator, and t represents the year. STD repre-
sents the standard value of indicator j for province i in
year t. Xi, j, t represents the value of indicator j for
Lee and Lio: The impact of information and communication technology on public governance and corruption in China 131

Table 1. Government Efficiency Indexes.

Factors Sub-Factors Indexes
Government Education, Science 1. Per Capita Government Budgetary Expenditures for
Public Services and Technology, Scientific and Technology Promotion (yuan)
Culture, and Public 2. Rate of Products with Excellent Quality (%)
Health Services 3. Three Types of Patent (Inventions, Utility Models and
Designs) Applications Granted (item/100,000 persons)
4. Per Capita Transaction value in Technical Market (yuan)
5. Student-Teacher Ratio of Primary Schools
6. Student-Teacher Ratio of Secondary Schools
7. Illiterate and Semi-illiterate Rate (%)
8. The Share of Government Appropriation for Education
in GDP (%)
9. Institutions for Culture and Art (unit/100,000 persons)
10. Number of Magazines and Newspapers Published (kind)
11. Beds in Health Institutions (unit/100,000 persons)
12. Employed Persons in Health Institutions (person/ 100,000
persons)
Public Security 13. Three Accidents (Traffic Accidents, Fires and Pollution
Services Accidents) (case/100,000 persons)
14. Losses in Three Accidents (yuan)
15. Number of criminal cases per 10,000 persons
Meteorological 16. Agro-Meteorological Services Stations (unit/100,000
Services persons)
17. Earthquake Monitoring Stations (unit/100,000 persons)
Social Security 18. Number of Careers Service at the end of year (unit/
Services 100,000 persons)
19. Number of Urban Community Welfare Facilities
(unit/100,000 persons)
Government Social Infrastructure 1. Total Investment in Fixed Assets (100 million yuan)
Public Goods 2. Ratio of Area of Nature Reserves and Provincial
Area (%)
City Infrastructure 3. Rate of Access to Gas (%)
4. Numbers Public Transportation Vehicles per 10,000
persons in Cities (unit)
5. Per Capita Area of Paved Roads (sq.m)
6. Per Capita Green Area (sq.m)
7. Number of Public Toilets per 10 000 persons (unit)
Government 1. Ratio of Staff and Workers in Government Agencies and
Scale Total Population (person/10,000 persons)
2. Ratio of Staff and Workers in Government Agencies and Total
Employed Persons (%)
3. Ratio of Government Consumption and Final Consumption (%)
4. Ratio of Government Expenditures and GDP (%)
5. The Share of Penalty and Confiscatory Income and Income
from Administrative Fees in Total Government Revenue
National 1. Per Capita Annual Net Income of Rural Households
Welfare (yuan)
2. Per Capita Annual Disposable Income of Urban
Households (yuan)
3. Engle Coefficient of Rural Households (%)
4. Engle Coefficient of Urban Households (%)
5. CPI (preceding year ¼ 100)
6. GDP per capita (yuan)
7. Ratio of Expenditure on Policy-related Subsidies and
Government Expenditure (%)
Note: The indexes in italic are inverse criteria.
132
province i in year t, and Xj is the average for all prov-
inces and across all years. Sj is the standard deviation
for all provinces across all years. Since the indicators
are standardized using the mean and standard devia-
tion of all samples (all provinces and all years), the
obtained standardized values could be used for
inter-provincial and inter-year comparisons. For
reverse indicators, such as the incidence rate of three
governancei;t ¼ 0:4  MeanfSTDi;j;t jFor j that belongs to the category 00 public services00 g
þ 0:3  MeanfSTDi;j;t jFor j that belongs to the category 00 public goods00 g
þ 0:2  MeanfSTDi;j;t jFor j that belongs to the category 00 govermentsize00 g
þ 0:1  MeanfSTDi;j;t jFor j that belongs to the category 00 national welfare00 g
This weight is allocated according to the number
of indicators in each category and the correlation
between the indicators in each category and gov-
ernment efficiency (Tang and Tang, 2004a,
2004b; Cole et al., 2009.) The governance perfor-
mance scores calculated through this approach
include indicators of comprehensive economic and
social development. What they indicate is very
similar to the Human Development Index (HDI)
used by the United Nations to measure the living
standards of countries. Therefore, our scores of
governance are like the transcript of the govern-
ment and reflected the outcomes of government
performance. In other words, these scores evaluate
government performance objectively.3
Table 2 shows a comparison of the governance
performance scores of provincial governments in
2004 and 2010. Generally, the scores of the coastal
provinces were higher and their progress year-over-
year was also greater. For example, Jiangsu, Zhe-
jiang, and Shandong exhibited substantial improve-
ment in governance performance. Coastal
provinces were richer, suggesting that the govern-
ments of richer provinces had achieved significant
governance performance improvements and that res-
idents of these provinces enjoyed a higher standard
of living. These results are consistent with the results
of international studies that state that GDP and the
HDI are highly positively correlated. It is worth
mentioning that several inland provinces, such as
Shaanxi, Ningxia, and Xinjiang, although exhibiting
middle-range governance performance scores and
rankings, have shown significant improvement in the
period from 2004 to 2010.
Information Development 32(2)
incidents and government size, we multiply the indi-
cators by -1. Therefore, for all STD values, the larger
the value, the better the governance performance
measured by the indicator.
Next, all indicators are aggregated according
to their weights in different categories to obtain the
governance performance scores of province i in
year t:
Corruption
We also use hard indicators to measure the level of
corruption in provincial governments. Two prior
attempts have been made to measure the level of cor-
ruption of provincial governments in China, including
Cole et al. (2007), which studies the impact of corrup-
tion on location choice of foreign direct investment in
China, and Dong and Torgler (2012), which studies
the causes of corruption of provincial governments
in China. They both use ‘‘the number of registered
cases on corruption under direct investigation by
procurator’s offices’’ to measure the level of corrup-
tion of provincial governments. However, Cole et al.
(2007) interpret the number as anti-corruption effort,
while Dong and Torgler (2012) interpret the number
simply as the level of corruption and argue that more
cases under investigation implies a more serious
level of corruption in a province. We follow the
interpretation of Dong and Torgler (2012) and use
‘‘the number of registered cases on corruption under
direct investigation by procurator’s offices per
capita’’ to measure the level of corruption of provin-
cial governments.
First, we calculate the statistics for ‘‘the number
of registered cases under direct investigation by
procurator’s offices per capita’’ for each province
in each year. Registered cases include job-related
crimes, such as corruption, bribery, misappropriation
of public funds, collective illegal possession of pub-
lic funds, unstated source of large property, abuse of
power, dereliction of duty and fraudulent practices.
These variables are subsequently standardized (sub-
tracting the average of all samples divided by the
Lee and Lio: The impact of information and communication technology on public governance and corruption in China 133

Table 2. Governance of Provincial Governments in China.

Governance Ranking

2004 2010 Change 2004 2010 Change

Beijing 0.594 1.021 0.427 2 1 improve

Tianjin 0.252 0.630 0.378 3 5 decline
Hebei 0.056 0.311 0.367 10 15 decline
Shanxi 0.165 0.341 0.505 16 13 improve
Inner Mongolia 0.010 0.400 0.390 8 9 decline
Liaoning 0.064 0.492 0.428 7 8 decline
Jilin 0.010 0.399 0.410 9 10 decline
Heilongjiang 0.089 0.330 0.241 6 14 decline
Shanghai 0.594 1.002 0.409 1 2 decline
Jiangsu 0.092 0.765 0.674 5 4 improve
Zhejiang 0.151 0.827 0.675 4 3 improve
Anhui 0.288 0.158 0.446 22 22 same
Fujian 0.107 0.357 0.464 14 11 improve
Jiangxi 0.309 0.082 0.392 23 24 decline
Shandong 0.088 0.622 0.710 12 6 improve
Henan 0.271 0.187 0.458 20 20 same
Hubei 0.202 0.202 0.404 19 18 improve
Hunan 0.365 0.113 0.478 27 23 improve
Guangdong 0.097 0.507 0.605 13 7 improve
Guangxi 0.547 0.005 0.542 30 27 improve
Hainan 0.353 0.062 0.291 26 29 decline
Chongqing 0.432 0.023 0.409 28 28 same
Sichuan 0.191 0.172 0.362 18 21 decline
Guizhou 0.505 0.191 0.315 29 30 decline
Yunnan 0.333 0.039 0.372 25 25 same
Xizang (No data) (No data) – (No data) (No data) –
Shaanxi 0.073 0.304 0.377 11 16 decline
Gansu 0.169 0.000 0.169 17 26 decline
Qinghai 0.152 0.194 0.347 15 19 decline
Ningxia 0.319 0.350 0.668 24 12 improve
Xinjiang 0.273 0.239 0.512 21 17 improve
Note: A larger value indicates a better governance.

standard deviation of all samples) to measure the

corruption levels of provincial governments. The
obtained corruption scores for each province in each
year could be used for inter-provincial and inter-year
comparisons, and the greater their value, the more
serious the corruption.
Table 3 reports corruption in each province. In
2004–2010, corruption improved in some provinces
and worsened in others. In 2004, corruption was
more serious in provinces such as Tianjin, Yunnan,
Jiangxi, Liaoning, and Hebei, whereas in 2010,
corruption was more serious in provinces such as
Shaanxi, Heilongjiang, Henan, and Fujian. Overall,
we did not observe a particular geographic pattern
or trend of change.
Estimation strategy: the Dynamic Panel
Data model
The empirical method typically adopted by scholars
when working with panel data is the fixed effect
model. However, using a fixed effect model to esti-
mate the impact of ICT on governance and corruption
may give rise to the problem of reverse causality.
Governments that deliver good governance usually
respond better to the needs of people and invest more
in infrastructures that facilitate social and economic
development, such as ICT infrastructures. Govern-
ments that are less corrupt may not fear the power
of the Internet as much and thus allow faster ICT
penetration. As a result, the feedback effect from this
134 Information Development 32(2)

Table 3. Corruption of Provincial Governments in China.

corruption Ranking

2004 2010 Change 2004 2010 Change

Beijing 0.72 1.24 0.52 23 26 improve

Tianjin 2.49 0.19 2.31 1 6 improve
Hebei 0.85 1.97 2.83 5 28 improve
Shanxi 0.66 1.09 0.43 6 1 worsen
Inner Mongolia 0.83 0.38 0.45 24 13 worsen
Liaoning 1.82 (No data) – 4 (No data) –
Jilin 1.99 0.02 2.01 30 7 worsen
Heilongjiang 1.09 0.68 1.77 28 2 worsen
Shanghai 0.85 -1.22 0.37 25 25 same
Jiangsu 0.08 -1.29 1.37 13 27 improve
Zhejiang 0.02 0.13 0.15 14 11 worsen
Anhui 0.63 -1.03 0.40 21 21 same
Fujian 0.50 0.22 0.28 7 4 worsen
Jiangxi 2.03 0.89 -2.92 3 20 improve
Shandong 0.11 0.87 0.98 12 18 improve
Henan 0.41 0.22 0.19 9 3 worsen
Hubei 0.16 0.12 0.04 16 10 worsen
Hunan 0.95 0.47 0.47 26 14 worsen
Guangdong 1.06 1.21 0.15 27 24 worsen
Guangxi 0.17 0.88 0.71 17 19 improve
Hainan 0.69 0.64 0.05 22 15 worsen
Chongqing 0.58 1.16 0.58 19 23 improve
Sichuan 0.59 1.16 0.57 20 22 improve
Guizhou 0.01 (No data) – 15 (No data) –
Yunnan 2.20 0.13 2.33 2 12 improve
Xizang (No data) (No data) – (No data) (No data) –
Shaanxi 0.23 0.09 0.32 11 8 worsen
Gansu 1.16 0.85 0.31 29 17 worsen
Qinghai 0.47 0.71 1.18 8 16 improve
Ningxia 0.47 0.20 0.66 18 5 worsen
Xinjiang 0.41 0.11 0.51 10 9 worsen
Note: A larger value indicates a more serious level of corruption.

reverse causality may cause the estimation results to
be upward biased. In addition, we could not rule out
the possibility that there may be the problem of simul-
taneity/selection. Some unobserved characteristics of
the countries, such as the tastes of governments, might
affect both governance and ICT development. For
example, countries with autocratic political systems
or countries that are experiencing political instabil-
ities may prioritize personal interests over public
interests, leading to poor governance (or more corrup-
tion) and deficient constructions of social and eco-
nomic infrastructures, such as low ICT penetration.
Consequently, the coefficient of ICT variables does
not necessarily indicate a causal impact of ICT on
governance and corruption.
To account for the potential endogeneity problem
caused by reverse causality and simultaneity/selec-
tion, we employ the Dynamic Panel Data Model to
estimate the impact of ICT. The estimating equation
which includes the lagged dependent variable as an
explanatory variable is given by
governanceit ¼ b0 þ b1 governancei;t1
(1)
þ b2 icti;t þ dXi;t þ eit
where i denotes for countries and t denotes for years
and ict refers to the progress of ICT penetration. We
use four different variables to measure the progress
of ICT development. Three of the variables are mea-
suring the progress of individual technologies: inter-
net, the percentage of Internet users; mobile, the
Lee and Lio: The impact of information and communication technology on public governance and corruption in China 135

Table 4. Variable Definitions and Descriptive Statistics.

Variable Definition Mean Std. Err. Min. Max.

governance The score of governance 0.00 0.32 -0.55 1.02

corruption The score of corruption 0.00 0.84 -1.99 2.49
internet The percentage of Internet users 0.16 0.15 0.00 0.73
mobile The percentage of mobile phone subscribing households 0.79 0.49 0.02 2.38
telephone The percentage of telephone subscribing households 1.28 0.89 0.03 3.92
ictfactor The common factor score of internet, mobile, and telephone with the -8.08e-11 0.83 -0.86 2.85
factor analysis
budget Budget deficit as a percentage of GDP 0.09 0.06 0.01 0.30
fund_state Sources of Funds for Investment in Fixed Assets—State Budget (%) 4.85 3.45 0.38 16.20
popdensity Population density (persons/km2) 407.13 519.87 7.41 2997.56
gdppc Per-capita GDP 18356.76 13082.54 3603 73124
edu Secondary Education Enrollment Rate 0.98 0.04 0.77 1
industrial The size of the industrial sector (GDP of the industrial sector/ 0.48 0.08 0.25 0.61
GDP)
service The size of the service sector (GDP of the service sector/GDP) 0.39 0.07 0.29 0.73
anticorrupt Per capita budgetary expenditure on police, procuratorate, court, 233.56 168.53 58.64 982.61
and judiciary

percentage of mobile phone subscribing households;
and telephone, the percentage of fixed telephone sub-
scribing households. The fourth variable measures the
overall development of ICT: ictfactor, a common fac-
tor score extracting from the previous three variables
using factor analysis. Table 4 provides definitions and
descriptive statistics of the variables.
The inclusion of the lagged dependent variable
accounts for the possible persistence of government
performance in a country. The performance of a gov-
ernment may involve a learning process. Some tradi-
tions or long-lasting habits may not be changed
easily. As a result, the governance of a government
in time t may depend on its governance in time t-1.
To address this issue, we follow Lio et al. (2011) and
work with a dynamic, lagged dependent econometric
model. We choose the system GMM estimator which
is proposed by Holtz-Eakin et al. (1988) and developed
by Arellano and Bond (1991) to estimate equation (1).
The Dynamic Panel Data model with the system GMM
estimator is able to cope with the endogeneity problem
by using the dynamic properties of the data to generate
proper instrumental variables (Lio et al., 2011). More
specifically, the system GMM estimator employs the
lagged values of the endogenous regressors (in our case
ICT variables) as instruments to solve the problem of
endogeneity. Following the suggestions of Roodman
(2009), we use their second lags as instruments for ICT
variables; for other control variables, we use their first
and second lags as instruments.
The system GMM estimator is also able to account
for two econometric problems that may arise from
estimating equation (1). First, the presence of the
lagged dependent variable governancet1 in the
regressor gives rise to autocorrelation. In the system
GMM, the lagged dependent variable is instrumented
with its past values to solve the problem of autocorre-
lation. Follow the suggestions of Roodman (2009), we
use the second lag as the instrument for governance.
Second, the panel data has a short time dimension
(T) and a large country dimension (N). The
Arellano-Bond estimator is designed for small-T
large-N panels.
X is the group of control variables, including the
ratio of the budget deficit to GDP (deficit), the ratio
of state funds to total investment (fund_state), and
population density (popdensity). A large number of
studies on changes in the general economy suggest
that the government’s fiscal situation may have an
impact on its governance performance (Balaguer-
Coll et al., 2007). Therefore, we include the budget
deficit-to-GDP ratio to control for the impact from the
government’s fiscal situation. In addition, previous
studies also suggest that fiscal autonomy might be
associated with government performance. Scholars
advocating for fiscal decentralization believe that
governance performance of local governments will
decrease with lower fiscal autonomy due to the lack
of motivation (De Borger and Kerstens, 1996). Scho-
lars advocating for fiscal centralization state that a
136
competitive relationship between local governments at
the same level will create negative external conditions
and that only centralization can allow for economies of
scale to be exploited to the fullest extent and prevent
corruption in local governments (Gordon, 1983; Bard-
han and Mookherjee, 1999). We control for the possi-
ble connection between fiscal autonomy and
governance in our model. We use the ratio of state
funds to total investment to measure the extent of fiscal
decentralization of each provincial government. The
higher the proportion of state funds, the lower the prov-
ince’s financial autonomy. Studies have also explored
the impact of population density on governance. One
of the conclusions is that the higher the population den-
sity, the easier it is for public services to achieve econo-
mies of scale (De Borger and Kerstens, 1996;
Grossman et al., 1999). Another conclusion is that the
higher the population density, the more difficult it is to
increase the quality and quantity of public services.
Therefore, we include the population density variable
in the model to explore this relationship.
We also use the same Dynamic Panel Data (DPD)
Model to estimate the impact of ICT on corruption.
However, an important adjustment is made to better
capture the impact of ICT on corruption. We note that
the development of ICT may enhance the capacity of
prosecutors to handle cases as well as their perfor-
mance in addition to increasing the number of meth-
ods and channels for the public to report corruption.
Therefore, the more developed the Internet, the more
likely the number of corruption cases indicted or pro-
secuted may show a reverse U-shaped trend. During
the initial development of the Internet, the number
of cases prosecuted may increase. As the Internet con-
tinues to play an oversight role, the number of corrup-
tion cases will begin to decrease. For this reason, to
measure the impact of ICT on the level of corruption,
we use a slightly different estimation:
corruptionit ¼ b0 þ b1
corruptioni;t1 þ b2 icti;t þ b3 ðicti;t Þ2 þ dZi;t þ eit (2)
We add the squared term of ict variables into the
equation. As a result, the ict variables along with the
squared terms of ict variables can capture the possible
non-linear relationship between ICT and corruption.
The lagged dependent variable is also included in the
equation to control for the possible persistence of cor-
ruption. The system GMM estimator is employed to
address the possible endogeneity problem stemming
from reverse causality and simultaneity/selection.
Information Development 32(2)
In Equation (2), Z is the set of control variables.
Unlike Equation (1), the explanatory variables in
Equation (2) are not economic and social indicators,
so the restriction in the selection of explanatory vari-
ables no longer exists and we could include different
explanatory variables in the estimation formula. In
reference with other studies, we include the following
control variables in the group of explanatory vari-
ables: GDP per capita (gdp_pc), enrollment rate in
secondary education (edu), the proportion of the sec-
ondary industry (industrial), and the proportion of the
tertiary industry (service). Past studies have generally
stated that in areas with higher incomes, the level of
corruption is relatively lower (Treisman, 2000;
Brunetti and Weder, 2003; Fisman and Gatti, 2002;
Serra, 2006; Lio et al., 2010), and in areas with higher
educational levels, the public is less tolerant of cor-
ruption (Ades and Di Tella, 1999; Persson, Tabellini,
and Trebbi, 2003; Serra, 2006; Lio et al., 2010).
Therefore, we include these two control variables.
In addition, the incidence of corruption is usually
related to the prevalence of rent-seeking opportunities
(Pinto and Zhu, 2013). During the industrialization
process, there are often a large number of rent-
seeking opportunities. For example, changes in land
projects in response to industrial and commercial land
use, tenders for national construction projects, and
limited trade competition between importers and
exporters have all created many opportunities for
improper rent-seeking. Therefore, we include two
variables that measure the industrialization process,
the industry and service variables, to capture this rela-
tionship. Finally, we also control for the anti-
corruption effort in each province. We follow Goel
and Nelson (1998) and Dong and Torgler (2012) and
use per capita expenditure on police, procuratorate,
court, and judiciary by local governments as a proxy
for the regional anti-corruption effort.
Estimation results
ICT and governance
Table 5 reports the estimation results on the impact of
ICT on governance. In addition to the results from the
Dynamic Panel Data Model, we also list the results
from the Ordinary Least-Squared (OLS) specification
for comparison.
The results of both specifications show that the
progress of ICT penetration had a positive impact on
governance of provincial governments. The coeffi-
cients of individual technologies, in particular the
Lee and Lio: The impact of information and communication technology on public governance and corruption in China 137

Table 5. Estimation Results of the Impact of ICT on Governance.

Dependent variable: governance

(1) (2) (3) (4) (5) (6) (7) (8)

OLS DPD OLS DPD OLS DPD OLS DPD

governance(t-1) 0.963*** 0.964*** 0.987*** 0.969***

(0.029) (0.031) (0.029) (0.038)
ictfactor 0.168*** 0.022**
(0.020) (0.009)
internet 0.968*** 0.132**
(0.113) (0.056)
mobile 0.186*** 0.027
(0.036) (0.023)
telephone 0.141*** 0.021
(0.018) (0.013)
budget 0.224*** 0.008 0.209*** 0.003 0.236*** 0.002 0.230*** 0.005
(0.030) (0.016) (0.030) (0.016) (0.034) (0.018) (0.031) (0.016)
fund_state 0.006 0.001 0.006 0.000 0.013* 0.002 0.010 0.000
(0.006) (0.002) (0.006) (0.002) (0.006) (0.002) (0.006) (0.002)
ln(popdensity) 0.051*** 0.000 0.051*** 0.002 0.035* 0.004 0.039** 0.003
(0.019) (0.007) (0.019) (0.007) (0.021) (0.008) (0.019) (0.008)
R-squared 0.646 0.649 0.567 0.624
Hansen Test chi2(50) ¼ 26.2 chi2(50) ¼ 26.8 chi2(50) ¼ 26.8 chi2(50) ¼ 24.7
N 210 180 210 180 210 180 210 180

Note: Numbers in parenthesis are standard errors. Significance level: *** 1% ** 5% * 10%.

Internet (models (3) and (4)) are positive and signifi-
cant. The coefficients of ictfactor which measures the
overall development of ICT are also positive and sig-
nificant (models (1) and (2)). These results suggest that
the development of ICT indeed had a positive impact
on governance performance in China. Possible chan-
nels include e-government, through which the develop-
ment of ICT improves the quality and increases the
amount of public services provided by the government.
Meanwhile, ICT may also enhance governance perfor-
mance through supervision from the Internet.
It is also noteworthy that the coefficients
obtained from the DPD specification, which is
designed to account for the potential endogeneity
problem, are smaller than the coefficients obtained
from the OLS specification. This could be indica-
tive of the upward bias in the OLS specification
due to the endogeneity problem. However, the
coefficients of ICT variables in the DPD specifica-
tion remain positive and significant, confirming the
positive impact of ICT on governance.
Other ICTs, such as mobile phones and telephones,
have significant and positive coefficients in the OLS
models (models (5) and (7)), but have insignificant
coefficients in the DPD models (models (6) and
(8)). This result implicitly suggests that the DPD
models correct for the potential upward bias of the
OLS estimates. Furthermore, the reason for the insig-
nificant impact of mobile phones and telephones may
be that the functions of mobile phones and telephones
are relatively limited compared to the Internet.
Although mobile phones have mobile functionalities
and are highly portable, they lack the ability to pro-
cess information. The functionality of landline phones
is the most limited. Therefore, the Internet had the
greatest impact on governance performance while
mobile phones and telephones had less impact on
governance.
The coefficients of deficit are negative and signif-
icant in model (1), (3), (5), and (7), indicating that
provincial governments with greater financial deficits
were not able to deliver governance of as good qual-
ity. Financial autonomy seems to play no major role
in determining the quality of governance among
Chinese provincial governments as almost all coeffi-
cients of fund_stat are insignificant (except in the
model (5)). Population density was negatively associ-
ated with governance, as shown by the negative coef-
ficients of popdensity in models (1), (3), (5), and (7).
This finding implies that the growing population has
become a pressure and added difficulties to public
governance. These difficulties, as currently faced by
major cities in China, are placing great pressure on the
local provision of public goods such as environmental
138 Information Development 32(2)

Table 6. Estimation Results of the Impact of ICT on Corruption.

Dependent variable: corruption

(1) (2) (3) (4) (5) (6) (7) (8)

OLS DPD OLS DPD OLS DPD OLS DPD

corruption(t-1) 0.573*** 0.582*** 0.571*** 0.579***

(0.121) (0.121) (0.122) (0.118)
ictfactor 0.065 0.085**
(0.099) (0.037)
ictfactor_sq 0.071 -0.053*
(0.062) (0.029)
internet 0.864 1.387**
(1.020) (0.589)
internet_sq 1.706* 1.366***
(0.780) (0.322)
mobile 0.108 0.183**
(0.377) (0.071)
mobile_sq 0.115 0.066***
(0.202) (0.018)
telephone 0.219 0.220*
(0.209) (0.118)
telephone_sq 0.011* 0.066*
(0.064) (0.035)
In(gdppc) 0.534* 0.335 0.611*** 0.544 0.364*** 0.431 0.296* 0.296
(0.289) (0.380) (0.294) (0.401) (0.076) (0.349) (0.146) (0.423)
edu 0.018 0.040** 0.017 0.038** 0.041*** 0.040** 0.038 0.039*
(0.039) (0.020) (0.039) (0.020) (0.014) (0.019) (0.027) (0.021)
industrial 4.738*** 1.235 4.580** 1.053 4.177** 1.566 4.382*** 1.314
(1.464) (1.058) (1.4477) (1.013) (1.405) (1.642) (1.478) (2.215)
service 0.653 0.696 0.805 0.270 1.681 0.627 1.021 0.741
(2.997) (1.058) (2.005) (1.867) (2.981) (0.986) (2.021) (1.262)
In(anticorrupt) 0.206 0.172 0.207 0.131 0.207 0.141 0.203 0.183
(0.213) (0.158) (0.212) (0.179) (0.204) (0.184) (0.213) (0.198)
R-squared 0.104 0.100 0.096 0.116
Hansen Test chi2(81) ¼ 19.8 chi2(81) ¼ 22.6 chi2(81) ¼ 18.6 chi2(81) ¼ 20.2
N 193 163 193 163 193 163 193 163

Note: Numbers in parenthesis are standard errors. Significance level: *** 1% ** 5% * 10%

protection, low-income housing, health care, and edu-
cation. Thus, many cities still hesitate to cancel the
household registration system.
ICT and corruption
Table 6 reports the estimation results of the impact of
ICT on the level of government corruption. As
expected, there was a clear, nonlinear, inverse
U-shaped relationship between the development of
ICT and corruption. In both the DPD and OLS mod-
els, the coefficients of ICT variables are all positive
and the coefficients of their squared terms are all neg-
ative. These results confirm our hypothesis that ICT had
two different impacts on government corruption: ini-
tially, the development of ICT made it easier to report
cases of corruption and enhanced the capabilities of
procuratorial offices, making the coefficients of first-
order ICT variables positive (meaning that the number
of registered cases increased with the development of
ICT). However, when ICT became more widely avail-
able, the subsequent supervision effect may have taken
over and led to the negative coefficients of the squared
terms of ICT variables (meaning that the number of reg-
istered cases started to decrease). Comparing the impact
of individual ICT variables on corruption reduction, the
coefficients of internet are the greatest, suggesting that
the Internet had the most significant impact on exposing
and reducing government corruption.
The coefficients of gdp_pc and edu are negative,
suggesting that in areas with higher incomes or educa-
tional levels, there was less corruption. This is consis-
tent with previous studies which argue that
populations with higher incomes and educational
Lee and Lio: The impact of information and communication technology on public governance and corruption in China
levels are less tolerant of corruption. The coeffi-
cients of industrial, the size of the industrial sector,
are all positive and the values are relatively large.
This result confirms our expectations that the inci-
dence of corruption was usually associated with the
prevalence of opportunities for rent-seeking. The
large number of rent-seeking opportunities during
the process of industrialization led to a rising inci-
dence of corruption. Conversely, the size of the
service sector (service) had no significant impact
on the incidence of corruption, which may be asso-
ciated with the relatively small economies of scale
and thus the more limited opportunities for rent-
seeking available to the service industry. The coef-
ficients of anticorrupt are all negative but not sta-
tistically significant.
After each estimation, we adopt the Hansen test to
examine if the estimation encounters an over-
identification problem. The chi-squared values of the
Hansen test are reported for each specification in
Table 5 and 6. As all of the statistics are insignificant,
we accept the null hypotheses that there is no indica-
tion of an over-identification problem.
Conclusion
In recent years, an increasing number of studies have
explored the impact of ICT application on government
performance and corruption. Theoretical studies pro-
posed that ICT can improve governance and reduce
corruption. Empirical studies have obtained some evi-
dence to support this conclusion. However, there are
still few studies exploring the situation in China. On
the one hand, the Chinese government is fully commit-
ted to the development of ICT infrastructure, hoping to
capture the economic benefits of ICTs. On the other
hand, the Chinese government is also investing a great
amount of resources to control the dissemination and
discussion of information online. With the many
restrictions on the flow of information, does ICT also
have a positive impact on governance and corruption
of the Chinese government as indicated in studies of
other countries? In this paper, we use provincial-level
data in China from 2004 to 2010 to examine empiri-
cally this question. We use the strategy of Tang and
Tang (2004a, 2004b), Cole et al. (2009) and Dong and
Torgler (2012) to establish scores for governance and
corruption for provincial governments. We then esti-
mate the impact of ICT development on the two scores.
To account for the potential endogeneity problem
stemming from reverse causality and selection, we
139
select the Dynamic Panel Data Model as the estimation
strategy.
The results show that ICT did have a positive
and significant impact on the performance of pro-
vincial governments in China; the higher the pene-
tration of ICT, the higher the governance scores
were. In addition, the impact of different ICTs var-
ied: the Internet had the greatest impact on govern-
ance while mobile phones and telephones had less
impact on governance. The relatively limited func-
tionalities of mobile phones and landline phones
compared to the Internet might be the reason for
this finding. In addition, we found that ICT had
two different effects on government corruption:
ICT helped expose cases of corruption; ICT also
helped reduce government corruption. The first
effect may come from the fact that ICT made it
easier to report cases of corruption and enhancing
the capabilities of procuratorial offices; the second
effect may originate from the fact that ICT
imposed supervision on the government. Further-
more, among individual ICTs, the Internet had the
largest impact on government corruption.
As argued in a large number of studies, technology
that allows information to be integrated and dissemi-
nated more freely and quickly could become a tool for
governance. Such technology could also provide a
channel for people to supervise the performance of the
government, leading to better governance and less
corruption. Our findings confirm the arguments of
these studies, showing that despite heavy control from
the Chinese government, the development of ICT was
still able to break through controls and affected the
performance of the Chinese government. In the
absence of representative politics and voter oversight,
the Internet may have become a new oversight
mechanism and supervised the behavior of the Chi-
nese government.
However, the variables used in this study to mea-
sure governance performance and corruption of the
provincial governments in China are all calculated
based on hard indicators because there was a lack of
soft indicator data that directly measures the feeling
of the public. If soft indicator data toward provincial
governments were to become available, it would
greatly facilitate future research in related fields.
Funding
This work was supported by Taiwan’s National Science
Council (grant number NSC 101-2410-H-110-021 and
NSC 100-2410-H-110-023).
140
Notes
1. This part of the content was in reference to the provisions
of the People’s Republic of China Internet Censorship
from Wikipedia. The website is http://zh.wikipedia.org/
2. Tang and Tang (2004a, 2004b) suggest the use of 47
indicators to calculate governance scores. However,
data for 11 indicators are incomplete, including 5 indi-
cators that measure public safety services (legislation,
the number of cases accepted at the first trial in Court,
the number of cases concluded at the first trial in Court,
the number of suspects arrested with approval from the
Procuratorate, and the number of criminal cases closed
or filed by the Public Security Bureau), 1 indicator that
measures social security services (rural social security
network), and 5 indicators that measure social infra-
structure (national budgetary basic construction and
renovation investments, the ratio of local projects and
central projects in basic construction and renovation
investments, the completion and operation rates of
basic construction and renovation programs, the effi-
ciency of industrial waste treatment, and reservoir
capacity per capita). We use ‘‘fixed asset investments
in society as a whole’’ to measure societal infrastruc-
ture. In addition, we use ‘‘the number of criminal
offenders’’ to replace the missing indicator for public
safety services.
3. Due to the lack of soft indicator data, the subjective feel-
ings of the public for the governance were not able to be
incorporated into the measures.
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About the authors
Ming-Hsuan Lee is an assistant professor at the National
Sun Yat-sen University, Taiwan. She received her PhD
degree in economics from Boston University in 2008.
Her research interests include economic development,
inequality, gender issues, and Chinese economy. Con-
tact: Department of Political Economy, National Sun
Yat-sen University, 70 Lienhai Rd., Kaohsiung, 804,
Taiwan. Tel: 886-7-5252000 Ext. 5757. E-mail:
mhlee@mail.nsysu.edu.tw
Mon-Chi Lio is a professor at the Department of Political
Economy, National Sun Yat-sen University, Taiwan. He
received his PhD degree in economics from National Taiwan
University. His research interests include development eco-
nomics, economics of crime, and political economy. Contact:
Department of Political Economy, National Sun Yat-sen
University, 70 Lienhai Rd., Kaohsiung, 804, Taiwan. Tel:
886-7-5252000 Ext 5585. E-mail: mclio@mail.nsysu.edu.tw