Like corruption, if the state is both player and referee, there is a much higher probability of fraud, because nothing can police itself. This is especially true when the economic stakes are high and national pride is involved

Last week there was a big scandal at the Olympics. Four of the badminton teams appeared to have thrown their matches. Watching the matches on television was fascinating. The Chinese team managed eight serves directly into the net. They didn’t even attempt to make their misses look reasonable. It was blatantly obvious that they were trying their best to lose. After the Chinese team started, they were followed by the Koreans and the Indonesians. During the match, the judges exhorted the players to play their best. They were ignored as was the crowd who booed loudly and even demanded their money back.

The reason why the players—four South Koreans, two Chinese and two Indonesians—were trying to lose was so they could get better spots for the matches that mattered. The governing body of the sport, The Badminton World Federation, disqualified the eight players saying that they had “conducted themselves in a manner that is clearly abusive or detrimental to the sport”. But is that the real moral here? Probably not. This incident is not so much about the Olympic ideal as it is about the true nature of corruption.

Besides it wasn’t only the badminton players. Chinese swimmer, Ye Shiwen, had an incredible last minute spurt in the women's 400-meter individual medley. She set a world record with a time of 4:28.43. Not only was it a world record, her speed during the last 50 meters even exceeded that of male US medal winner Ryan Lochte. Immediately there were some questions. The World Swimming Coaches Association executive director John Leonard called the performance ‘disturbing’. Understandably the Chinese were furious that aspersions were cast at their new hero. In the light of other athletes accomplishments, Ye’s feat was perfectly plausible and her anti doping tests came up clean.

The past history of China’s participation in the Olympic Games does at least provide some basis for the questions. The Chinese Olympic program is heavily dominated by the state. It follows the old “Soviet system”. Chinese sports officials travel the country to find young talent. The kids are then placed in special schools for an intense regime of training with absolute obedience to the coach. The result of this system has been spectacular. By the Beijing Games in 2008, China had doubled its medal take. It now wins more than any other country, over a 100 medals and 51 of those were gold.

But like corruption if the state is both player and referee, there is a much higher probability of fraud, because nothing can police itself. This is especially true when the economic stakes are high and national pride is involved. According to the former chief doctor for the Chinese gymnastic team, doping was state sponsored in the 1980s. Seven Chinese swimmers were caught at the 1994 Asian games in Hiroshima, Japan, and another Chinese swimmer was caught at the 1998 world championships in Perth, Australia.

The Chinese government’s involvement in ensuring victory is not old history. The minimum age for gymnasts at the Olympic is 16. However smaller size is an advantage for gymnasts and so younger athletes have an advantage. According to her Chinese passport issued by the government, gold medalist He Kexin was 16. The New York Times cited online records from official Chinese news media which listed her age as 14.

But it is not just the Olympics where government interference has been costly. Even though Mao himself played the sport and Deng Xiaoing was a football fanatic, China has not even come close to winning a World Cup. Its present FIFA ranking is a miserable 68. This is for one reason. According to The Economist Chinese football is “flagrantly and undeniably terrible and corrupt”.

The good news is that it is getting better. After a scandal originally uncovered outside the country in Singapore, there was an investigation and cleanup in 2009-2010. But the problems are sure to continue for the simple reason that the state organization charged with policing the game, the Chinese Football Association, was also involved in the corruption. Like the Communist Party, the government cannot arrest itself.

The problem is also that China, like other emerging markets, is a relationship based system, not a rule based system. Connections and relationships make a big difference. Games are won or lost and which players play for which teams depends a lot on who owes who a favour.

These scandals have nothing to do with the character of the Chinese, Asians or anyone else. Certainly the highest economic incentives in the world have tainted American sport with its share of cheating. The difference has to do with the institution. German athletes stopped using drugs when they stopped being East Germans. But as long as the government of any country becomes a player in any sport or any business, there are certainly going to be problems.

(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at william@emergingmarketstrategies.com or w.gamble@alrroya.com.)