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Analysing the Consequences and the Future of the Chinese Anti-Corruption Campaign

Beyond Cracking Down on Tigers and Flies?

Chinese money bills © Moerschy / Public Domain / Pixabay

Since the Great Reform of the 80s, the growth of the Chinese economy has generated new worries for the Chinese Communist Party (CCP). One of the greatest is corruption, as newfound wealth always leads to people trying to take their own share of the pie. Despite this topic acquiring more prominence since the launch of the anti-corruption campaign by Xi Jinping, it has been an enduring concern at the upper echelons of the CCP, as was evidenced by the Jiang Zemin discourse at the 15th Congress in 1997. There, he stated that the fight against corruption is a grave political struggle vital to the very existence of the party and the state (Zeng, 2015, p. 9).

Corruption is a threat not just for political but also economic systems. The dangers of corruption to the CCP are great because, as many scholars have pointed out, the use of corruption rents are distributed to maintain political support and keep on extracting more corruption rents in the future (Muñoz, 2013, p. 25). The menace of clientelism is self-evident. The logic of corruption is a vicious cycle that is more difficult to eliminate, the more time it stays unchallenged. China has many factors that are positive reinforcements for the expansion of corrupt systems; countries with more administrative levels are much more prone to corruption and more costly to firms and firm performance and the effect of this reality is much more acute in developing countries (Fan et al., 2009, p. 26). Moreover, the political legitimacy of the CCP is tied to an economic performance standard since moving away from the ideological legitimacy paradigm (Zeng, 2015, p. 10), making the preservation of a functioning system without corruption even more necessary.

To give a little context, the anti-corruption campaign in China started after the national Congress of 2012 under the stewardship of the new leader, Xi Jinping. With the famous slogan of “crack down both tigers and flies”, China started the most ambitious campaign against corruption in the history of the PRC, aimed both at lower level officials (flies) and powerful members of the party (tigers). The main organization that is in charge of fighting corruption is the Central Commission for Discipline Inspection (CCDI). The organization has expanded its power to carry out the improvement of the political system. To throw some light into the scope of the campaign, dozens of cadres at the ministerial level or above have been put under investigation for corruption or other disciplinary issues (Fewsmith, 2015, p. 1) in the military, the campaign has led to the downfall of more than 30 army generals (Wang & Zeng, 2016, p. 5). The dimension of the campaign in some of the most corrupt provinces, such as Shanxi, gives enough evidence that the problem is entrenched in the deep economic interest of local factions with the necessary help of cadres and the leadership (or, at least, the passive conformity) of higher up officials (Fewsmith, 2015, p. 15). Therefore, we ought not to think of this campaign as something that only affects the public sector, but the economic life as a whole. An evidence of that is that the CCDI now has delegations on all big SOEs (State Owned Enterprise) and other big companies (Lam, 2015, p. 7).

This ambitious campaign led to serious implications for important figures within the CCP. Prominent examples are the prosecution of important political figures, such as Bo Xilai, Ling Jihua, and especially Zhou Yongkang, a former member of the Politburo Standing Committee (PSC). The political implications of the detention and conviction of the Yongkang had deep implications in the system, as it breached the convention that no former PSC could be convicted and that no retired officials can be convicted (Wang & Zeng, 2016, p. 11). The new paradigm is a consequence of the CCCP anti-corruption campaign that needs to be taken into consideration going further. Finally, the last contextual element we need to take into consideration is how the campaign is affecting the collective leadership of the CCP and the PRC. It is alleged that one of the main goals of this initiative is to consolidate political power and erase any opposition to the current leadership and its political objectives (Yuen, 2014, p. 47).

The economic system has been deeply impacted by the CCCP anti-corruption campaign. An evaluation of the consequences of the campaign on both SOE and non-SOE has concluded that anti-corruption efforts have short term positive effects on both kinds of enterprises, but have a negative effect long term on non-SOE (Kong et al., 2017, p. 195). The explanation for this phenomenon is that SOEs, being already connected to officials by nature, treat corruption only as an unnecessary cost. On the other hand, for privately owned companies, the cost of corruption is considered an investment, as it eases off the wheels of bureaucracy and property rights (Kong et al., 2017, p. 194). The implications are quite damning, as it implies a firm can’t optimize performance if not politically connected through corruption, pointing out a deep-rooted problem. Therefore, if the CCCP anti-corruption campaign keeps on, we can expect reduced output by non-SOEs if business culture elements are not changed at the same time. If not, we can expect an environment more suited to SOEs and more state control in the economy.

The second economic parameter which we can use to analyse the anti-corruption campaign is firm fraud. The academic evidence shows that the decrease in fraud likelihood in China’s privately owned businesses fell by 46,8% since the start of the campaign (Zhang, 2018, pp. 392-393). This indicator shows how the campaign has had a positive effect on economic transparency by giving negative incentives to corruption, thus damaging the enterprises that committed any kind of business fraud. Another specific economic reference standard is the investment in Research and Development (RD) by firms. China has the structural necessity to be a leader in RD, as the necessity to fully modernize all economic environments and be at the forefront of the technological market is key to avoid growth reduction and even stagnation. Evidence shows that firms based in provinces with higher anti-corruption efforts invest more in RD, and that this effect is particularly strong in non-SOE (Weiyu & Xixiong, 2019, p. 296). By making firms connections-oriented, corrupted environments drain resources that could be reinvested. Therefore, this effort being greater for non-SOE, their improvement is more marked. This piece of evidence is consistent with our analysis and the policy logic behind it. Any anti-corruption efforts have to be structured in a way that incentivises economic performance. Firms, both SOE and non-SOE, need to be certain that they operate in a system that doesn't include corruption as an option to enhance performance and that they will be better off in engaging in productive investments. This idea pairs perfectly with the announced objectives in the Fourth Plenum of the Party in 2014 of creating a rule of law country in which transparency and accountability are the basis for society and, therefore, for doing business (Wang & Zeng, 2016, p. 6).

It is now time to analyse the societal and structural consequences of the anti-corruption campaign. Assuming that the problem of corruption is structural and critical for the long run health of the Chinese economic system, the first allegation that must be challenged is that strike hard campaigns in the last four decades in China have only had a temporary halt on corruption but have not proposed a long term stable solution (Wedeman, 2012). The unprecedented length of Xi’s campaign and the invested political capital are the first signals of an effort of distinct nature. But the key is in the numbers. Indictments of senior officials at all levels rose by 47% in 2013, 126% in 2014 and 27% in 2015 (Brown, 2018, p. 2). Those numbers show a great increase that is unprecedented since the beginning of the reform era under Deng Xiaoping's leadership. But it is still unclear whether this has changed the long-term structure of corruption. Looking at the public perception of corruption, and despite the lack of sufficient data, the Chinese public is still identifying corruption as a problem with 84% considering it either a big or moderate worry (Wike & Parker, 2015). Despite being useful results, they are not conclusive at all; they are relatively old considering the quickly changing environment. Moreover, important international organizations assessing the perception of corruption show that China has not improved outside the margin of error since 2012 (Transparency International, 2019). So, there must be additional focus on making the increasing number of indictments reflect lower corruption and assure that public perception feels its effects. On a positive note, data show popular confidence that the corruption problems will get better in the following years (Wike & Parker, 2015), which shows confidence in the CCP´s ability to solve the problem and that it hasn’t affected it’s performance legitimacy yet.

An example of the ineffective excesses of the anti-corruption campaign is how a CCDI county level office operates regarding the number of indictments. A case study showed that the offices tried to adjust the number of procedures in order not to prosecute too many or too few people, as both extremes are susceptible to be punished by higher up authorities (Xingmu & Tsai, 2020, p. 38). Moreover, to prosecute a higher official there needs to be an express authorization from higher ranks of the CCDI, which usually depends on political decisions (Xingmu & Tsai, 2020, pp. 39-42). This kind of behaviour puts political and strategic interests at the forefront rather than the identification of actual corruption, thus going against the rule of law. The result is absolutely distant from the aims of the CCP and the anti-corruption campaign. If this logic were to be perpetuated, even in the most corruption free areas, many honest and well-functioning cadres will be indicted, reducing the confidence in the system and the incentives to hold public office in the long run. The necessity to keep the best minds working for the state is something that must be cared for more by the CCDI leadership, whilst the “shock and awe” techniques that have been promoted during the campaign should be eliminated or, at the very least, used to the bare minimum (Brown, 2018, p. 9).

The final element through which we have to consider our various policy alternatives is how the campaign directly affects the leadership. The most prominent claim is that the campaign is being used to strengthen Xi’s grip on the party and its policy direction (Brown, 2018). While it is difficult to assess the extent to which this is true, it is accepted that the anti-corruption campaign has a number of important effects on the party and state leadership style. A strengthened centralized control over the party and the state through anti-corruption prosecution could have mostly negative effects regarding policy outcomes. Despite less high-level resistance, local agents of the party will lose incentive to aggressively pursue institutional change and bold policy objectives (Wang & Zeng, 2016). The reinforced top-down approach goes against some of the causes of the success of the Reform era under Deng Xiaoping. The increasing power of the CCDI is leading to an empowering of the party over the state. An example of this is that the campaign has been relying much more on the party’s disciplinary organs rather than the ordinary judicial system (Yuen, 2014, p. 47) and the increased reliance on the parties committees to design new policies and reform projects (Wang & Zeng, 2016, p. 9). There is an obvious contradiction between this progressive erosion of state institutions and the so-expressed desire in the objective of achieving the rule of law. On the other hand, the significant steps Xi has taken to reassess the role of the party in political life can have a positive impact regarding the incentives of corruption (Gilley, 2019, p. 146). If cadres remain under strict control, the means of corruption will be progressively lesser. The problem with this assumption is that it relies on constant control through coercion of the party that can’t be assumed as a given. This style of under-institutionalized governance isn’t helpful in establishing a frame of confidence for the blooming of business and a safe, peaceful society. Therefore, we ought to recommend a change of approach regarding the fight against corruption. The indictments of corruption shouldn’t be used as power moves, as it weakens the state. There is a debate to be held over the style of leadership going forward and how to define the roles of the party and institutions, but it is key not to mix it with the anti-corruption fight as it muddies the water and drives it further away from its goals.

The anti-corruption campaign was something that had to be done for the health of the CCP party rule, but it’s intention can be weaponized by political actors. The key point is to make sure political ambitions and interests are kept out of the campaign, in order to achieve better results and more public recognition. In plain words, quality rather than quantity. The CCP has the opportunity, in the next few years, to become a stronger party in a stronger political and economical system if the proper decisions are taken without hesitation but also without excesses.

Gerard Izquierdo i Toda has recently graduated from Philosophy, Politics and Economics by the Universitat Pompeu Fabra and Universidad Autónoma de Madrid. He has been researching issues linked to political participation and European politics, and has a special interest in the Chinese political system. You can find him on Linkedin or on Twitter.

The opinions expressed here are those of the writers and do not represent the views of European Guanxi.

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