China extends corruption investigations

China’s President Xi Jinping has announced that his national anti-corruption campaign will now extend beyond individuals and begin investigating state firms.

This directive, says state media organization Xinhua News, is a new priority in 2015. President Xi announced this change through a party communique on Wednesday, after the 5th plenary session of the Communist Party of China’s (CPC) Central Commission for Discipline Inspection (CCDI).

It’s impossible to overstate what this anti-corruption drive has done in China. It has claimed one of the highest government officials to go down since the days of Mao. It has changed the entire business landscape and changed the social structure of the world’s biggest gambling center, Macau. It has rich Chinese people worried about being flashy with their money which has led to a significant reduction in luxury brands performance in China. It has uncovered millions of dollars held by corrupt officials. But the question remains whether or not this is totally about wiping out corruption. Some believe it’s about Xi consolidating power not merely under the party, but under him.

Chinese investigations

The biggest Tiger caught in the net so far is Zhou Yongkang, former security head and retired member of China’s Politburo Standing Committee. He will stand trial for a range of serious crimes, including taking bribes, adultery, and leaking state secrets. He is the most senior official toppled for corruption since 1949. The trail of the investigation so far has gone through his power bases—the sprawling province of Sichuan, where he was once the top official; the “petroleum mafia,” once-impregnable fortresses of the big state-owned oil giants, which have deep military connections; and finally in the state security establishment, which he oversaw under Hu Jintao.

But there is no good reason, other than power politics why Zhou was singled out to be investigated instead of, say, that of the outgoing premier, Wen Jiabao (see especially here), or perhaps even members of Xi’s own family, Both have amassed enormous wealth, chronicled in detail by The New York Times and Bloomberg News, or leaked records yet they remain untouchable.

When Secretary Xi Jinping became President, many analysts both in China and abroad had believed that the new leadership would continue to maintain the roughly equal balance of power that existed between the Jiang Zemin (princeling) camp and the Hu Jintao camp. Yet in the end after the Jiang camp won a landslide victory by obtaining six out of the seven seats on the Politburo Standing Committee (PSC) and only one leader in the Hu camp—Li Keqiang, China’s premier—was able to keep a seat on this supreme decision-making body. Since this time the corruption drive has netted many senior and junior officials principally part of the Hu Jintao camp.  It could be that the Princelings are trying to hide their priviledged lifestyle behind a campaign to root out corruption (maybe just not theirs)?

The crackdown on corruption has had some unintended consequences. One months has publicly complained she can find no one to bribe to get her daugter into school. And businesses are having trouble navigating approvals processes where Officials are too afraid to accept bribes to facilitate work… no one knows how to get the work done. Alternatively some officials are asking more money from trusted friends who they know won’t complaint to the anti-corruption police. The challenge is Officials are used to a certain lifestyle, and while they can live modestly for a month or so, or can fund their lives from savings what will happen when the money runs out.

In the latest phase of the campaign, here’s what the CCDI will be focusing on, according to Xinhua:

  • The top task for 2015 will be the tightening up of internal management and ensuring central leadership policies are implemented. The CCDI demanded that senior officials “toe the line” and that cronyism, fakery and sycophancy would not be tolerated.
  • All state-owned enterprises (SOEs) under the care of the central government will be subject to inspections and supervision will be tightened on SOEs across the board.
  • The heads of Party and government departments, and state-owned enterprises will be held accountable for any serious corruption cases that happen under their charge.
  • The rooting out of harmful working practices, including abuse of public money and bureaucracy, will continue.
  • Officials in key positions who use their influence in infrastructure projects and public land deals, embezzle state-owned assets, or buy and sell government posts will face serious penalties.
  • Disciplinary inspection organs will strengthen international cooperation in the hunt for fugitive officials and asset recovery.
  • The CCDI will build a loyal, clean, responsible discipline inspection team. Incompetent inspectors will be replaced and those who look the other way would be punished.

This will get interesting.  When shall we see if this is really a corruption drive OR a bid to strengthen support around President Xi and his cronies.