Via FTAlphaville, Gavekal today sees a top in China’s anti-corruption drive:
The hunt for tigers should therefore be winding up, now that Xi has bagged both Zhou, the former security chief, and retired general Xu Caihou, a former senior military leader. Such a shift could alleviate some of the political uncertainty that the anti-corruption campaign has brought about, since its breadth and ambition has kept every Chinese official guessing about who will be targeted next.
The swatting of flies, however, is certain to continue. About 63,000 people, mostly lower- level officials, have already been investigated this year, and the Communist Party’s disciplinary arm is now gearing up for a new round of inspections in several provinces. And the Politburo on Tuesday announced that an important Party conclave, the Fourth Plenum, will be held in October and will focus on “ruling the country according to law” (the Chinese phrase yifa zhiguo is sometimes misleadingly translated as “rule of law,” a concept with very different connotations). The juxtaposition with the corruption probe into Zhou may provoke a sad chuckle from some observers, since these investigations take place outside the legal system and are clearly politically motivated. But from the perspective of the Party leadership they are all of a piece: the message is that no one is exempt from Party discipline, and that lower-level officials need to fall in line and work hard on pushing forward Xi’s priorities.
Nomura’s China team sees it differently:
How does the new rectification compare to the Yan’an one?
There are plenty of naysayers now
The current anti-corruption campaign has triggered heated discussions in the past few years on Chinese top leaders’ sincerity towards anti-corruption and we see a lot of scepticism about the eventual outcome of the campaign.
Teng Biao, a human rights lawyer, wrote in his article Don’t Get Too Excited about China’s Latest Corruption Crackdown published on the Foreign Policy website on 26 Mar 2014 that “to the party, anti-corruption campaigns are very useful because they are popular with the masses and can help take out political rivals. But because they allow winners in a political struggle to consolidate their gains, the end result of these anti- corruption campaigns is yet more corruption among those lucky enough to remain in the system.”
Yang Hengjun, explained in his article Why Chinese People Doubt the Anti-Corruption Campaign published on The Diplomat website on 26 Apr 2014 that the reason why Chinese people are unexcited about the anti-corruption news is that they believe “for each corrupt official sacked… there are higher-level ‘tigers’ behind the scenes.”
The helpful drivers then, and the helpful drivers & challenges now
In our view, the Yan’an Rectification has several attributes that the current rectification lacks. First, back then, it was 800K cadres gathering in a relatively enclosed location of Yan’an. Right now there are over 86mn of CCP members alone in China, spread out in a vast geography. Second, back then, these 800,000 cadres mostly came together on certain shared values and aspirations, as well as a common enemy in the incumbent, corrupt and incompetent ruling party, KMT. Now, one interesting observation by China experts that we spoke to, is that Chinese intellectuals have all but lost their ideals and aspirations, and that government employees have lost their camaraderie, and that everyone is for him or herself in endless materialistic pursuits.
On the other hand, there are some advantages that we see for the current rectification that the Yan’an Rectification did not have.
First, the CCP members are more educated now than before which leads to increased self-awareness and rise in general sophistication. A rule of thumb is that if economic independence in a nation is low, its citizens may care less about corruption as they are too busy feeding themselves, though their political independence will still require the proper rule of law.
Second, information asymmetry is much better now than before, thanks in part to the internet. The masses may use the Internet to expose corruption cases directly which has been acting as a counterbalance to potential abuses of power by government officials or SOEs at the street level.
At the execution level, there continue to be resistance from local governments and SOEs. It is difficult to change people’s entrenched mind-set and behaviors overnight, and it is even more difficult to ask people to forego their materialist interests. It has been reported by the people.cn website on 29 Apr 2014 that acts of corruption have gotten more innovative and in more hidden ways. E-bribery (bribing government officials or business partners with electronic gift cards), for instance, is becoming increasingly popular due to its anonymous nature.
So, on this basis, if Yan’an Rectification took three years, the current rectification may take at least one decade if not several decades.
However, the CCP has little choice not to go through such a rectification. China started to lose its demographic advantages in 2012 when nation’s labour force shrank for the first time since the late 1970s. Li Peilin, vice president of Chinese Academy of Social Sciences, forecasted disappearance of China’s demographic dividends by 2015. As this occurs, China needs to change its model of development to one that is more sustainable and more innovative via systematic reforms.
Central to the reform is the function of the marketplace, which has been held back due to economic intervention by the various levels of government, which lend itself to rent-seeking. Therefore, reducing government intervention in economic activities should reduce corruption, and restore energy and growth to the private sector. Furthermore, government can change its functions from running the economy to supervising the marketplace and the market participant to overcome potential market failures.
That is exactly right. It is now in the Party’s interests to pursue reform and therefore anti-corruption. That’s why we’re seeing this, from Xinhua today:
The Communist Party of China (CPC) will hold the fourth plenary session of the 18th central committee in October, to discuss key issues concerning the rule of law, it was announced on Tuesday.
The Political Bureau of the CPC Central Committee will discuss “governing the country according to law” on every front, it was announced after the Tuesday meeting, presided over by the CPC Central Committee’s general secretary, Xi Jinping.
It was agreed that the rule of law is a must if the country will attain economic growth, clean government, culture prosperity, social justice and sound environment, and realize the strategic objective of peaceful development.
A statement after the meeting said that the rule of law is an intrinsic requirement of socialism with Chinese characteristics and crucial to modern governance. Governing according to law holds the key to the CPC’s leadership, the people’s well-being, deepening reform and long-term stability. The statement emphasized, that governing according to law has become more significant in the entire agenda of the Party and the nation, due to new circumstances.
If China is to reform then the anti-corruption drive will be an ongoing feature of the Xi Jinping regime.
