The Art of Discipline: The Unintended Consequences of Xi’s Anti-Graft Campaign

In 2012, Zhou Yongkang enjoyed political success as both the chairman of the Central Political and Legislative Affairs Commission and a prominent member of the Standing Committee of the Politburo – the highest organ-of-state in the Communist Party of China (CCP). Within the next two years, however, Zhou would find himself indicted for a “serious disciplinary violation” and sentenced to life in prison. Such a fall from grace is just one of thousands: Ever since Xi Jinping’s administration introduced policies to curtail corruption in 2013, the indictment of bureau-level officials has increased by 41 percent. Due to these anti-graft measures and investigations into inter-party gift-giving, China has seen a significant drop in the luxury goods market as sales in gold bars declined by approximately 10 percent. In response to critics’ claims that Xi’s is merely using the anti-corruption drive to effectively silence and remove his opponents from office, the CCP continues to point to the falling sales of luxury goods as tangible and observable evidence of its success.

Despite the administration’s allegations, Xi’s policies for combating corruption, while seemingly effective, have backfired. The administration’s anti-graft policy implementation is problematic and must be refined for many reasons. First, the crackdown has been undermining China’s economic growth by curtailing new infrastructure projects. Second, although Xi’s efforts may have reduced conspicuous consumption, there is little to no evidence to suggest that his efforts have been successful in reducing less visible corruption, such as extravagant banquets that happen behind closed doors. Finally, the anti-corruption drive, rather than polish the party’s image and reputation, has only made citizens perceive Beijing as even more untrustworthy.

In November 2012, Xi ascended to the position of General Secretary of the Communist Party. Attaining leadership during the volatile period of the Bo Xilai scandal – Bo Xilai, the Party Secretary of Chongqing was sentenced to life in prison due to his involvement in the murder of businessman Neil Heywood – Xi was politically obligated to take immediate anti-graft efforts. Due to unusually low salaries for Chinese officials and public service workers, corruption has been an integral part of the Chinese administration. In response to public scrutiny, at the start of his term Xi banned extravagant purchases of luxury goods and went as far as to prohibit TV advertisements for jewelry. By November 15, 2013, Xi’s administration drafted a manifesto that vowed to “root out corruption” through investigation and strict discipline. The manifesto emphasized combating forms of corruption such as extravagance and waste, and Xi took particular interest on cracking down on gift-giving among party officials. Luxury good sales prior to the anti-graft campaign are simply staggering: In 2012, gifts purchased with state money comprised 25 percent of all luxury spending in China, and the extravagant banqueting among party members produced 80 percent of the nation’s food waste. Under Xi, investigations into the trade in luxury goods increased by 30 percent, which not only resulted in declining sales in the jewelry market but also in the electronics and alcohol markets. Many liquor store owners in China have been suffering from a drastic drop in sales, with one owner even disclosing to the New York Times “I don’t know how much longer I can survive.” The magnitude and effects of Xi’s efforts are aptly captured by Harvard Political Scientist, Anthony Saich who claimed that: “This is the most ambitious anti-corruption campaign since at least Mao’s days.” And although the Party, through its extensive manifesto and policies, has attempted to root out fraudulent conduct, it has only prompted a series of unintended, negative consequences.

Anti-graft laws have played a major role in slowing China’s financial growth, particularly in its infrastructural sector. China, facing its slowest economic growth in 25 years, is only further stagnating. In many cases, officials, afraid of accusations and indictment, are reluctant to collaborate with investors on projects, ultimately slowing national development. Critics have condemned the anti-corruption campaign for significantly disincentivizing politicians from being active in their communities. In fear of consequences, politicians are, according to a Chinese news agency, “simply doing nothing at all.” In fact, investors who had already undergone the painstaking processes of receiving property and government subsidies were unable to complete their projects because their local officials refused to sign off on them. The aggressive and often ambiguous prosecution of Party members has constructed a relatively regressive political environment in which everyone is afraid of being “uprooted” by the administration. Even with the Chinese Premier Li Keqiang’s condemnation of these “indolent officials,” the crackdown continues to have a pervasive influence over policy-making in China.

Despite the administration’s allegations, Xi’s policies for combating corruption, while seemingly effective, have only backfired.

Furthermore, China has become an unstable financial site for foreign investors. Due to the ambiguity of the political indictments, foreign investors have begun to fear for their own and their business partners’ safety; individuals with whom investors have established serious business relationships with are suddenly being “removed” by the Party, spreading anxiety among the international commercial community. This fear is not unfounded; on February 3, 2017, Xiao Jianhua, a Chinese billionaire, was suddenly abducted by law enforcers and sentenced to five and half years in prison. Due to these complications and reluctance, China’s national audit office reported that $45 billion worth of projects (approximately one-sixth of all projects that year) have been either canceled or delayed. The delays in infrastructural development and investment are presumed by experts to lower China’s rate of annual GDP growth within the next few years. Such consequences cannot be ignored by the global economy as a weakening economy undermines the growth of nations that directly depend on Chinese demand for their exports. The local and global spillovers from China’s slowing growth are rather significant and outreaching.

Furthermore, while Xi’s efforts may have reduced conspicuous consumption (the purchasing of luxury goods), there is little to no evidence to suggest that his efforts have been successful in reducing inconspicuous consumption (goods that may be consumed behind closed doors ). While the crackdown on conspicuous goods may have disincentivized party officials from purchasing goods such as jewelry, several experts agree that officials are merely substituting these goods for other forms of corruption and consumption. Maxims among government officials such as “eat quietly, take gently and play secretly” suggest that party officials are simply reverting to forms of corruption that happens away from public scrutiny. In fact, data collected by John Griffin, a Professor of Finance at the University of Texas at Austin, indicate that although there may have been a visible decline in luxury expenditure, there is no evidence to suggest that there has been an actual decline in corruption. The study also argues that statistical indicators do not yet show signs of improvement within the party.

Finally, although one of the underlying intentions of the anti-graft campaign was to refine the party’s image to the eyes of the public, such efforts have only backfired. The constant indictment of officials has confirmed the people’s belief that the CCP is riddled with corruption, which has harmed the Party’s image. The pervasive publicity of arrests has actually made more people aware of the fraudulent political activity and the flaws of their governing body. A survey conducted with 83,300 people throughout the nation confirms such growing distrust for the party; the campaign’s wide scope and alleged success has hurt the party leadership. Professor of Ni Xing of Sun Yat-sen University has analyzed the current data by suggesting that if local and provincial institutions are shown to be filled with corruption, people will only further accuse Beijing of its poor management. While the campaign was instituted to burnish the Party image in light of the Bo Xilai scandal, it has only promoted and bolstered people’s disapproval of the CCP.

Despite causing a series of unintended consequences through its anti-graft campaign, the CCP could still pursue other methods to curb government corruption, such as adopting or roughly following Singapore’s administrative strategies. In the earlier phases of the administration, due to the low salaries of the public sector and lax policing, Singapore was also overflowing with corruption. However, after effective anti-graft administrative decisions, Singapore boasted its status as the fifth least corrupt nation in the Corruption Perception Index of 2012. Jon Quah of the Asian Journal of Public Administration effectively argues that  China can adopt ‘four lessons’ from Singapore.

First, CCP officials must understand that political will is essential for anti-grafting policies: The current campaign and its disincentivizing of politicians to take action are regressive to its purpose. Second, the anti-corruption effort must be detached from the party’s absolute control. Due to the campaign’s inextricable ties to the CCP, the indictments of Xi’s opponents are often criticized for serving the leader’s self-interests. Third, building upon the second lesson, Quah argues that anti-corruption agencies in themselves cannot be corruptible. Finally, the CCP must follow the steps of Singapore and tackle the primary source of corruption within the party: low salary for public service workers. According to Van Rijkegehem and Weder (2001), higher wages for officials would increase the opportunity cost of being indicted for corruption; their data analysis indicates that in developing countries, proportionally higher wages are, indeed, highly correlated with lower rates of corruption.  Low public service wages will, in the long term, only oust capable and talented civil servants from the civil service to the private sector while encouraging the less capable to remain and take part in corrupt behaviors.

Such reforms are necessary for significant progress in the anti-graft campaign. Without them, the campaign will only continue to lower political will, stagnate the economy, and worsen the image of the CCP.