Minxin Pei
The Indian Express
January 29, 2013
Can Xi’s high-profile anti-corruption campaign really dent China’s kleptocracy?
If one is to believe the official press of the Chinese government, it is easy to have the impression that the new leadership under Xi Jinping is getting serious about official corruption. Recently, Xi vowed that a new campaign against graft would “swat flies and kill tigers”, using a colourful Chinese proverb that refers to punishing both junior and senior officials tainted by corruption.
In the two months since he assumed the top position in the Communist Party of China’s hierarchy, Xi has indeed put dozens of venal officials behind bars. His anti-corruption trophies so far include a deputy provincial party boss in Sichuan and a dozen mid-level local officials, who may not exactly be “tigers” but are certainly more substantial than “flies”. The real test for Xi is, of course, whether in the coming months (anti-corruption campaigns don’t last years) his government will actually fell some real “tigers” — very high-ranking officials such as ministers, provincial governors and members of the party’s central committee or even politburo.
For the average Chinese, campaigns against official greed have become too frequent to get excited about. Xi himself is certainly not the first one to venture out to hunt “tigers”. His predecessors made the same pledges when they came into power, only to see their war on corruption fizzle out quickly. To be sure, anti-corruption campaigns in the past have typically started with much political fanfare and brought down a large number of venal officials. It was no coincidence that in the first year after a new leader came to power, the number of officials sent to jail for corruption would double but then fall in the second year. This indicates that a substantial part of an anti-corruption campaign is connected to settling political scores, not weeding out official miscreants. Incidentally, there was a significant increase in capital flight out of China last year as officials worried about getting caught in the impending anti-graft net sent their ill-gotten wealth abroad.
Of course, Xi’s fight against corruption may be a genuine effort to improve governance in China, simply because failing to rein in China’s newly emerged kleptocracy could spell the end of the party’s rule. The scope and severity of corruption have grown so much in the last ten years that official graft is now widely believed to be the principal cause of many of the country’s political, economic and social ills, such as the abuse of power, wasteful investment and inequality. Even though it is impossible to measure precisely the cost of corruption in China, a rough estimate, based on the international experience that kickbacks and bribes typically account for 10 per cent of a contract, would suggest that the total amount of bribes paid to government officials in China is about 3-5 per cent of the GDP (or $210-350 billion). The two principal sources of corruption in China are fixed asset investments and government procurement. Today, China invests about 45 per cent of its GDP in fixed assets, primarily infrastructure, manufacturing facilities, and housing. Half of such investments are made by the government, allowing officials to demand kickbacks from contractors. If 10 per cent of the contract goes towards paying off officials, as that is the average rate of kickbacks around the world, it is reasonable to hazard that Chinese officials can steal about 2.25 per cent of the GDP from fixed investments alone per annum. If we add non-investment purchases by the Chinese government (which spends 35 per cent of the GDP) and petty thievery and extortion from private entrepreneurs by low-level officials, it would not be an exaggeration to claim that another 1-2 per cent of the GDP is lost to corruption every year.
This back-of-the-envelope calculation gives you some idea why the new Chinese leadership is so worried about corruption. The question is whether it can actually wage a more effective battle against this long-standing scourge of the Chinese political system.
Unfortunately, Xi and his colleagues, even if we assume they are truly committed to cleansing a rotten system, have a tough job to do. Academic research and international experience suggest that corruption is rooted in a country’s political economy. Typically, states that have more direct control over the economy are more corrupt because officials in these states use such control to line their own pockets. For China, one of the most effective solutions to its corruption problem is not just launching periodic high-profile campaigns (which treat the symptoms, not the cause), but also drastically reducing the role of the state in the economy. But making the state smaller economically will undermine the foundations of the one-party state because the ruling CPC needs to control a significant portion of the economy — through state-owned enterprises and fixed investments — to maintain a huge patronage system that rewards its loyalists. If the party takes away their privileges and perks, these followers would no longer do its bidding. Another proven tool against corruption is the mobilisation of the press and civil society. Without vigilant monitoring by journalists and social activists, few governments can keep their officials honest. But again, in the context of a one-party system, such a cure appears worse than the disease because freeing up the media and civil society will threaten the party’s hold on power.
Xi and his colleagues are smart individuals who must understand the political dilemma of fighting official corruption in China: corruption will doom the country, but fighting corruption will destroy the party.
So in an important sense, China’s new leadership is on an impossible mission. Yet, at this stage, we should give it the benefit of doubt — and wait to see whether the carcasses of the proverbial “flies” and “tigers” are going to pile up in Beijing in the coming months.
The writer is a professor of government and non-resident senior fellow at the German Marshall Fund of the US.
