Bloomberg Brief

China’s Corruption Crackdown More Than Factional Politics

Chinese President Xi Jinping’s anti-corruption campaign kicked into higher gear this week with an investigation of former Politburo Standing Committee member Zhou Yongkang. In his interview with Tom Orlik below, Cheng Li offers his insights into this deepening campaign.

Orlik: What can we tell from the announcement on the probe of Zhou Yongkang?

Li: It raises more questions than it answers. First, why make the announcement of the investigation by the Central Commission for Discipline Inspection now when the investigation has been in fact under way for months? The Chinese public had expected the case would be transferred to prosecution. Second, the charge of “serious disciplinary violations” is very ambiguous — it could include anything from adultery to conspiracy. Third, why has the pace of investigation been so slow? Due to strong resistance from some political circles? Or to deliberately slow down the process to prevent an unintended domino effect? We can only speculate on the answers, but possibly the charge is ambiguous to leave room for negotiation with Zhou.

Orlik: What are the similarities and the differences between the Zhou case and the Bo Xilai case?

Li: Both are heavyweight politicians. Both are part of the faction of former General Secretary Jiang Zemin. Both abused power and ignored the rule of law. At the same time there are important differences. Bo was not well known for corruption, but Zhou was. Bo was the head of a movement with a lot of public support. Zhou doesn’t represent a movement, and doesn’t have a swell of support from the public. That makes his case easier to deal with.

Orlik: Is this a genuine attempt to promote clean governance or another factional purge?

Li: Corruption is ruining the Chinese Communist Party, causing a serious legitimacy crisis. This is the 25th anniversary of Tiananmen. If there was a similar event would the public and the military support the party? No, because they are too corrupt. So from day one Xi Jinping made fighting corruption the top priority.

Foreign observers might cynically conclude this is all factional infighting. The evidence points in another direction. Xi Jinping and Zhou Yongkang are former political allies of Jiang Zemin’s faction.

Orlik: What’s the impact of the corruption crackdown on growth?

Li: Is fighting corruption the right thing to do or the wrong thing to do? It’s the right thing to do. Could it go too far and destabilize the government? I don’t think so. There are over 5,000 officials at the vice-ministerial level or above. So far only 35 have been arrested. That’s about 0.7 percent. It’s enough to change the behavior of officials, not enough to bring the government grinding to a halt.

On a very short-term time horizon, there might be some negative impact on luxury consumption. Sales of Rolex watches might go down. But that is trivial, especially set against the damage to the economy from large-scale official graft. The shift toward consumption in China should be driven by the middle class, not a few corrupt officials.

Orlik: How can China go beyond anticorruption campaigns toward institutional changes?

Li: Xi and Wang Qishan, who heads the anti-corruption campaign, recognize that dealing with corruption requires tackling causes and not just symptoms. The fourth plenum — a key meeting scheduled for October — will deal with legal reforms. Regulations requiring disclosure of official income and property and clamping down on conflicts of interest would all represent concrete progress.

More importantly, China needs more vigorous checks and balances in the system. Judicial independence should be near the top of the list of priorities. That would prevent abuses of power like that of Bo Xilai in Chongqing. Some of these reforms could take months, some could take years. The important thing is to start moving in the right direction to build public trust.

Political reform is not something you can choose or not choose. It is the direction of China’s rapidly changing society. You can put it off for a few years but not for too long.