In his November 2012 address to the Politburo Standing Committee, Chinese President Xi Jinping promised to rid the Chinese Communist Party (CCP) of corruption, vowing to capture both the ‘tigers’ and the ‘flies.’ He has since implemented what is considered the farthest-reaching anti-corruption campaign in the modern history of the CCP.
Targeted ‘Tigers’
President Xi is not afraid to tackle the big ‘tigers’ of the Party. President Xi’s crusade against corruption has led to the arrest, dismissal or discipline of over 200,000 officials since it began in 2012. No one is immune – dozens of general officers of the armed forces and high-level ministry officials have been prosecuted or expelled from the Party. Even retired officers have been investigated, including two of the most senior leaders of the People’s Liberation Army.
Zhou Yongkong, the former head of Chinese domestic security, and General Xu Caihou, a former member of the Politburo and highest-ranking Chinese military officer, both fell victim to investigation after leaving government. Zhou received a life prison sentence; Xu was expelled from the party and lost his rank of General. The most recent ‘tiger’ to fall was General Guo Boxiong, another former leader of the Chinese military. Xi prosecuting these leaders, even after retirement, sends a signal to former officers to limit their attempts to influence the workings of the Chinese government.
Questionable Motives
Xi’s motives are unknown. The Chinese President has consolidated his own personal power as a result of this campaign. At the same time, however, he has successfully reduced corruption and excess by government officials, and in doing so, improved the CCP’s domestic image.
Skeptics believe Xi is positioning himself and political allies ahead of a major leadership change in 2017, when five of the seven-member Politburo will retire. Xi’s term ends in 2022. Of all of the high-ranking officials targeted in Xi’s campaign, very few are of Xi’s political class, the ‘princelings’ – leading some to suspect that this is simply a purge. Others applaud Xi’s efforts to restore legitimacy to the Communist Party following years of corruption and social inequality. To them, the anti-corruption campaign is part of a larger plan to bolster long-term stability.
Economic Impact
The campaign has impacted China’s domestic economy. Chinese citizens at every level of income are feeling the anti-corruption crackdown. Elite Chinese, particularly officials, fear appearing ostentatious. This caused both the real estate and catering markets to slow; growth in China’s luxury market fell from 7 percent in 2012 to 2 percent in 2013. Because China is the leading market for luxury goods, this impacted brands globally. High-end services including restaurants and hotels have either closed or slowed their operations. This in turn affects the staff and supporting suppliers of these companies – mainly made up of poorer Chinese.
Bank of America Merrill Lynch estimated that this could cost China’s economy more than $100 billion in 2014—just over a 1 percent hit. China’s leader executed the campaign despite such warnings. It’s unclear how much of a hit the economy took last year as a result of the campaign.
Foreign businesses operating in China are also at risk. Business in China is based on relationships, known as guanxi, which blurs the definition of corruption. This relationship with government officials delivers access to resources, influence over government policies, introductions and potential business opportunities. In a business culture where many feel that the only way to turn a profit is to “level the playing field,” many businesses likely have some ties to corruption.
Moreover, international companies with branches in China are now subject to unannounced government investigations into corruption. Experts suggest that these ‘dawn raids’ of foreign firms are a means by which Chinese domestic firms can gain an advantage.
Wealthy Chinese are fleeing abroad—and taking their money with them. The EB-5 program in the United States grants visas to foreigners who invest at least $1 million in a U.S. company and create at least 10 jobs for U.S. citizens. The U.S. offers 10,000 EB-5 visas per year. In 2012, Chinese nationals made up 1,675 of these visas; in 2014, they accounted for 8,308.
Others have chosen to invest their money in foreign projects, including hotels, sporting complexes such as the Barclay’s Center in New York City and medical technologies. By moving their money outside the grasp of the CCP and any potential investigation for corruption, Chinese investors are creating a drain on capital and intellect in China. Even so, Xi and his anti-corruption campaign show no sign of slowing.
Alexandra Viers is an analyst at The Cipher Brief.
