Curbing China’s Corruption

No one will be surprised by a first official report on the subject that finds that corruption in China is a “still very serious” problem. Corruption is endemic among rank-and-file officials at all levels of government. A study for the Carnegie Endowment in 2007 estimated that 10% of government spending, contracts and transactions went to kickbacks and bribes or was otherwise syphoned off. That adds up to a staggering degree of illicit wealth redistribution. But a lined pocket beggars another. There is an economic cost to corruption, and at some point even China won’t be able to absorb it, particularly if and when growth slows.

There is a growing political dimension, too. The leadership increasingly sees corruption as a threat to social stability, and thus to its legitimacy to rule. And corruption is affecting a widening circle of issues beyond business where the leadership perceives itself as vulnerable to increasingly voluble public opinion: the environment, education, public health and food safety. Reasonably enough citizens don’t want their land polluted, their children’s schools to collapse, their water poisoned and their diary products tainted because an official is being paid to turn a blind eye.

Corruption is also an increasing obstacle to the policy changes needed to sustain the next phase of China’s economic growth, on which the leadership’s authority also rests. Vested interests, especially in the areas were there is heavy state involvement, have proved adept at keeping the resistance to change well oiled. If Beijing is to be serious about reorienting the economy and making Chinese companies world class as well as national champions, many of those vested interests will have to be made less obstructive.

The new report promises another round of tougher anti-corruption measures. New rules require Party members to report incomes and investments, in the hope that transparency will curb the worst excesses of the connections between officials and businesses, especially at the local and provincial level. The Party is also to curb spending on official entertaining and study groups, which can transmute seamlessly from hospitality into payola.

This isn’t the first anti-corruption campaign to have been launched — often at times of leadership transition. Nor will it be the last. There are already more than a thousand anti-corruption rules on the books. As for the new additions, as so often, the devil won’t be so much in the details as in the implementation. Up to now, corruption has been a low-risk, high-reward activity for most officials. If corruption is to be reined in that balance will have to change.