Beijing must break with Confucius to stamp out corruption

Beijing must break with Confucius to stamp out corruption

Editorial

2013-09-08

Following the recent trial of former Chongqing Communist Party secretary and Politburo member Bo Xilai, Beijing has continued its latest anti-graft campaign with investigations into four top-level oil sector executives during this past week. The investigations have seen the removal of Jiang Jiemin as the head of the State-owned Assets Supervision and Administration Commission. Jiang has also been accused of corruption during his stint as chairman of China National Petroleum Corp (CNPC).After Xi Jinping took over as the party’s general secretary last November, nine senior officials have been placed under investigation and Xi has announced his determination to crack down on “tigers” and “flies” alike, signifying that corrupt officials should beware no matter how senior or lowly their position.

On the surface, the latest anti-corruption measures represent the leadership’s efforts to restore public confidence in the integrity of the party. On the other hand, the measures are also aimed at removing barriers to market reforms spearheaded by Xi and Premier Li Keqiang by breaking up vested interests.

However, to fight corruption effectively, the government should strengthen its anti-corruption supervision mechanisms and there are two types of monopolies which tend to foster corruption.

Monopolistic state-run industries such as the oil, telecom and banking sectors should be broken up to avoid the misappropriation of resources. The government should also prevent policymakers also occupying senior positions at large state enterprises.

Despite Beijing’s frequent claims to the contrary, no one truly believes that China has an independent judiciary or a legal system that operates outside the influence of the party. This makes it difficult to fight corruption based on the rule of law. The system is based on Confucian ideology that emphasizes the ideal of the perfect ruler who exercises his authority with benevolence and whose character is without flaw. This model scholar-official stood in contrast to the scheming for power, venality and corruption Confucius saw around him.

Though there have undoubtedly been officials of great Confucian integrity in China’s long history, they are generally celebrated precisely because they are so rare. Most officials from antiquity up to the present day have been prone to corruption and abusing their power, and those that fall usually do so because they or their clique have fallen out of favor rather than the inevitable consequence of their wrongdoing. This has been the case up to the present day. Bo Xilai’s trial was trumpeted as a demonstration that China has the rule of law but most analysts would agree that Bo’s misdeeds in Dalian and Chongqing would not have been a problem if he had not been a demagogue who was at odds with the central party line.

When Xi talks of placing the power in China in a “constitutional cage,” this — if it truly comes to fruition — would signify a break from centuries of the arbitrary exercise of authority. This is not a plot to impose Western values on China — the ruling party itself has recognized that corruption flourishes when laws are unevenly applied. To use another concept from Chinese antiquity, the party knows that it must tackle internal weaknesses if it is to retain the Mandate of Heaven to rule.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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