China’s Phony War on Corruption; Beijing’s anti-graft efforts are really about the Party’s power.

September 20, 2013 Leave a comment

Updated September 18, 2013, 6:47 p.m. ET

China’s Phony War on Corruption

Beijing’s anti-graft efforts are really about the Party’s power.

The Mid-Autumn Festival on Thursday is an occasion when Chinese exchange gifts of mooncakes, a calorie-laden treat. But this year tradition collided with a government campaign against the “four decadences”: formalism, bureaucratism, hedonism and extravagance. As a result, sales of luxury mooncakes that are often given as bribes fell around 20% and retailers are desperately cutting prices.China’s new paramount leader Xi Jinping launched the anticorruption campaign as a way to deflect public anger with Communist Party cadres who abuse their power. It’s unlikely to have a lasting impact on embezzlement and bribe-taking, but at least for the duration of the campaign officials will be reluctant to flaunt their ill-gotten gains. Demand has declined for luxury goods of all kinds, from shark fins to moutai liquor.

For some officials, however, Mr. Xi’s campaign is simply one more challenge to be overcome. Their new motto is “to eat quietly, to take gently and to play secretly.” They simply entertain guests in secret banquet halls and order luxury items, including mooncakes, from new services that offer discrete home delivery.

What these officials fear most is exposure by citizen journalists and activists. And here Beijing is on their side.

Consider the case of Shaanxi province’s Work Safety Administration chief Yang Dacai. A year ago, a blogger known as “Boss Hua” noticed that photos of Mr. Yang at the scene of an accident showed him wearing a luxury watch far beyond the means of a local official. Public uproar ensued, and Mr. Yang was dismissed from office; on Sept. 5 he was sentenced to 14 years in prison.

But instead of getting a commendation, on Tuesday Boss Hua was detained by police. Last week outspoken businessman and venture capitalist Wang Gongquan met the same fate. Mr. Wang is a close friend of activist Xu Zhiyong, a leader of a loose coalition of anti-graft advocates known as the New Citizens Movement. Mr. Xu was arrested earlier this year after he suggested public officials should be required to disclose their personal finances.

Beijing’s two-faced treatment of corruption, throwing minor offenders and political enemies under the bus while suppressing activists who would expose more dirt, shows that the real objective is preservation of the Communist Party’s power. This is sure to leave citizens hungry for reform even as they enjoy discounted mooncakes.

 

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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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