China’s Corruption Drive Shifts Gears

October 18, 2013, 8:05 PM

China’s Corruption Drive Shifts Gears

By Russell Leigh Moses

The detention of Nanjing Mayor Ji Jianye earlier this week might seem like just the latest move in Chinese leader Xi Jinping’s drive clean up the Communist Party ranks by going after both “tigers” and “flies.” In fact, the Nanjing case marks a departure from Beijing’s usual method of coping with corruption by Party members, in a number of important ways. Typically, announcements of an investigation and confinement of a high-ranking cadre that appear in the state-controlled press are terse and uninformative. That’s how the Nanjing media covered the event (in Chinese).But the official coverage out of Beijing went far further this time, noting Ji’s ties to a Suzhou construction company that worked on major infrastructure projects in Nanjing (in Chinese) and accusing him of taking at least 20 million yuan ($33 million) in bribes (in Chinese).

It’s rare for an official’s connections with local businessmen to be mentioned publicly so early in an investigation. By calling attention to that relationship, Party disciplinarians were out to demonstrate that Ji fit the profile of an imprudent and immoral cadre. But the Party media machine was also revved up quickly to prevent social media from getting its usual jump on the news, before Weibo users could start speculating about the reasons for Ji’s dismissal. Beijing is now especially attentive to making its case before others do it for them.

Also interesting is the nature of the coverage. Much of the mainland press has focused more on Ji’s governing style as his alleged malfeasance. Ji’s treatment of personal staff and subordinates in Nanjing is being portrayed as “very rude and disrespectful” (in Chinese). One widely-reprinted commentary refers to Ji as a “bulldozer” when it came to policy matters there (in Chinese).

Indeed, it was Ji’s obsession with remaking Nanjing through massive urban development — sports stadiums and a disruptive subway project for the upcoming Youth Olympics to be held in the city, for example — that seems to have truly infuriated his superiors in Beijing.

According to public reports, there were unnecessary demolitions of homes to clear land for new buildings and roads, forced relocations of residents, and “projects that from time to time stimulated public resentment.” On one occasion, the renovation of the city to Ji’s specifications – by removing swathes of beloved wutong trees — led to large-scale mass protest by residents.

As one assessment concluded, “Ji’s four years in power disemboweled Nanjing” (in Chinese).

There is, of course, the possibility that Ji’s takedown was political score-settling: that Xi and his reformers bested conservatives who placed Ji in charge and liked what he was up to in Nanjing.

But indications out of Nanjing are that Ji was massively unpopular. While some were taken by surprise by the announcement, cadres in particular were quick to get in line and publicly support the dismissal (in Chinese).

So what does Ji’s removal tell us about the state of Xi’s anti-corruption campaign and where it might be moving?

For one, it’s clear that the campaign is still struggling to find a way to cope with cadres who are successful in forcing change, but actually corrupt, unpopular, or both.

Ji had extensive experience in managing and redeveloping mid-size cities in eastern China, and the move to Nanjing was a further promotion. He remained in Nanjing for three years, carrying out the same policies that he is now condemned for. That shows a flawed system of assessment—there’s still either too little supervision, or too much political protection available for too many cadres even when they do behave badly.

Xi’s answer seem to be that from here on, it’s not only the cash that some leading cadres are pocketing that could lead to dismissal, but also the way officials under suspicion are performing with the public and their comrades.

As anti-corruption czar Wang Qishan noted at a major seminar this past week (in Chinese), “setting an example of honest and clean self-discipline” in all areas—specifically, to be “self-restrained” where power is concerned—is “the essence of governance.”

In Ji’s case, as one commentary noted (in Chinese), while “many corrupt officials under investigation have no problem from a legal perspective, they monopolize power during their tenure in an arbitrary and partisan manner [and their] policy mistakes cause heavy losses which are abuses of power and dereliction of duty.”

In other words, cadres must be outstanding and upstanding at the same time.

That could be a mixed message to many officials who are accustomed to being powerful instead of being popular. But it shows that the Xi leadership isn’t shy about paying even closer attention to how leading cadres run their localities.

Ji’s takedown contains another lesson for officials in this regard: The public matters more than you think.

When officials focus too much on major projects for the sake of development and promotion, Xi and his allies are arguing, they end up losing touch with the masses. Now, officials not staying abreast of public concerns more regularly could be vulnerable, even if they are relatively free of suspicion of corruption.

The takedown of Nanjing mayor Ji Jianye is the story of a battle won against an unpopular official. But it’s also shows that Xi and his allies are interested in trying out new strategies, if only because they recognize that this is going to be a long, difficult war.

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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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