Xi Fails to Earn Stripes as China ‘Tiger’ Corruption Hunt Underwhelms

Xi Fails to Earn Stripes as China ‘Tiger’ Corruption Hunt Underwhelms

By Adam Rose on 12:22 pm November 24, 2013.
Chinese President Xi Jinping has raised expectations he will tackle corruption much more forcefully than his predecessors, but official data on investigations suggests the crackdown so far is little different to previous years. Authorities have opened a similar number of corruption probes in 2013 to last year, data from the Supreme People’s Procuratorate (SPP), which oversees criminal investigations and prosecutions nationwide, shows.According to a Reuters analysis of the data, authorities have prosecuted far fewer people this year compared to the past five years, while the number of senior officials being investigated is on track to match those in prior periods.

Such statistics are at odds with the frequent trumpeting of Xi’s anti-graft campaign by Chinese state media. Since he took over the ruling Communist Party a year ago, Xi has vowed to root out endemic corruption by catching “tigers”, or senior officials, and not just lowly “flies”.

Xi might be treading carefully since putting too many officials behind bars could paralyse decision-making across the government and the party, experts said.

“They don’t want everybody worried about being arrested. That would be a disaster for the party,” said Yuhua Wang, a China corruption expert at the University of Pennsylvania.

A remarkably similar number of corruption investigations each year over the past decade suggests authorities might even have minimum targets to meet, some experts said.

Xi could surprise, as he did earlier this month with far-reaching economic and social reforms announced at the end of a conclave of senior leaders, if his crackdown gathers steam in the coming year and prosecutions jump.

For now, experts said authorities had yet to demonstrate the campaign was anything other than business as usual.

“Anti-corruption campaigns are in large part exercises in pure public relations,” said Andrew Wedeman, a professor at Georgia State University who has written a book on corruption in China. “You need a few pelts.”

Graft oils the wheels of the government and party at almost every level in China, which ranked 80th out of 176 countries and territories on Transparency International’s 2012 corruption perceptions index, where a higher ranking means a cleaner public sector.

Like almost all his predecessors, Xi has said corruption threatens the party’s very existence.

Spearheading his crackdown is Wang Qishan, head of the party’s Central Commission for Discipline Inspection (CCDI). Wang warned party investigators last month that their jobs were on the line if they failed to root out corruption, telling them to use “shock and awe” on their targets.

The party said this month it plans to set up a database to record information on the income and property of party officials. It has said nothing about making the income database public.

The central discipline commission, however, did hold its first news conference ever in January and launched a website in September that allows the public to report alleged misbehaviour.

Some analysts expect further reforms to the commission could be in the works, which might affect its approach to fighting corruption.

Neither the government nor the commission responded to queries about the anti-corruption campaign or the SPP data.

“I think they genuinely want to fight corruption,” said Zhu Jiangnan at the University of Hong Kong, who researches corruption in China. “There’s certainly been an increase in transparency.”

Last year, government authorities investigated 35,648 people for corruption, based on data in publicly available SPP work reports that covered the 2008-2012 period.

As of the end of August, 30,938 investigations have been opened. That was up 4 percent compared to the same period last year, the SPP said in its official newspaper last month.

And from 2011 to 2012, the number of investigations rose 6 percent, suggesting marginal growth in the number of probes is likely for all of 2013.

“My hunch is that the year-end figures for 2013 will be pretty close to the totals for 2012,” said Wedeman, who studies the SPP data.

“Past experience suggests that part-year figures often overstate the actual annual increase.”

The central discipline commission and its regional branches also carry out corruption investigations, but only of party members. The commission has not released data on the total number of graft cases this year, which are dealt with internally. A fraction are handed over to prosecutors.

Zhu said the commission was “extremely overloaded”.

“The CCDI’s staff hasn’t markedly increased … They face the limits of manpower,” she said.

At the same time, the government had prosecuted half the number of officials investigated for corruption during the first eight months of the year. From 2008 to 2012, it was 90 percent, SPP data shows.

China had investigated 129 officials at the departmental-bureau level and above for corruption during the January-August period, according to the SPP’s newspaper. If investigations remain steady, that would mean roughly 194 for the full year.

The annual average over the five years to 2012 was 186, or just over one high-level official per city with a population of one million people.

At the vice-ministerial level and above, China has announced criminal investigations into four top leaders this year. Two other unnamed leaders were mentioned in a party legal newspaper in August. The annual average from 2008-2012 was six.

And while at least eight leaders ranked vice-minister or above have been investigated by the discipline commission and removed from office up to November of this year for violations of party discipline, often a codeword for corruption, at least 10 were toppled in 2009. Such moves, announced by state media, precede any criminal investigation.

Experts said this year’s numbers suggested the anti-graft drive may be more about bolstering the party’s image given the attention in state media to the government’s success in catching offenders.

“I think the goal of the anti-corruption campaign is to establish more legitimacy for the party. The goal … is not to arrest more people,” said Wang, from the University of Pennsylvania.

Meanwhile, the number of people investigated for corruption has remained remarkably consistent since 2003.

Between 2003 and 2007, an average of 33,495 people were investigated by judicial authorities each year, based on the SPP’s work reports. Between 2008 and 2012, the average was 33,569, a difference of less than 100.

That hints at the use of targets for graft investigations in China, a country where anything from issuing parking tickets to gross domestic product growth is assigned a target.

“They do a lot of investment earlier on, to make sure that they won’t need to catch up or rush at the end of the year,” said Wang, referring to how Chinese provinces meet GDP targets.

Few “tigers” have been rounded up under Xi’s tenure.

In May, Liu Tienan, the former deputy head of China’s top planning agency, was removed from his post after allegations of corruption were posted against him online. A criminal investigation was opened in August.

Authorities also recently said several former executives at state energy giant PetroChina and its parent China National Petroleum Corporation were being probed for “serious discipline violations”, shorthand generally used to describe graft.

The executives included Jiang Jiemin, the former chairman of both entities and who most recently headed the government body that oversees state firms. Authorities have given no details on their alleged wrongdoing.

Wang said the low prosecution rate overall so far this year could indicate authorities wanted to unravel big cases, and that results might come next year.

“That would mean it’s actually very serious,” said Wang. “They single out the flies, but they want to find the tigers behind the flies.”



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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