Without corruption, some ask, can China’s economic system function?

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As China enters the third year of its massive anti-corruption campaign, experts and officials worry that without the fat of the bribes, projects will stagnate and the economy will suffer.

Across China, more than 100,000 civil servants have have been disciplined since President Xi Jinping’s anti-corruption campaign began, according to government figures.

As a result, many more sit idly by, delaying decisions and refusing to grant approvals for investment projects, either out of fear of being caught up in a future corruption investigation or because, without pot -of-wine, they simply lack any incentive. to act.

The problem has become so serious that it is sounding the alarm bells at the highest levels of government.

On Monday, Premier Li Keqiang demanded that local authorities sign a pledge to faithfully carry out major economic and social policies, saying their dereliction of duty has slowed the economy, state media reported.

Some officials, he said, “have taken a wait-and-see attitude, being reluctant to implement major central government policies,” China Daily reported.

Ren Jianming, a professor of clean governance at Beihang University in Beijing, said officials were not used to a system that worked without corruption.

“Developers don’t believe that without bribes they would get a project, and officials don’t believe that without bribes they could be promoted, he said. “They don’t trust a clean system.

“Managers have stopped or delayed decision-making to avoid risks. Even if they don’t take a bribe now, they could be suspected or reported. Then their previous corruption would be discovered.

Graft may not have disappeared, but the anti-corruption campaign has taken its toll on luxury goods sales and business in upscale restaurants and hotels.

Some karaoke bars, where officials have softened up with alcohol and women, have closed their doors; the former Portuguese enclave of Macao has been hit hard by a sharp drop in income from gambling, a pillar of its economy.

The new unwillingness of Chinese officials to act appears, as Li said, to have accelerated China’s economic slowdown, although the exact effect is difficult to measure, not least because official statistics are not particularly credible.

“For the record, this had a real impact on investment projects [domestic and foreign-invested] for which approvals are not expected, “wrote Arthur Kroeber, head of research at consultants Gavekal Dragonomics, in an email, describing the fight against corruption as” one of the policies designed to slow the growth of the government. GDP at a more sustainable rate. “

Lu Ting, a Hong Kong-based economist at Bank of America Merrill Lynch, warned in a report last year that the campaign was creating “political paralysis” that depressed investment.

He estimated at the time that this could reduce overall economic growth in 2014 by around a percentage point, although figures reported by officials likely ended up being inflated for political reasons.

“Nobody wants to do anything,” said an official in Beijing, who declined to be identified as he spoke on a sensitive issue. “If we do things, we are exposed to all kinds of risks, including political risks. And we don’t have financial incentives.

Ren said some hospitals have apparently stopped buying equipment because policymakers feared they might be investigated for corruption, while a businessman in Beijing said the campaign not only had depressed demand, but had also created new uncertainties.

“Before, when we wanted to get things done, we would invite officials to dinner,” the businessman said. “If they showed up, we knew things were going to get done. But they’re not showing up, so we don’t know what’s going to happen.

Minxin Pei, director of the Keck Center for International and Strategic Studies at Claremont McKenna College in California, said officials were engaged in a form of non-cooperation, of “passive resistance” to Xi’s efforts to reform the Chinese Communist Party.

“He took their cheese away without offering anything in return,” he said. “They say, ‘If you don’t allow us to have a comfortable and corrupt life, we are not going to work for you.'”

Officials, Pei argued, know the party’s survival would be in jeopardy if they stopped working indefinitely and the economy collapsed, and they are asking to be allowed to return to their corrupt ways.

“They are engaged in a test of will with Xi Jinping,” he said.

Some economists argue that the anti-corruption campaign will ultimately make the Chinese economy more efficient and lower business costs, just as similar campaigns in Hong Kong and Singapore were credited in the 1970s. Foreign business executives say that it could help level the playing field.

“It takes the stress out,” Joerg Wuttke, president of the European Chamber of Commerce in China, told Bloomberg News last year. “You’re not afraid that someone will get an order because they’ve found better champagne or something like that. It’s not Singapore yet, but it’s a very positive development.

Meanwhile, Bank of America’s Lu expects the campaign to have less negative impact on economic growth this year, in part because, after consolidating power, “the government regains the power to force or d ‘urge government officials to act “.

IMoreover, he written in a research note last month, “the young public servants promoted over the past two years are either cleaner or more loyal to the current government. These officials tend to be more proactive in spurring growth.

Others are not so sure that the effect of the campaign will be lasting.

“The party knows that it cannot completely clean the system because the corruption problem has been around for many years,” said Li Yongzhong, senior researcher working in the anti-corruption system.

“It is a consequence of the establishment by China of the Soviet system, with a concentration of power, and officials appointed by their superiors rather than elected. Without reform of the system, the appointment of new officials can only treat the symptoms. It won’t make any fundamental difference.

Xu Jing contributed to this report.


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