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Bad For Business? China's Corruption Isn't Getting Any Better Despite Government Crackdowns 6park.com



Ralph Jennings
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China has become chronically stuck mid-way between very high and very low scores for levels of graft

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(AP Photo/Mark Schiefelbein) 6park.com
Chinese President Xi Jinping has called corruption the ruling Communist Party’s biggest threat and vowed a “sweeping victory” over the problem. Graft in the world's second-largest economy has manifested as casino junkets, blow-out banquets and suspected collaboration with stock traders. Stopping it has been a key point for Xi, who got clearance Sunday to serve indefinitely in the country’s highest office.
But the country’s corruption rankings in world surveys suggest that China has become chronically stuck mid-way between very high and very low scores for levels of graft . That’s because of, and despite, five years of stepped-up crackdowns against thousands of public officials since Xi took power in 2012.
China ranked 77th last year on Berlin-based nonprofit Transparency International’s 180-country “Corruption Perceptions” scale. The widely cited index assigned it a low-ish to mid-range score of 41 last year, barely changed from 39 in 2012 when Xi took office and in every intervening year. China still has room to improve in order to rank alongside the cleanest countries such as New Zealand, Singapore and most of Northern Europe. (Somalia came in last place in the 2017 index.)
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The World Bank’s World Governance Indicators place China in mid-range territory for “regulatory quality,” a measure of particular interest to offshore investors. It has scored between the 30s and 50s over the past 10 years. Cleaner countries score in the 80s and 90s. China’s “rule of law” numbers, a subset of the World Bank indicators, are lower than the marks for regulatory quality. 6park.com
Moody’s Investors Service has found that China also falls in the middle of the pack for graft that impairs a country’s “ability and willingness” to repay debt, the service’s Singapore-based associate managing director Marie Diron says. It also monitors whether a country's anti-corruption campaigns lead to “durable improvement” in debt repayments, according to Diron.
“International surveys that aim to provide common measures of corruption tend to place China around the middle of the range of sovereigns that we rate,” Diron explains.
Struggle to move onward
This month China set up a new, local-to-central level network to intensify patrols against corruption, as described by the state's official media Xinhua News Agency.
Over the past six years, an average of about 50 high-ranking officials were arrested per year, Minxin Pei, professor of government at Claremont McKenna College in the U.S., told a panel of experts at the Center for Strategic and International Studies. That’s double the figure before Xi’s anti-corruption campaign.
In China's capital Beijing, a city targeted for early anti-graft reforms, the number of officials “under supervision” increased from 210,000 before Xi to 997,000 as of December, according to Xinhua.
China has ample reasons to target corruption. The problem contributes to income disparity as well as limiting the ruling party’s “legitimacy,” according to the Center for Strategic and International Studies.
Foreign investors also have reason to be concerned. Firms in China find that corruption can divert staff time from normal work to satisfying government officials, says Stuart Orr, a professor of strategic management with Deakin University in Australia.
Companies fret further about inconsistently enforced regulations, Orr explains. For example, he says, when China tightened the allowable level of sulfur in imported wine in 2014, some Australian shippers had to dump their stock at customs while others got it through as they had “achieved a good relationship with customs."
“Corruption hot spots tend to focus on ambiguous regulation such as import requirements which allow or require the local authority to make an interpretation," he says. 6park.com
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In this March 9, 2012 photo, China's People's Liberation Army Gen. Guo Boxiong sits during a session of the National People's Congress in Beijing. The former general killed himself during a probe into suspected bribery. (AP Photo/Ng Han Guan) 6park.com
More on Forbes: Why Foreign Businesses Will Put Up With Some Corrupt Practices In Southeast Asia
Foreign companies prefer to operate in China’s 14 special trade zones, Orr adds, because they’re relatively free of corruption.
Some experts believe that Xi's anti-corruption campaign may struggle without stronger rule of law, freer mass media and a smaller role for government. These changes could expose and prosecute corrupt people without concern about protecting a ruling party. They're hallmarks of democracies, as well, while in China the Communist Party is the sole ruling force.
Nine countries on the Transparency International index’s top 10 are solidly democratic, Singapore being the only debatable one.
“To get rid of corruption in an economy, you really have to strengthen the rule of law, you have to downsize the government, reduce the role of government, and also liberalize the press, give the press more leeway in exposing corruption,” Pei told the panel. “None of these efforts have occurred in China.” 6park.com