Panda vs. Bamboo: How China is tackling corruption again and why it's failing

Recently, a fresh wave of government purges swept through China. On October 24, Xi Jinping ousted Defense Minister Li Shangfu from his post, citing an ongoing investigation. Li Shangfu's fate closely paralleled that of Qin Gang, the former Foreign Minister, who faced dismissal in July following an extensive probe. This marks the most prominent facet of a renewed anti-corruption crusade initiated this summer. Notably, this sweeping crackdown resulted in the apprehension of 176 hospital administrators from all corners of the country and subjected 20 officials from anti-corruption units to investigations. Furthermore, purges within the party hierarchy were reignited. Nevertheless, practical experience underscores that high-profile anti-corruption initiatives and, at times, stringent penalties yield limited effectiveness. The authorities have nearly conceded the persistence of “moderate corruption,” and substantial transformation remains elusive without a shift in the political system.

Content

• Anti-corruption ideology

• Moderate corruption

• Why it's hard to combat corruption in China

• Sacred guanxi

Anti-corruption ideology

While China attempts to propagate the myth of a successful anti-corruption campaign, the country still grapples with a high level of corruption. This, in turn, gives rise to a multitude of issues, including the neglect of safety measures and the resulting technogenic disasters, ranging from gas explosions to mine collapses. Moreover, it fosters the proliferation of illegal “sweatshops” – factories that fail to meet even the most basic safety requirements.

In Russia, articles extolling the virtues of the “successful fight against corruption” are a regular feature, and social media abounds with memes on this theme. This phenomenon owes a significant portion of its existence to Chinese PR efforts and the personal influence of Xi Jinping. In 2018, he delivered a speech in which he boldly claimed that China had successfully uprooted corruption. The intense focus on this subject comes as no surprise for two primary reasons.

In 2018, Xi Jinping delivered a speech in which he boldly claimed that China had successfully uprooted corruption

First and foremost, post-communist China had valid associations with high levels of corruption. According to the Corruption Perception Index, an annual assessment of a country's corruption level by Transparency International, published since 1995, China found itself among the world's 40 most corrupt nations in the late 20th and early 21st centuries. The severity of this issue and its detrimental impact on the economy and international investments kept the fight against corruption prominently featured on the Party's agenda, although this didn't ensure high efficiency.

Xi Jinping seized upon this agenda as soon as he came to power in 2012, launching an extensive anti-corruption campaign and vowing to hunt both “tigers” and “flies” – referring to both high-ranking officials and low-level bureaucrats. By 2022, more than 4 million people had come under investigation, with many of them being found guilty. The anti-corruption campaign indeed reached both “flies” and “tigers,” including high-ranking party officials, military personnel, and even the Communist Youth League.

By what seemed a “fortunate turn of events”, nearly all of Xi Jinping's political adversaries were arrested as part of this campaign, while loyalists and individuals from Xi's inner circle were appointed to vacated positions. This allowed him to consolidate almost all forms of power, formal and informal, in just a few short years.

Nearly all of Xi Jinping's political adversaries were arrested as part of this campaign

Simultaneously, the anti-corruption campaign served to legitimize the party's authority in the eyes of the public. Instead of promises of substantial economic reforms or rapid growth, Xi Jinping focused on combating corrupt officials and entrepreneurs, essentially rebranding counterrevolutionaries and enemies of the people. The idea of fighting corrupt officials and businesspeople resonated with a majority of the population, helping to control and alleviate dissatisfaction with less popular reforms.

Assessing the effectiveness of Xi's “hunt for tigers and flies” is a complex task. China's position in the Corruption Perception Index did indeed improve, rising to 65th in the world by 2022 from 80th in 2012 when Xi came to power. On the other hand, one cannot speak of a “victory over corruption,” as President of the People's Republic of China claimed back in 2018. China, on average, still lags behind many European countries, Armenia, Saudi Arabia, and falls notably behind Japan, South Korea, and even its own Hong Kong.

Moderate corruption

However, it's possible that Xi Jinping never aimed to completely eradicate corruption. In 2012, the Chinese government-affiliated publication, Global Times, published a column titled “The Anti-Corruption Battle in China Will Be Challenging,” which discussed the “unwritten rules” in Chinese society and the difficulty of eliminating them. One specific phrase from the article gained widespread attention:

“The public must understand the objective reality – China cannot entirely suppress corruption without throwing the entire country into pain and confusion.”

The article quickly spread on social media and sparked sharp criticism, which intensified after several publications reprinted it with a rephrased headline: “The public should understand that China must allow for moderate corruption.” The term “moderate corruption” (适度腐败 or shìdù fǔbài) swiftly became a meme and, of course, triggered even more significant criticism.

The term “moderate corruption” swiftly became a meme

However, this seems to be an apt description of Xi Jinping's approach to anti-corruption measures. A conspicuous hunt for major corrupt officials, including his own rivals, and equally high-profile mass detentions of mid-level bureaucrats, combined with the disregard for violations, such as the aforementioned “sweatshops,” or widespread economizing on safety measures, along with the active utilization of party functionaries and loyal officials to strengthen his own power – this is precisely what “moderate corruption” entails, and at least under Xi Jinping, there are no plans to eradicate it.

Why it's hard to combat corruption in China

There is some truth in the Global Times column. Corruption in China is indeed unlikely to be easily eradicated, even with sincere political will, due to several cultural and socio-economic factors.

First and foremost, the post-reform transitional state of China's economy plays a significant role. The coexistence of a market economy and a capitalist mode of production with a planned economy and a substantial state presence in the market creates unique conditions for corruption. The rapid income growth in the private sector, linked to liberalization and market reforms, coincides with stagnant salaries in the public sector and its still significant influence on the economy, creating intriguing structural inequalities. Officials possessing political capital cannot easily convert it into monetary capital, but wealthy entrepreneurs seeking additional approvals or passing regular inspections can help them.

As a result, officials are incentivized toward corrupt practices, and private entrepreneurs, for the most part, don't object. Instances of corruption in regions with burgeoning commercial sectors in China are more prevalent than the norm, and the magnitude and “intensity” of these cases escalate with the GDP.

Government officials are incentivized toward corrupt practices, and private entrepreneurs don't object

At the same time, China faces another structural imbalance: it mixes a high degree of decentralization with a rigid authoritarian regime. Local authorities and lower-level officials have considerable fiscal autonomy, but they lack effective oversight. The party apparatus, though authoritarian, is distant and inefficient, and these officials are not accountable to the local people. In this system, officials are appointed based on loyalty and enjoy some trust from the authoritarian leader, giving them virtually limitless opportunities for corruption. However, the ongoing process of recentralizing power and fiscal responsibilities has led to a moderate reduction in corruption within tax authorities and local officials. Nevertheless, corruption persists due to the lack of democratic accountability and the unfeasibility of a complete shift to a merit-based selection system.

Another peculiarity of the Chinese economy, also stemming from its transitional nature and influencing the level of corruption, is the concept of “soft budget constraints.” “Soft budget constraints” mean that state-linked enterprises can always count on a government “safety net.” Regardless of their performance and productivity, the government often cannot allow many enterprises to go bankrupt due to the potential harm it could inflict on local markets and for reputational reasons.

State-linked enterprises can always count on a government “safety net”

“Soft budget constraints” are, of course, not unique to China. They are believed to have played a significant role in the 2008 crisis. In Western economies, they are often referred to as the “too big to fail” principle. However, it's in China that “soft budget constraints” are widely prevalent. Therefore, due to virtually unlimited resources and a lack of serious accountability, managers of certain corporations can afford corrupt practices.

Sacred guanxi

Cultural factors also come into play alongside the economic and structural peculiarities. Nearly any experienced entrepreneur or politician who has worked in China will readily share insights into the concept of “guanxi” (关系, guānxì) and its nearly sacred significance in China. However, mystifying this concept excessively is not warranted, as it is not unique to China. Literally, “guanxi” means any relationship, and in the context of economics and politics, it is often translated into Russian as “cronyism,” “connections,” or simply “relationships.” More formally, “guanxi” is a practice of social exchange, both instrumental (intentional, with calculated benefit) and affective (emotional, not pursuing a specific goal). “Guanxi,” like any social exchange, is a complex concept due to the variety of practices, meanings, and understandings.

In brief, “guanxi” practices involve establishing close relationships and engaging in mutually beneficial exchanges (whether it's giving a gift or treating someone to a meal), and they are essential for many political or economic interactions.

Properly establishing such relationships is necessary – and at the same time, highly beneficial – for corrupt practices at any level, from bribery to appointments to party positions. For example, Ling Li, in her work on “guanxi,” presents two examples from judicial practice. In both cases, lawyers attempted to offer bribes to judges. In one case, a lawyer sent a straightforward letter offering a share of the profit, to which the judge responded, “such an approach to guanxi is too much.” As a result, the lawyer lost his license. The second story tells of a much more successful bribery case: instead of money, the protagonist provided the judge with small but unpaid services over an extended period and eventually became almost like a family friend.

Properly establishing relationships is necessary for corrupt practices at any level

The role of such relationships is presumably what the Global Times column referred to as “unwritten rules,” even though the author avoided using the term “guanxi.” The role of connections in corruption in China is difficult to overstate: the quantity of documented and described cases in legal and anthropological literature clearly indicates their nearly inseparable nature.

However, the concept of reciprocal social exchange, whether it's guanxi, potlatch, “blat,” or any other custom, does not necessarily imply corruption, and perhaps in suitable socio-economic and political conditions, unethical practices and the role of “connections” in corruption could be significantly reduced.

To achieve this, though, an entirely different political system and rule of law are necessary. It's pointless to talk about combating corruption until the country establishes the rule of law, equal protection of civil rights, and independent courts. In the modern authoritarian system of the PRC, built by Xi, the public will have to accept “moderate corruption.”

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