11 January 2012

The Chinese President delivered his annual pep talk on the importance of fighting corruption to the Communist Party’s Central Commission for Discipline Inspection this week. He ordered a more rigorous fight against corruption and more discipline from within the Party. An interesting theme of his message was that the next generation of leaders must present to the Chinese people a Party with a “new face and new image”.

The Commission for Discipline Inspection is the Department responsible for compliance with policy by Party officials. Theoretically it merged several years ago with the agency monitoring the effectiveness of Federal, Provincial and city administrations but the special status of the Party remains.

President Hu’s concern is the plague of corruption scandals which the official Xinhua news agency acknowledges is behind growing social discontent. and could threaten the Party’s political authority.

A prominent fraudster was the Railways Minister alleged to have received more than NZ$150 million in kickbacks during construction of the high speed network. In December, a week of police action was needed to restore “order” after the public reacted against corrupt officials in a Guangdong village. This intolerance is being voiced also in a growing number of social networking sites protesting against graft, and some openly critical of the government..

President Hu spoke of the need to stick to a policy of “putting the people first” .

“The fight against corruption remains severe and the task is still arduous…We need to intensify supervision and discipline, let public supervision play a positive role and rigorously enforce the party’s rules.”

Privatising the fight may be a solution. The United States Government announced that $532 million was paid last year to whistleblowers who identified and initiated action against corrupt government contractors. The False Claims Act designed to “out” corrupt contractors in the Civil War has a new life. Health care providers and pharmaceutical companies have been the main “victims”, with more the $3 billion recovered by the Ministry of Justice in cases brought against unscrupulous contractors.

One suspects that Chinese entrepreneurship could exploit this type of process given an opportunity. In the US whistleblowers can earn bounties of up to 30% of monies recovered by the government under the False Claims Act.