10 April 2014

Trials began in Beijing yesterday of two members of the New Citizens Movement charged with “summoning a mob to disturb public order”. They follow a long list of Movement members being prosecuted and imprisoned for campaigning for the disclosure of assets by senior officials. Media and the public were prevented from entering the court.

Ironically although President Xi Jinping has been vocal about tackling corruption, there is no acceptance of civil rights groups doing likewise. Anti corruption initiatives are a Party monopoly; there is no tolerance for any form of organised opposition. The politically controlled measures seem to be having a substantial economic effect on their own.

A Bank of America assessment is that the official anti corruption campaign has taken $100 bn out of the Chinese economy this year.  The effects are seen in a slow down of restaurant business and a slump in sales of luxury goods. There has been a marked decline also in the sex trade in many cities.

Another problematic consequence has been a rapid increase in government bank deposits, up almost 30% year on year. The report indicates that “even honest officials, are now so terrified of starting new projects, for fear of being seen as corrupt, that they’re simply keeping public funds in the bank”.

The result may be that economic activity will reduce by up to 1.5% this year.

The anti corruption policy was intended to lower public consciousness of graft because widespread anger at the excesses of senior Communist Party members could threaten Party rule. But attacking corruption is having an unintended but substantial effect on slowing China’s economy.   Corruption has proved itself as a lubricant for growth. Can integrity prove to be of greater and more beneficial effect?