Xi Jinping seen to focus more on reform after big tiger caught
Anti-graft investigation into former security tsar Zhou Yongkang could shift Xi Jinping's agenda to institutional reform, analysts say
Beijing's announcement of the long-awaited anti-corruption case involving former security chief Zhou Yongkang clears a major overhang on the leadership's agenda for reform, observers said.
Oil stocks surged yesterday, defying the 0.09 per cent decline of the Shanghai stock market after the ruling Communist Party confirmed on Tuesday a widely speculated investigation into Zhou, a former member of the Politburo Standing Committee and so far the most senior "tiger" caught in Beijing's anti-corruption fight.
Zhou previously headed PetroChina, the mainland's biggest state-owned crude producer, and had exerted deep influence on domestic security issues as well as energy-related matters.
The probe into Zhou marks an initial victory for President Xi Jinping who is seeking to consolidate his authority after taking office less than two years ago, although how the case is handled may stir further power struggles among different interest groups.
Bocom International chief China strategist Hong Hao said the fall in the stock market yesterday was probably a result of "buy the rumour, sell the news" as market expectations for a near-term announcement on Zhou turned into reality.
"The market's earlier rally has also priced in recent stabilisation of economic growth. But it would need more good news for it to post further rises," he said.
Analysts say it would be the right time for Xi to refocus on structural reforms, such as overhauling tax, fiscal, and financial systems. Critics said these reforms had proceeded too slowly because of the leadership's focus on the anti-corruption campaign and efforts to stem an economic growth slowdown.
"With some high profile arrests under its belt, we believe the focus of the new government can start to shift from the anti-graft campaign to real institutional reforms, which are badly needed for China's long-term economic health," said Bank of America Merrill Lynch economist Lu Ting.
China's economy expanded by 7.5 per cent in the second quarter compared to double-digit growth in the past decade, as a reliance on cheap labour and credit expansion caused productivity to shrink.
Capital Economics saw Xi's hardline stance on corruption as positive for hopes of significant reform, as the tough approach should make vested interests "less likely to press their claims", while reducing the threat that "relaxing state control over the economy will result in large-scale embezzlement that would diminish economic efficiency down the line".
Part of the recent stock market rally was fuelled by hopes that some state-owned enterprises will team up with private capital to foster greater operating efficiency.
The Communist Party's Central Committee decided to hold its fourth plenary session in October to discuss law reforms as part of efforts to improve governance, which sparked hopes that Beijing would manage the economy based more on rules, making it less susceptible to influence by power groups.
Hong said it remained unclear whether the leadership might roll out firm details at the plenum on protecting the interests of private capital, but expected authorities would come up with "better, clearer" language on the matter.