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Xi Jinping's anti-graft campaign

Business losing out as Chinese officials strive to appear squeaky clean

Bureaucrats steer clear of sector because they don’t want to be targeted in Beijing’s sweeping anti-graft drive

PUBLISHED : Friday, 18 August, 2017, 8:31pm
UPDATED : Friday, 18 August, 2017, 10:50pm

Beijing is apparently starting to worry about an unintended side effect of its sweeping crackdown on graft – officials are giving the business community a wide berth.

A Communist Party journal even warned this week that when bureaucrats stay away from business because they don’t want to be targeted in the campaign, the result is just as damaging as corruption.

“[This attitude] has cast a shadow over normal government-business relations,” according to a commentary in the latest issue of Qiushi, or Seeking Truth. “It is a drag on economic development and it has led to missed growth opportunities. The consequence is equally serious – and the impact equally damaging – [as corruption].”

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Chinese President Xi Jinping launched a high-profile anti-corruption drive and introduced frugality measures for officials in late 2012.

Since then, the business community has complained that it has become difficult to communicate with government officials, who can now be punished for accepting gifts or attending lavish banquets.

Xi called on those officials last year to actively change the way they engaged with the business sector, ensuring dealings were kept “close” but “clean”.

Yet over a year later, civil servants are still keeping their distance, turning down banquet invitations and gifts – but also legitimate business requests, according to the Qiushi article.

Zhuang Deshui, deputy director of Peking University’s Clean Government Centre, said some bureaucrats were now simply unwilling to take the risk of interacting with businesspeople.

“But this means they are, to some extent, failing to meet the country’s needs when it comes to economic development,” Zhuang said.

In Hong Kong, financial services sector lawmaker Christopher Cheung Wah-fung, who also runs brokerage firm Christfund Securities, agreed that the anti-graft drive had made it tough for the business sector to communicate with officials.

“Many mainland officials have refused to attend meals or even drinks since the anti-corruption campaign started,” Cheung said. “These business lunches or dinners are just to exchange ideas or maintain the relationship. It can be just a coffee, or a simple meal – nothing excessive. But these officials still worry that they might get into trouble so they just turn down every invitation.”

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He said this was not an ideal situation, since it was important for civil servants to have contact with the business sector so they could keep track of trends and issues.

“Without these communication channels, it’s hard for officials to address problems in the sector and it’s also hard for businesspeople to keep on top of the latest policies,” Cheung said. “There needs to be a balance so that officials can keep these channels open.”

The problem has not gone unnoticed by Beijing. Shang Fulin, the former banking regulator chief who is now an economic panel vice-chairman on the national political advisory body, said last week it had become a widespread phenomenon. Shang told a political advisory meeting that civil servants were actively avoiding contact with the private sector in order to appear “clean” – and this was problematic for businesspeople who needed to discuss policy matters with them.

Analysts noted that in the past, graft was a fast track for private businesses to get around bureaucratic hurdles in a country where political connections can provide access to capital and resources.

Edward Zhao Xiaofeng, a researcher on business corruption at Lingnan University in Hong Kong, said although the anti-graft measures had improved efficiency in the overall economy, they put pressure on private firms facing an uneven playing field.

“Compared with state-owned enterprises, small private firms are at a disadvantage when it comes to capital and permits,” Zhao said. “So they’ve had to make up for that with bribes.”

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Although the party has tried to set up formal communication channels such as state-run chambers and consultative bodies, the smaller players were often denied a say, according to Chen Minglu, a political scientist at the University of Sydney.

“The majority is left out,” she said. “This institutionalised way of participating in politics and decision-making is actually exclusive to the bigger, more successful businesses.”

Still, some small business owners are happy that they no longer have to shell out for banquets. Ge Guoqiang, who owns a textile company in Zhejiang province, said the anti-corruption campaign had saved him more than 200,000 yuan (US$30,000) a year in entertaining local cadres.

“They have become much more careful,” Ge said. “I don’t get any officials requesting banquets now – in fact, they refuse to eat with me unless it’s a home-cooked meal.”