Action on CNPC signals Beijing’s resolve to hit corruption hard
Hu Shuli says the Politburo’s launch of a new five-year plan to tackle corruption, just ahead of a key meeting on reform, is significant
Hu Shuli 05 September 2013
An anti-corruption drive is sweeping China. As soon as Bo Xilai’s trial ended on August 26, news broke of trouble brewing at China National Petroleum Corporation (CNPC), one of the nation’s biggest state-owned enterprises and parent company of the Hong Kong-listed PetroChina.
First, the Central Commission for Discipline Inspection announced that CNPC deputy general manager Wang Yongchun was being investigated for gross violation of party discipline. A day later, the State-owned Assets Supervision and Administration Commission (Sasac) said newly promoted deputy general manager Li Hualin, along with two PetroChina senior executives, Ran Xinquan and Wang Daofu, had been relieved of their duties pending a disciplinary probe. The sacking of four senior management employees in one go was a first in the history of China’s state-owned enterprises.
The market reacted accordingly: in one day, some HK$21.7 billion was wiped off the market value of CNPC’s two listed companies, PetroChina and Kunlun Energy.
At a press conference held that day, CNPC officials made a point of stressing that the investigation was no less serious than the one on Bo. Just when speculation was heating up about details of the misconduct, the bombshell dropped that the head of Sasac itself, former CNPC chairman Jiang Jiemin, has also been placed under investigation. Jiang is the first Central Committee member of the 18th party congress to be purged. The launch of the campaign signals leaders’ belief that cleaning up the government is a key step
There’s no ignoring the broader picture of this targeted campaign. On August 28, the Politburo endorsed a new five-year plan on fighting corruption. Nine months after a new generation of leaders took power, the government is showing that it not only understands the urgency of tackling the problem, but it also has come to some consensus on how to do it - by building an effective system of controls.
In China, sadly, corruption is a “low-risk, high-profit” venture that, as it grows more widespread, has become more inventive and less visible in practice. The sums at stake have also grown larger.
Apart from the challenge of gathering evidence, anti-corruption officers must confront a more grievous problem: the selective application of the law. Effective discipline based on the rule of law depends on treating all as equal before the law. In their fight against corruption, authorities must be committed to catching both the “flies” and the “tigers”. No one should imagine themselves untouchable by the law.
Economists have long said that corruption in mainland China is directly linked to the rent-seeking opportunities exposed by an economy in transition. So the reforms this year targeting government administration - by reducing officials’ ability to vet and approve applications - will help close these loopholes. But the going has been slow, partly because of bureaucratic inertia but mostly because interest groups are fighting tooth and nail to protect these opportunities for palm-greasing.
Reformers can only inch forward. Hence, strengthening the existing disciplinary measures is equally important. In this respect, the disciplinary officers must lead by example. They must address the problem of insufficient oversight over colleagues of the same rank in other departments; streamline and refine their operations; and ensure their own system of oversight stands up to scrutiny.
Meanwhile, the case files also tell us that while corrupt officials might spend time thinking up ways to enrich themselves, an act of bribery often requires no effort at all. This exchange of money for power is easier than any business negotiation. This reflects a failing of China’s political system: officials in high places are given power without sufficient checks, which encourages abuse.
In this system, corrupt officials may easily hide their tracks, complaints and charges of misconduct are often ignored, and corrupt officials may appeal to patrons higher up. The Politburo may have had this in mind when it emphasised the four types of checks and balances in its new plan to tackle corruption: supervision within the party, by democratic institutions, through rule of law, and by public opinion.
Party leaders will hold the third plenary meeting of the 18th Central Committee in November to discuss reform. The launch now of the anti-corruption campaign signals leaders’ belief that cleaning up the government is a key step towards reform.
Besides its message of zero tolerance, the current crackdown should spur reflection on the related ills of China’s economy. The CNPC scandal, for instance, should raise questions about how graft is linked to the monopoly power of state-owned giants.
The fight against corruption and the drive for reform complement each other. For success in implementing reforms, the authorities can afford to hit much harder at corruption.
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Action on CNPC signals Beijing’s resolve to hit corruption hard
Hu Shuli says the Politburo’s launch of a new five-year plan to tackle corruption, just ahead of a key meeting on reform, is significant
Hu Shuli
05 September 2013
An anti-corruption drive is sweeping China. As soon as Bo Xilai’s trial ended on August 26, news broke of trouble brewing at China National Petroleum Corporation (CNPC), one of the nation’s biggest state-owned enterprises and parent company of the Hong Kong-listed PetroChina.
First, the Central Commission for Discipline Inspection announced that CNPC deputy general manager Wang Yongchun was being investigated for gross violation of party discipline. A day later, the State-owned Assets Supervision and Administration Commission (Sasac) said newly promoted deputy general manager Li Hualin, along with two PetroChina senior executives, Ran Xinquan and Wang Daofu, had been relieved of their duties pending a disciplinary probe. The sacking of four senior management employees in one go was a first in the history of China’s state-owned enterprises.
The market reacted accordingly: in one day, some HK$21.7 billion was wiped off the market value of CNPC’s two listed companies, PetroChina and Kunlun Energy.
At a press conference held that day, CNPC officials made a point of stressing that the investigation was no less serious than the one on Bo. Just when speculation was heating up about details of the misconduct, the bombshell dropped that the head of Sasac itself, former CNPC chairman Jiang Jiemin, has also been placed under investigation. Jiang is the first Central Committee member of the 18th party congress to be purged.
The launch of the campaign signals leaders’ belief that cleaning up the government is a key step
There’s no ignoring the broader picture of this targeted campaign. On August 28, the Politburo endorsed a new five-year plan on fighting corruption. Nine months after a new generation of leaders took power, the government is showing that it not only understands the urgency of tackling the problem, but it also has come to some consensus on how to do it - by building an effective system of controls.
In China, sadly, corruption is a “low-risk, high-profit” venture that, as it grows more widespread, has become more inventive and less visible in practice. The sums at stake have also grown larger.
Apart from the challenge of gathering evidence, anti-corruption officers must confront a more grievous problem: the selective application of the law. Effective discipline based on the rule of law depends on treating all as equal before the law. In their fight against corruption, authorities must be committed to catching both the “flies” and the “tigers”. No one should imagine themselves untouchable by the law.
Economists have long said that corruption in mainland China is directly linked to the rent-seeking opportunities exposed by an economy in transition. So the reforms this year targeting government administration - by reducing officials’ ability to vet and approve applications - will help close these loopholes. But the going has been slow, partly because of bureaucratic inertia but mostly because interest groups are fighting tooth and nail to protect these opportunities for palm-greasing.
Reformers can only inch forward. Hence, strengthening the existing disciplinary measures is equally important. In this respect, the disciplinary officers must lead by example. They must address the problem of insufficient oversight over colleagues of the same rank in other departments; streamline and refine their operations; and ensure their own system of oversight stands up to scrutiny.
Meanwhile, the case files also tell us that while corrupt officials might spend time thinking up ways to enrich themselves, an act of bribery often requires no effort at all. This exchange of money for power is easier than any business negotiation. This reflects a failing of China’s political system: officials in high places are given power without sufficient checks, which encourages abuse.
In this system, corrupt officials may easily hide their tracks, complaints and charges of misconduct are often ignored, and corrupt officials may appeal to patrons higher up. The Politburo may have had this in mind when it emphasised the four types of checks and balances in its new plan to tackle corruption: supervision within the party, by democratic institutions, through rule of law, and by public opinion.
Party leaders will hold the third plenary meeting of the 18th Central Committee in November to discuss reform. The launch now of the anti-corruption campaign signals leaders’ belief that cleaning up the government is a key step towards reform.
Besides its message of zero tolerance, the current crackdown should spur reflection on the related ills of China’s economy. The CNPC scandal, for instance, should raise questions about how graft is linked to the monopoly power of state-owned giants.
The fight against corruption and the drive for reform complement each other. For success in implementing reforms, the authorities can afford to hit much harder at corruption.
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