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The Limits of China’s Anti-Corruption Crackdown

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China Power

The Limits of China’s Anti-Corruption Crackdown

Beijing wants to pursue anti-corruption on its own terms, with the Party in complete control.

The Limits of China’s Anti-Corruption Crackdown
Credit: Xi Jinping image from Kaliva / Shutterstock

As Beijing gears up to host this year’s APEC summit, the Chinese government is placing a major emphasis on anti-corruption cooperation among the 21 APEC members. One key initiative, the Wall Street Journal reports, would set up a new network (“Act-Net”) for transnational information sharing on corruption. The network would be based in China, under the aegis of the Party’s main anti-corruption agency, the Central Commission for Discipline Inspection. According to Xinhua, a preliminary Act-Net meeting took place in August, when “attendees shared detailed insights into ongoing criminal investigations and prosecutions for the first time on an APEC-wide basis.”

The proposal for Act-Net is part of the broader “Beijing Declaration on Fighting Corruption.” According to APEC secretariat executive director Alan Bollard, this anti-corruption statement is being jointly pushed forward by both China and the United States. Yet even as Beijing pushes forward with anti-corruption proposals at APEC, it stands accused of trying to block other measures.

According to ABC, Transparency International claims that Beijing is unhappy with anti-corruption measures under discussion for the G20 Leaders Summit, which will take place in Brisbane, Australia on November 15 and 16. Specifically, the proposal would help crack down “on shell companies and secret jurisdictions and a range of opaque practices that allow individuals to launder dirty money” by requiring clear reporting on corporate ownership. Transparency International’s senior advocate at the G20, Maggie Murphy, told ABC the proposed measures were in danger of being quashed by Beijing. “If China does not sign on the principles that are on the table… they will not go ahead,” she said.

Murphy argued that the proposals would mesh well with China’s own anti-corruption drive. The measures, she said, would “make it harder to hide your identity and harder to shift those funds out of the country, and that means potentially corrupt politicians and corrupt public officials in China itself.”

Indeed, China has been actively going after corrupt officials who have transferred assets overseas. As Yang Hengjun described in a recent piece, this “fox hunt” is a crucial part of China’s domestic battle against corruption – one that has had only limited success thus far. China’s push at APEC for transnational organization to share information on embezzled funds and fugitives would be a major step forward in this direction.

At the same time, however, China has entirely separate reasons for dragging its feet on corporate transparency. Chinese corporations, even privately owned enterprises, have a complicated relationship with the Chinese government – one that often raises suspicions overseas. As Richard McGregor described in his book The Party: The Secret World of China’s Communist Rulers, Chinese firms have to set up Party departments within their own organization; CEOs and other corporate leaders are beholden to Party guidance and discipline. Like so much of what goes on within the CCP, these ties are well known but poorly understood – and the CCP apparently wants to keep it that way. A stringent corporate transparency initiative would risk uncovering details about Party connections to and influence in Chinese corporations that the CCP would rather keep under wraps.

Of course, there’s also the question of whether China’s top leaders themselves could be exposed if outside forces start snooping into the corporate ownership structures of Chinese companies. In 2012, reports from the New York Times and Bloomberg investigated massive fortunes amassed by the relatives of former Prime Minister Wen Jiabao and current President Xi Jinping, respectively. Many of those assets were hidden through shell companies and convoluted ownership structures — exactly what the G20 proposal would seek to eliminate.

Responding to the ABC report, Chinese Foreign Ministry spokesperson Hong Lei insisted that China “takes an active part in the G20 counter-corruption cooperation.” Tellingly, though, Hong did not mention any support for the proposed corporate ownership initiative. Instead, Hong emphasized China’s preferred focus on “cooperation in judicial assistance, seizure of fugitives and their illegal proceeds and retrieval of assets.”

As the CCP has proven many times over, it wants to pursue corruption on its own terms, with absolute authority to select its preferred targets. For Beijing, anti-corruption measures are crucial but potentially dangerous if the Party is not in complete control. Anti-corruption initiatives that might overstep the CCP’s self-defined limits face a steep uphill battle – whether the G20 proposal for corporate transparency or Chinese netizens’ calls for officials to disclose their assets. International cooperation that will make it easier for Beijing to track and possibly extradite corrupt officials? Absolutely. Forcing Chinese corporations to open up their books? No, thank you.