As China’s economy cools, a hot debate on graft

Critics contend that China’s anti-corruption campaign has helped to slow the economy. But the evidence points to honest governance as better for growth, if integrity in officials can be promoted.

The Monitor's View

China’s economy, the second largest in the world, is now growing at its slowest pace in a generation. While this has cooled down financial markets globally, it has warmed up a difficult question within China: Is the campaign by President Xi Jinping to root out official corruption contributing to the slowdown?

Critics contend Mr. Xi’s campaign since 2012 to instill honesty in civil servants and to punish the corrupt has only delayed investments in the economy. Officials in charge of clearing new projects have come to fear being caught in the government’s anti-graft net. Corruption, say the critics, is still a “necessary evil” to getting business done based on a traditional culture of patronage and cronyism.

This argument has grown so strong that it forced Xi, who has built immense powers for himself, to take the unusual step of recently defending his campaign. “Anti-corruption will not affect economic development,” he stated. “On the contrary, it will make the growth healthier.”

The criticism is not unique to China. As global efforts to curb corruption have found some success in the past 15 years, some economists and others say corruption is sometimes a necessary lubricant for poorer countries. It binds the elite in common cause and supplements the low salaries of bureaucrats. It helps investors cut through red tape and “greases the wheels” of decisionmaking.

The World Bank and other institutions, however, say corruption adds an average of up to 10 percent to the cost of doing business. Honest governance creates a fair playing field and rewards businesses by merit and innovation. Virtue is not only its own reward but creates winners that benefit all of society.

The most compelling example of this argument – and a model for China – is Singapore. Under the late leader Lee Kuan Yew, the island nation tackled corruption in many ways, such as keeping salaries high for civil servants. Its economy has flourished.

By contrast, China still ranks 100 out of 175 on a scale of perceived corruption, as determined by Transparency International. Reducing this corruption is necessary to help the Chinese economy become less dependent on state-run enterprises. Xi does not want the sale of those enterprises, as expected under coming reforms, to go to those who pay the highest bribe.

If the critics of anti-corruption campaigns have any argument, it may be that such campaigns can stigmatize an entire country.  The corrupt only learn how to better hide their deeds. An equal effort must be made to promote honesty, such as directing projects toward local, community involvement where accountability is often stronger.

One global group, the Accountability Lab, has worked with Liberia, Nepal, and other countries to identify “honest government officials” through popular campaigns. It attempts to “name and fame” officials of integrity rather than “name and shame” corrupt ones. Honesty then becomes a powerful incentive for effective governance.

”In the battle against corruption, we all have a responsibility to stand for integrity,” said Antony Blinken, deputy US secretary State, in a June meeting of the G20 anti-corruption working group.

As China deals with a difficult transition to a new economic model, it must continue to make the right choice of sticking with its anti-corruption campaign – while also rewarding its honest leaders.