General Secretary Xi Jinping's Anti-Corruption Campaign and China’s Business and Politics

Politics and Business in Post-Mao China
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Table of Contents Introduction. 3 1.    Historical Background and Campaign Launch. 3 1.1         Chinese Corruption's Historical Foundations. 3 1.2         Beginning the Anti-corruption Campaign Under Xi Jinping. 4 1.3         Corruption from a political economy perspective. 4 2.    Direct Effects on the Business Climate. 5 2.1         Regulation Modifications and Compliance. 5 2.1.1  New regulations and domestic and foreign business impacts. 5 2.1.2  Improved surveillance and reporting. 6 2.2         Market and Economic Sentiment 6 2.2.1  Investor confidence and stock market reactions. 7 2.2.2  A shift in business tactics, particularly for state-owned enterprises (SOEs)…..7 3.    Political Consequences and Power Structure. 8 3.1         Elites and the Concentration of Power 8 3.1.1  Targeted Politicians and Their Message. 8 3.1.2  Campaign rumors to consolidate power for Xi 9 3.2         Effects on Regional Governance. 9 3.2.1  Change in Power Dynamics. 9 3.2.2  Case Studies and Regional Effects. 10 4.    Broader Implications and Theoretical Interpretations. 10 4.1         Political control perspective. 10 4.1.1  Compare Anti-Corruption Initiatives in Other Countries. 12 4.2         International Relations Affecting China. 12 4.2.1  Campaign Impact on China's Global Image. 12 4.2.2  Changing Diplomatic and Business Partnerships. 13 5.    Critiques and Obstacles. 13 5.1         Perceived Campaign Limitations. 13 5.2         Responses and perceptions of society. 14 Conclusion. 14 Reference. 15
Introduction
General Secretary Xi Jinping's vigorous anti-corruption campaign changed China's political trajectory dramatically (Li, 2019). The campaign's goal of rooting out corruption within the Communist Party of China (CPC) has made waves in China's corporate and political spheres. The mere inception of this initiative reveals the pervasive corruption problems that China has been dealing with. This analysis explores the various impacts of this campaign in a meticulous manner. Eliminating corrupt practices could seem to be a noble goal, but it has far-reaching effects on how power is distributed, how businesses are run, and how China's bureaucracy is structured. The main point to be examined is the campaign's dual-edged nature, contrasting its effectiveness in battling corruption with its subsequent changes to power structures and business paradigms.
1 Historical Background and Campaign Launch
1 Chinese Corruption's Historical Foundations
Corruption in China has an extensive and turbulent past linked to the country's imperial epochs. Corruption, inefficiency, and power imbalances have plagued China's dynastic cycles, often triggering periods of social unrest and even complete collapse (Bunker, 2019). Qin Hui, a renowned scholar, attributed many of these occurrences to an "unjust administrative system" (xingzheng bu zheng). As Deng Xiaoping led China from a centrally planned to a socialist market economy, modern corruption emerged. Deng's famous proclamation, "To get rich is glorious," sparked economic growth and opened the door to bribery and corruption.
2 Beginning the Anti-corruption Campaign Under Xi Jinping
The anti-corruption campaign in China has made significant progress since Xi Jinping came to power in 2012 (Li, 2019). Xi launched an unprecedented anti-corruption campaign to restore public trust and the Communist Party's legitimacy. The seriousness of the crackdown was signaled by the fact that this campaign targeted both low-level officials (the "flies") and high-ranking elites (the "tigers").
In the historic CCP 20th Congress in October 2022, Xi reaffirmed his commitment, calling the anti-corruption campaign a fight against "corruption on a scale unprecedented in our history." While corruption exists, the fight will continue, he said emphatically. According to Xu et al. (2022), clear evidence of China's progress can be seen in its ranking on the Corruption Perceptions Index, which improved from 80th in 2012 to 65th by 2022.
3 Corruption from a political economy perspective
To fully comprehend corruption in China, one must adopt a meticulous approach rooted in the study of political economy. Although corruption frequently slows economic growth, China's experience has been the opposite. It is worth mentioning that during the initial stages of China's economic liberalization, corruption appeared to play a role in promoting economic development. The distinction between reform efforts and corruption has been obscured by events like township-village enterprises (TVEs) growth (Mushkat & Mushkat, 2022). However, the unique characteristics of China's government structure account for this anomaly. Regional leaders were given the discretion to meet growth and financial targets set by Beijing under its regionally distributed, authoritarian structure despite being chosen by the central Party. The Party's emphasis on growth and this flexibility unintentionally opened doors for graft.
The "Ease of Doing Business" index published by the World Bank also provides insight into the evolving Chinese regulatory landscape; due to the anti-corruption campaign, China jumped from 99th place in 2012 to 31st place in 2019 (Sharpe, 2021). This notable advancement highlights the measures to streamline administrative processes and facilitate commercial activities. The anti-corruption campaign led by Xi Jinping is a clear demonstration of the Communist Party's determination to tackle one of its most urgent issues. While the global fight against corruption continues, China's anti-corruption drive provides a fascinating case study due to its historical and political context. The information, patterns, and scholarly perspectives thoroughly comprehend this complex matter.
2 Direct Effects on the Business Climate
4 Regulation Modifications and Compliance
Significant changes have been made to China's regulatory environment over the past ten years, especially under President Xi Jinping's direction. There is a noticeable inclination towards increased centralization and regulation of businesses, whether they are domestic or foreign, within its jurisdiction. China's economic policies and strategies reflect its goals for the global stage even as it continues to become a superpower.
1 New regulations and domestic and foreign business impacts
China has released a bunch of new rules that will have an immediate effect on businesses. The recent crackdown on the tech industry, including behemoths like Alibaba and Tencent, shows that no business is safe from government oversight. These regulations primarily address antitrust concerns, data protection, and cybersecurity. The regulatory landscape for foreign enterprises has become increasingly uncertain. According to (Zhou, Kong, and Jiang, 2020), the 2020 Foreign Investment Law promises fair treatment but leaves technology transfer unclear, which could complicate operations for foreign businesses in China.
2 Improved surveillance and reporting
Xi's era has seen information control and surveillance tighten. The implementation of the Social Credit System (SCS) is a clear indication of this. According to this system, businesses are evaluated using a range of metrics, such as regulatory adherence, environmental impact, and other factors. A low grade could be met with sanctions, like limiting market access. This system requires businesses to prioritize compliance to a greater extent than ever before. In addition, due to the state's growing proficiency in digital surveillance utilizing advanced technologies like AI, businesses are constantly under scrutiny (Scharre, 2023). The lines between state and business operations are blurred because they must share more operational data with the state.
It has benefits as well as drawbacks to have such strict regulations. From a scholarly perspective, it compels businesses to embrace optimal methodologies, guaranteeing the safeguarding of consumers, preserving the environment, and promoting equitable competition (Hsu et al., 2021). Businesses operating in China now must consider a dynamic and stringent regulatory environment and enormous market potential. This includes higher operational costs, a more complex regulatory environment, and the risk of state interference in business decisions. A meticulous and methodical approach, combined with a comprehensive knowledge of the local environment, is essential for success in this emerging business model. Businesses must remain flexible to align with China's vision and protect their interests as it balances domestic and global goals.
5 Market and Economic Sentiment
China's complex governance, corruption, and economic growth have sparked global and domestic market reactions. The interaction between these elements establishes a setting where it is crucial to comprehend market sentiments and economic indicators.
3 Investor confidence and stock market reactions
Including the "A" shares of 222 Chinese companies in MSCI's Emerging Market Index in 2017 was a significant nod to China's improving corporate governance (Bilyay-Erdogan et al., 2023). However, these shares only comprised 0.7% of the index's value, as shown in the figure.
Figure 1: China A shares Index Weight (Cole et al., 2020)
This minimal representation can be viewed as a sign of acknowledgment and a careful strategy by global investors. However, the antitrust investigation conducted by the State Market Supervision Administration into Alibaba has had a significant impact. When China's leading market regulator sets its sights on the tech giants, investor confidence will undoubtedly be affected. These instances demonstrate China's economic dichotomy of progressive governance and systemic issues.
4 A shift in business tactics, particularly for state-owned enterprises (SOEs)
In the 1990s, state assets were significantly released, allowing executives of state-owned enterprises to acquire these assets at discounted rates. This was done as part of the "SOE restructuring" initiative. Despite being catalysts for short-term growth, such choices had long-term effects like job losses. The significant workforce reductions during the 1990s and the ongoing continuation of this pattern into 2016 and beyond underscore the difficulties that state-owned enterprises (SOEs) encounter in balancing expansion with societal stability (Leutert & Vortherms, 2021). China's prosperity has led to widespread corruption, suggesting SOEs face both opportunities and risks. In the face of an increasingly service-driven economy and social instability, SOEs must reassess their business strategies as China's economic growth slows. China's trajectory, marked by governance progress and deep-seated challenges, is nuanced. Investors and businesses must comprehend the opportunities and risks of progressive reforms, endemic corruption, and changing economic strategies.
3 Political Consequences and Power Structure
6 Elites and the Concentration of Power
Xi Jinping's "tigers and flies" initiative, which targets high- and low-ranking officials, is more than just an anti-corruption drive. This message resonates strongly within China's political sphere, emphasizing that no individual is exempt from scrutiny regardless of their position or power.
5 Targeted Politicians and Their Message
Targeting prominent individuals like former Interpol chief Meng Hongwei, Hainan party chief Zhang Qi, and business moguls like Jack Ma exemplifies the scope and ferocity of Xi's campaign. These actions have both positive and negative implications. Consequently, they pledge to end corruption, which garners domestic support, especially from a population tired of elite impunity. Furthermore, perhaps more strategically, they warn potential dissenters or rivals of the risks of challenging Xi's authority or party directives.
The abduction of Xiao Jianhua, a billionaire with ties to Beijing's elite, is a clear example of the extensive implications of the campaign (Rithmire & Chen, 2021). Despite his Canadian citizenship in Hong Kong, his abduction showcased Beijing's determination to act regardless of geographic boundaries or internation...