Encouraged by the current anticorruption drive in Europe and the United States and indeed in other countries around the world, which in the West is predominantly due to new laws and/or increased enforcement of the laws, China’s new prime minister is himself now on a major anticorruption drive domestically within China.   By contrast, the West is concerned principally with stamping out anticorruption abroad, and seeks to punish their own domestic corporations and any foreign corporations which indulge in bribery and corruption to win new business while abroad. Often that has involved using illegal means to win business in China.

China’s Transparency International ranking is 80 in 2012.  This is only a few places behind Italy, which has a shockingly poor ranking at 72.  The UK by comparison has slipped a few places in recent years to 17th place, due mostly to the parliament expenses scandal and also to the phone hacking and media scandal where, over a number of years, journalists are said to have been hacking the phones of celebrities as well as paying police officers for information.  In the course of this on-going investigation over 100 people have been arrested.  Many have been charged with a variety of corruption and other related offences. A series of trials has already started and are likely to last for several years due to the scale of the problem.

China on the other hand has a very poor image internationally and domestically when it comes to transparency and fairness in doing business.  It appears to affect all areas of life in China.  It is widely believed that many of those who hold political power are “on the take”.  Further, the perception has long been that if you want to get business from a state owned company, you need to wine and dine the relevant officials in a lavish way.  Others with more perceived power do even better than this and have, until recently at least, been proud to show off their luxury cars and watches (mostly western brands), items which no Chinese official could afford on an official’s salary. See the Financial Times article of 2nd June 2013.

Since the new  Chinese leader, Xi Jinping, came into power he quickly made it clear that anticorruption was an important part of his agenda.  As the Financial Times article asserts, anticorruption campaigns in China are nothing new, and they usually run out of steam quickly (one wonders whether this is because the leader of the time subsequently found out that those closest and dearest to them are themselves beneficiaries of corruption).  However, as the article notes, it appears that on this occasion the new initiative may last longer than previous initiatives.  

Today, 10th June,  it is reported in the BBC that the former Minister for railways in China was tried for corruption on 9th June.  He was accused of receiving over £6m in bribes over 25 years. The verdict has not yet been delivered. The railway itself has undergone a huge expansion and renovation programme in the last 10 years although a series of fatal accidents have demonstrated that health and safety standards have not been properly applied. One might infer (not unusually) that corruption in the rebuilding programme has led to poorer standards, and the cutting of corners along the way and may have been responsible for the fatal accidents.

The local high end restaurants in Beijing are reporting a dramatic fall off in trade in the last few months, as those government officials who might habitually be invited to lavish meals in order to win new business from state owned companies no longer wish to be seen enjoying these “privileges”.  It is reported in many places including here that they are now either going to cheaper restaurants in Beijing, or that they are enjoying those meals in private rooms where they can’t be spotted.  The luxury restaurants might not all survive with dramatically lower turnover.

At an international level, it is reported that sales of luxury Western goods have fallen off, or that the rate of increase is far less than less than one might expect when considering the growth of GDP as a whole.  This is reportedly because officials are trying to draw less attention to themselves, and therefore avoiding obviously expensive brands. On the other hand it may instead be a cynical tactic by officials to persuade Chinese people to buy locally produced goods, and to support the domestic consumer economy.  

The same FT article suggests that the public (there are no voters) overwhelmingly support the Prime Minister’s initiative, presumably because they are mostly the victims of corruption and not the beneficiaries of this illegal practice.  

In any event it does appear that China is starting off on the road to clean up its act. This is likely to be a  very long road because corruption is endemic, but also due to China’s sheer size.  Overall, China as a country will benefit from the clean-up, but there may be companies such as German luxury car makers who do less well in the future than they may have previously hoped.

Finally, as a further omen that the anticorruption drive might last, it is reported here that this year Jia Zhanke’s Chinese language film “ A Touch of Sin” won this year’s award for best screenplay at the Cannes Film Festival.  The plot of the film follows the lives of four individuals whose lives are adversely affected by corruption and exploitative practices in China.  It is reported that the film has been approved for release in China in its uncut form.

In the long run, of course, not paying bribes will mean that competition flourishes and China becomes  more open and a fairer place to do business both for domestic and foreign companies.