Corruption Threatens Chinese Regime's Legitimacy

Widespread, massive corruption is the biggest threat to social stability in China and to the Communist Party’s durability in power.  The extent of the problem was revealed in a amazingly detailed new report this week.
Also on full display this week was the Communist government’s determination (or desperation) to try to control the narrative and stop the truth from getting out.  But in the age of weibo and WeChat, that is increasingly an uphill battle.
The ICIJ — the International Consortium of Investigative Journalists — launched a two-year probe into the off-shore holdings of Chinese officials and “princelings,” the children and family members of the elite.  The ICIJ’s findings, released this week, are eye-popping.  Some 21,000 people from China and Hong Kong have set up off-shore accounts in tax havens in the Caribbean, and they include relatives of some of the most powerful figures in the Communist Party hierarchy.
Former prime minister Wen Jiabao’s son and son-in-law are included among those funneling their cash to off-shore accounts, as is the daughter of Li Peng, another former premier.  Also included is a brother-in-law of President Xi Jinping; Xi has tried to convince a skeptical public that he is serious about cracking down on corruption. Relatives of the late paramount leader Deng Xiaoping, and also of immediate past president Hu Jintao, make the list, as well as some of China’s best known real estate moguls and entrepreneurs.
According to the ICIJ’s exhaustive report, between $1 trillion and $4 trillion have left China since 2000.  The full ICIJ interactive report, in English here, and in Chinese, includes terrific graphics to help readers “follow the money.”
The reaction of the regime was typical.  First, of course, was an attempt to block internet sites that referenced the article.  It’s not entirely clear at this writing, but it appears likely that the ham-handed attempt to block so many web sites led to an inadvertent shutdown of most internet service in China for almost eight hours, with 500 million Chinese internet users being directed to outside servers normally blocked here.
Not that the censorship worked anyway.  Chinese Netizens quickly found work-arounds, and soon there was word making the rounds on the Twitterverse of an “unblockable link” to the full ICIJ report.
The other official reaction, from a foreign ministry spokesman, was equally typical; don’t address the substance of the exhaustive report, but blame nefarious people with shadowy ulterior motives for leaking the information.
In fact, the Communist government’s fear over the issue of high-level graft was on display in another venue, the courts, where anti-corruption activists this week were put before show trials for their supposed crime of daring to call for officials to disclose their financial assets.  The crackdown on members of the New Citizens Movement began last year with up to 20 arrests, and this week, the movement’s founder, the human rights lawyer Xu Zhiyong, was put on trial, accused of “gathering crowds to disrupt public order.”  Other trials this week followed.
Apparently for the leadership in Beijing, encouraging the public to demand financial disclosure is tantamount to insurrection.
And why wouldn’t it be?  Given the shocking amount of high-level malfeasance hinted at in the ICIJ report and other investigations by Bloomberg and The New York Times, among others, the Chinese public should understandably be outraged. And with the internet, and particularly social media sites, such information is very easily spread, and not readily suppressed.
During three decades of economic reform, China has become a very rich country, with the world’s second largest economy, in overall GDP terms, behind only the United States.  But much of that wealth remains concentrated in the hands of the elite few — Communist Party officials, their family members, and some savvy businessmen and women. In terms of per capital GDP, or purchasing power of people, China ranks around 92nd or 93rd in the world, according to the IMF and the World Bank. That means Chinese are poorer than people in Serbia, South Africa, Gabon, Bulgaria or Kazakhstan.
A common refrain I’ve often heard here is, “The country is rich, but the people are poor.”
The huge amount of cash the elite is shipping out of China to tax havens off-shore reminds me of an old joke from my Africa reporting days (which I include in my book “Out Of America.” ) The joke compares corruption in Asia and Africa.  In Asia, the jokes says, a corrupt minister  points to a new highway and power plant being built, and boasts that he gets “50 percent.”  In Africa, according to the joke, a corrupt African minister points to an empty field and remarks that he gets “100 percent” — meaning in Africa, the highway and the power plant never get built.
China so far has been able to get away with staggering levels of corruption, because when you look around, you see the infrastructure is getting built — the highways, the high-speed trains, the new airports, the new commercial centers sprouting up.  But growth is slowing, concerns about local debt are growing, and there’s real fear that the expansion of the last three decades has to come to a halt.  When there’s less money for growth, how will people react to top officials and their family members siphoning off billions of dollars of the nation’s wealth to Caribbean tax havens?
But to me, the rush to funnel money off-shore speaks to the underlying fragility of the system, and the fact that even those at the top levels are hedging their bets, having their family members get the cash outside the country.  Perhaps officials see how quickly fortunes changed for the onetime Chongqing Party boss Bo Xilai, who went from being a top prospect for the ruling Politburo Standing Committee to disgrace and jail. Maybe they just understand this anachronistic Leninist system cannot sustain itself for the longterm.
We had long known about what the Chinese call “naked officials,” or Chinese Communist officials who send their spouses and children overseas, often as a way to move assets out of the country and avoid investigation.  Just last week, the government announced in the state-run media a new crackdown on “naked officials,” saying those with family members abroad would be denied promotions.
So the ICIJ revelations come at a particularly embarrassing time as Xi tries to gain public favor for his anti-corruption baby steps.  Will he step up to the task, and really start to demand that the top officials, starting with himself and his Politburo members, reveal their assets? Is Xi, with his family members, too entrenched in the same web of corruption to be the one to rein it in? Or will the so-called anti-corruption campaign continue to target lower-level “naked officials,” and officials who have retired or relinquished their positions and titles?
With the crackdown on the bloggers and activists, like the New Citizens Movement, and the earlier threat to withhold visas for foreign journalists, the government is signaling that it alone will battle corruption, and will not allow any citizen or media to join in the effort.  But is the emperor really wearng any clothes?
I’ve forgotten most of my high school Latin, but one phrase has always stuck in my head; “Quis custodiet ipsos custodes.”  It translates as; “Who will watch the watchmen?”
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