Fighting corruption with an “iron fist”.
The Party, and Xi, continue to put anti-corruption at the top of their agendas. At a three-day plenary session of the Central Discipline and Inspection Committee (CDIC) Xi said that the Party would employ a zero-tolerance policy to corruption, and would punish offenders with an iron fist. The meeting- attended by all seven PBSC members- and Xi’s remarks were widely publicized, receiving over 10 minutes of coverage on Tuesday night’s Xinwen Lianbo.
We will likely see more investigations into officials and state-owned enterprises. Private companies, including MNCs, are also likely to be under increased scrutiny and should review internal compliance systems and make sure that they have processes for ensuring that employees do not engage in corrupt practices.
Coverage of CDIC meeting did not mention official asset declarations, but a five-year plan (2013-2017) for preventing corruption released in December 2013 stated that officials will only be promoted if they declare their assets. Such calls have been made for years with no success, and it will be interesting to see if Xi and Wang Qishan might actually have the political will and influence to finally pull it off. This would be a major coup for transparency, but would likely have a strong adverse effect on the real estate sector.
The anti-corruption campaign could be a key tool in carrying out SOE reform (and other broader structural reforms). It was announced this week that two former Sinopharm executives are being investigated for corruption, the latest in a series of senior people at large SOEs (PetroChina, Chinalco, China Mobile) to come under investigation. There has also been talk about making government procurement more transparent, following a recent National Audit Office report that showed “problems” related to procurement in 28 of 58 central government departments.
The anti-corruption campaign is now over a year old and shows no sign of slowing down, much less stopping. Xi appears dedicated to creating a more transparent and efficient party and government. However, as the ongoing trial of anti-corruption activist Xu Zhiyong shows, any reforms of the Party will come from within.
Giving credit where credit is due.
This week’s State Council meeting focused on “improving the social credit system”. Since Zhu Rongji introduced the idea of the social credit system in August 1999, China has made great progress establishing a credit system. The PBOC set up national unified individual and enterprise credit information databases in 2006; these now cover nearly a third of the population, and China now scores 5 out of 6 on the World Bank’s credit depth of information index (up from 2 out of 6 in 2005).
Wednesday’s meeting gives a timeline of 2020 for improving the system, which will aim to incorporate information on environmental compliance and product safety into ratings of creditworthiness. The meeting follows an announcement by the MEP that, as of March 1, banks with bad environmental ratings will not be eligible for subsidies or new loans.
Progress will be slow, but the changes proposed should help to increase transparency within the government and the wider economy (including the financial sector), and improve market mechanisms.
Galloping towards the year of the Horse.
There’s a distinct end-of-year feeling to Chinese politics these days as officials and departments review 2013 work and prepare for 2014. Li Keqiang and other members of the State Council are drafting the Government Work Plan for 2014. On Friday they held a meeting to solicit opinions from different segments of society regarding the 2014 plan, which will be presented by the premier on March 5 at the opening of the NPC’s annual session.
Two of the four business leaders invited were from the IT sector (Tencent and Xiaomi); not surprisingly, stronger IPR protections was high on the list of business suggestions, and likely heralds increased efforts at enforcement in this area. This is good news for all business in China, including MNCs, but must be bittersweet for foreign tech companies to see such a clear signal that the government is heavily invested in developing domestic companies.
The CPPCC Standing Committee also met this week to deliberate priorities for its upcoming annual session to begin on March 3.
The new Silk Road
China continues to pursue an active trade policy, this week agreeing to resume FTA talks with the Gulf Cooperation Council (which includes Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Bahrain and Oman) in preparation for one day creating a free trade zone among the seven countries. FTA negotiations began in 2004, but had stalled in recent years. China frames this cooperation as part of its Silk Road Economic Belt initiative that aims to increase trade links across the Eurasian continent.
This week’s warm welcome of Bulgarian president Rosen Plevneliev was in part also due to trade considerations. Bordering Turkey, key trans-Eurasian rail links pass through Bulgaria. Stronger ties with Bulgaria also offer the possibility of greater access to the EU market, as well as a strong (if small) pro-China voice in Europe.
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Top Leaders Week in Review |
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Xi Jinping
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Jan 18 |
http://cpc.people.com.cn/n/2014/0118/c64094-24156687.html
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Jan 17 |
http://cpc.people.com.cn/n/2014/0117/c64094-24155478.html China-GCC strategic dialogue resumes after 32-month hiatus.
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Jan 16 |
http://cpc.people.com.cn/n/2014/0116/c64094-24143035.html
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Jan 15 |
http://cpc.people.com.cn/n/2014/0115/c64094-24121633.html
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Jan 14 |
http://cpc.people.com.cn/n/2014/0115/c64094-24120035.html
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http://theory.people.com.cn/n/2014/0114/c168825-24108856.html The articles read as a kind of “how-to” for being a good official. Don’t be corrupt, follow the will of the people and take a long-term view of a region’s development.
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Jan 13 |
http://cpc.people.com.cn/n/2014/0114/c64094-24108651.html China has been focusing a lot on building ties with Central and Eastern European countries. Expect more investment in Bulgarian manufacturing and infrastructure by Chinese firms looking to produce in Europe. Chinese automotive, solar panel and wind turbine manufacturers in particular have discussed setting up shop in the country as they continue to seek inroads to the EU market. Bulgaria likely to be another pro-China voice in the EU. Did the Bulgarian president get better meetings than David Cameron? .
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Li Keqiang
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Jan 17 |
http://cpc.people.com.cn/n/2014/0119/c64094-24162116.html
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Jan 15 |
http://cpc.people.com.cn/n/2014/0116/c64094-24133488.html
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Jan 14 |
http://cpc.people.com.cn/n/2014/0115/c64094-24120045.html
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Jan 13 |
http://cpc.people.com.cn/n/2014/0114/c64094-24108652.html
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Zhang Dejiang |
Jan 15 |
http://cpc.people.com.cn/n/2014/0117/c64094-24146257.html
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Jan 14 |
http://cpc.people.com.cn/n/2014/0115/c64094-24120046.html
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Jan 13 |
http://cpc.people.com.cn/n/2014/0114/c64094-24108653.html
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Yu Zhengsheng |
Jan 14 |
http://cpc.people.com.cn/n/2014/0115/c64094-24120055.html
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Liu Yunshan |
Jan 16 |
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Jan 16 |
http://cpc.people.com.cn/n/2014/0115/c64094-24129391.html
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Jan 14 |
http://cpc.people.com.cn/n/2014/0115/c64094-24120068.html
The commission was formed in 1997 and meets annually.
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Wang Qishan |
Jan 13-15 |
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Zhang Gaoli |
Jan 17 |
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Jan 13 |
http://cpc.people.com.cn/n/2014/0114/c64094-24108654.html Zhang’s an ex-oil man.
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