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How effective is China's corruption crackdown?

04 May 2016

At the 18th National Congress of the Communist Party of China on 8 November 2012, Chinese President Xi Jinping vowed to hunt down 'tiger and flies'; in other words, crack down on the endemic corruption between high-level officials and lower-level civil servants.

This vow was not taken lightly. To date, over 100,000 high-ranking officials, politicians, military officers and senior executives of state-owned companies appeared to have been convicted for corruption, some even sentenced to death. 

What is defined as corruption in China?

An Interpretation was issued setting out the standards and penalties of bribery crimes in accordance with the law of China. According to the Interpretation, there are three categories of bribes: 

1. Least serious case 

The 'least serious case' is where a bribe is of more than RMB 10,000 (GBP 1,000). In these circumstances, conviction will give rise to a short-term detention or imprisonment of less than five years. 

2. Serious case 

A 'serious case' is where either:

  • the bribe is between RMB 100,000 to RMB 200,000 (GBP 10,600 to GBP 21,200) and is made in any of the following circumstances: offered to more than three people; offered to various public officials; and/or where the bribe comes from illegal income; or
  • the bribe is between RMB 200,000 and RMB 1 million (GBP 21,200 to GBP 106,000)

Punishment entails a fixed-term imprisonment of five to ten years. 

3. Very serious case 

A 'very serious case' is where the bribe is between RMB 500,000 to RMB 1 million (GBP 53,100 to GBP 106,000) under the circumstances described in the first bullet point above or of more than RMB 1 million (GBP 106,000). Punishment may be a fixed-term imprisonment of not less than ten years or at the higher end of the scale, life imprisonment. 

According to Xinhua News Agency, the Chinese Communist Party also reportedly banned bureaucrats from engaging in 'sinful activities'. Such activities include extravagant eating and drinking, nepotism, adultery and, rather interestingly, golf. 

The crackdown evidenced in Macau and Hong Kong 

In Macau, the campaign has resulted in a plunge in the gaming market, reportedly caused by a reduction in gambling by Chinese officials. In Hong Kong, there has been a fall in the number of Chinese visitors making expensive purchases, as officials are now fearful of being seen to splurge on luxury goods. 

Famously known as the 'Las Vegas of the East', Macau is the only (special administrative) region in China where casinos are legal – there is not one single casino in mainland China or Hong Kong. 

Prior to the crackdown, the casino industry in Macau enjoyed a period of significant growth (it first outstripped Las Vegas in 2007 by a staggering USD $3.51 billion). It is widely considered that this growth was supported by corrupt Chinese officials who flocked to Macau to gamble and/or to launder funds out of the country.

Macau's gaming revenue has, however, fallen steeply in recent years. The significant decline suggests that the measures implemented by President Xi have been effective, not least from restraining RMB being transferred out of the country by illegal means. 

In Hong Kong, the measure of the campaign is visible through the reduced high-profile visits of mainlanders and their spending on extravagant items such as cognac, watches and expensive handbags. Research has revealed that sales in the retail industry plunged 13.6% in the first two months of 2016 – the biggest slump since 1999; which is attributed to a drop in 13% of visitors to Hong Kong during the same period. 

The future 

Four years on, it appears that President Xi’s campaign is successful and thriving. There is no sign of the campaign slowing down – quite the contrary, it is showing its prominence throughout all provinces in China and continuing to crack down on officials of the highest kind. Cities heavily reliant on China such as Macau and Hong Kong are also feeling the effectiveness of the campaign and may wish to divert their attention elsewhere to avoid the slump continuing.