A crackdown on corruption has spread anxiety among China’s business elite
“PROBLEMS that occur in business …should not be politicised.” So said President Xi Jinping before leaving China for London on a state visit this week. He was referring to foreign critics of Chinese investment in Britain’s infrastructure. At home, however, his words had resonance too. Mr Xi’s fierce and unusually sustained crackdown on corruption has led to much anxiety among businessmen—especially those with close ties to political leaders and other officials.
Mr Xi’s campaign against graft has ensnared some prominent business figures. Last month it was announced that Song Lin, a former chairman of China Resources Group, a state-owned conglomerate, was being prosecuted. On October 7th came news that Su Shulin, a former chairman of Sinopec, a state-run oil company, was under investigation. Mr Su had been serving as governor of Fujian province, making him the first incumbent of that rank to be targeted in this campaign. Five days later Jiang Jiemin, the former head of PetroChina, another state-controlled petroleum firm, was sentenced to 16 years in jail. On October 13th Chinese media reported the arrest of Sam Pa, a middleman in resource deals done in Africa by Chinese state-owned firms.
As Mr Xi’s purge expands, the anxieties of some businessmen are growing. Hurun Report, a rich list, shows there are now more dollar billionaires in China (596) than in the United States (537). According to its research, carried out after this summer’s stockmarket plunge and currency devaluation, China added 242 of its billionaires just this year. Some of these fortunes were earned honestly, but some surely were not. A Chinese property tycoon (who has not been accused of wrongdoing) says many fellow billionaires are akin to corrupt robber barons in America over a century ago.
Crooked businessmen have reason to be nervous. But some analysts worry that the recent arrests of business leaders signal a broader anti-corporate campaign. Some believe that Mr Xi is taking a leaf out of Vladimir Putin’s playbook, learning from his campaign against Russian oligarchs. They see the recent arrests as the possible start of a long-running reign of terror waged by an anti-business regime.
Such fears are overblown. Businessmen targeted so far are mostly senior managers of state-owned enterprises (SOEs), not private firms. In China powerful SOE bosses are also important figures in the Communist Party, so there are likely to be political reasons as well as economic ones for many of the arrests. Some of those detained are linked to Zhou Yongkang, a former security chief and head of a corrupt network of officials known as the “petroleum mafia” (he was sentenced to life in prison in June). Of more than 100,000 people indicted for graft since Mr Xi became leader in 2012, most are politicians and officials—not private businessmen.
Some of them, like Mr Pa, have been caught up in the crackdown. But the purge has so far mostly steered clear of the private sector. Indeed, Mr Xi’s government has been rather supportive of Chinese business. Internet giants have been encouraged to expand into the provision of government-related services, such as booking hospital appointments and processing utility bills. They have been kept largely clear of antitrust scrutiny. The government has slashed red tape and made more credit available to startup firms. This may reflect a degree of understanding of the private sector’s importance: it produces perhaps two-thirds of economic output and almost all new urban jobs.
In his dealings with business, Mr Xi is no Putin. His campaign is very clearly an effort to clean up the party; going after crooked SOE bosses is a necessary part of that. When Mr Putin attacked Russia’s oligarchs—handing over their assets to his cronies—it had nothing to do with putting his political party on the straight and narrow. Mr Xi is different. His crackdown is an effort to “get rid of the thugs at the SOEs,” says an adviser to multinationals in China.
Economic growth has been hurt by bureaucratic paralysis. Fearful of being branded corrupt, officials have become reluctant to facilitate deals. In the long term, however, a cleaner and more predictable business environment will help. The property tycoon says he believes Mr Xi will soon have no need to keep lashing out, having already made it clear that he will not tolerate corruption. “You can’t even give a bribe these days,” he says.