Adopt­ing a pa­tient ap­proach will pay div­i­dends

China Daily (Canada) - - FRONT PAGE -

DChina’s anti-cor­rup­tion cam­paign help the econ­omy? At first glance, it’s hard to say. Look­ing into the near fu­ture, one just might say it doesn’t. This is be­cause all the rules to make of­fi­cials mind their be­hav­ior hold them back from spend­ing their work time and public funds on en­ter­tain­ing them­selves. And in­sti­tu­tional spend­ing, that done by or­ga­ni­za­tions and most of­ten by gov­ern­ment of­fices, used to make up a hefty part of the na­tion’s re­tail and ser­vice rev­enues. Ex­cept for some very wealthy in­di­vid­u­als, of­fi­cials and staff from State-owned en­ter­prises tended to make the largest group of cus­tomers for luxury ho­tels and their ban­quet halls.

Not any longer. One wouldn’t be sur­prised to learn if the na­tional re­tail growth dur­ing the com­ing Lu­nar New Year hol­i­day this year is softer than in pre­vi­ous years.

The anti-cor­rup­tion cam­paign may not in­stantly ben­e­fit the econ­omy, but in the long run, it will. There are many things in China that, by the logic of ev­ery the­ory, should come along very soon. But at times, that “very soon” may keep peo­ple wait­ing, and wait­ing.

A stern re­al­ity is that, ever since the lead­er­ship promised over­hauls of the ex­ist­ing SOE sys­tem at the Third Plenum of the 18th Cen­tral Com­mit­tee of the Com­mu­nist Party of China in 2013 — a con­tin­u­a­tion from industrial re­forms in the 1990s — noth­ing has hap­pened over the past cou­ple of years. Lit­tle has been done to­ward the fur­ther di­ver­si­fi­ca­tion of SOEs’ eq­uity struc­ture to make them more re­spon­si­ble in man­age­ment and un­der more ef­fec­tive su­per­vi­sion by share­hold­ers.

On a few oc­ca­sions, the State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion, which rep­re­sents the cen­tral gov­ern­ment’s SOE con­trol sys­tem, talked about plans for pi­lot re­form pro­grams. But none of th­ese pro­grams seems to have been put to work, much less re­sulted in dif­fer­ences from the past.

But as with many things in China, peo­ple do need pa­tience to reap the benefits of the anti-cor­rup­tion cam­paign.

In fact, start­ing al­most from day one of re­forms, back in the early 1980s, Chi­nese lead­ers have kept telling would-be trade part­ners and in­vestors to be pa­tient. At times, pa­tience sounded omi­nous, if not en­tirely dis­ap­point­ing. But in other times, it did pay off. Be­cause when a change does come, it comes in a ma­jor way in a large coun­try like this. When the wind is strong, as Chi­nese en­trepreneurs like to joke, pigs may well fly.

Now that the CPC Cen­tral Com­mis­sion for Dis­ci­pline In­spec­tion, China’s pow­er­ful anti-cor­rup­tion author­ity, an­nounced last week that it would com­plete its in­ves­ti­ga­tion rounds at all na­tional-level SOEs this year, one can come to re­al­ize why the re­form failed to make the promised progress over the last cou­ple of years.

The CCDI listed 26 of the largest SOEs, in­clud­ing some high-pro­file en­ergy com­pa­nies, as the first batch to be in­spected, start­ing im­me­di­ately af­ter the Lu­nar New Year hol­i­day on Feb 24.

In a meet­ing the other day, as the Chi­nese-lan­guage press re­ported, Wang Qis­han, the CCDI chief, pointed out the prob­lems that widely ex­ist in the ex­ec­u­tive suite of many SOEs, rang­ing from trad­ing power for money, em­bez­zle­ment, bend­ing of the rules, fac­tion­al­ism and nepo­tism, let alone poor man­age­ment.

Small won­der that with top man­agers en­gaged in such things, and with no author­ity so far to ef­fec­tively po­lice their be­hav­ior, SOEs would have no in­ter­est what­so­ever in im­ple­ment­ing re­forms that only place them­selves un­der stronger su­per­vi­sion. SOEs can’t even start re­forms un­til the CCDI hauls away their own cor­rupt of­fi­cials to face the mu­sic. It is no ex­ag­ger­a­tion to say, in­deed, the an­ti­cor­rup­tion cam­paign is the true start­ing point of China’s next round of industrial re­form.

No one doubts that the CCDI will work hard to pur­sue its goal with dogged­ness. And once China can claim a victory in its anti-cor­rup­tion cam­paign at the en­ter­prise-level, which may still take sev­eral years, a new gen­er­a­tion of cor­po­rate ex­ec­u­tives will begin to deal with the world who are joined by fewer chil­dren and rel­a­tives of of­fi­cials and with more in­di­vid­u­als ed­u­cated in law and per­haps legal pro­fes­sion­als.

In due time, as one can imag­ine, China will present a ris­ing de­mand for cor­po­rate legal ser­vices and in­ter­nal com­pli­ance ex­ec­u­tives. Ev­ery large cor­po­ra­tion will need to have their own Wang Qis­han to check its busi­ness in­tegrity and staff be­hav­ior. By then, China’s def­i­ni­tion of its cor­po­rate elite will have changed.

The anti-cor­rup­tion cam­paign may not in­stantly ben­e­fit the econ­omy, but in the long run, it will. There are many things in China that, by the logic of ev­ery the­ory, should come along very soon. But at times, that “very soon” may keep peo­ple wait­ing, and wait­ing.

The au­thor is edi­tor-at-large of China Daily. Con­tact the writer at edzhang@chi­nadaily.com.cn.

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