White paper The Anti-Corruption Campaign in China: An Unending Hunt For “Tigers and Flies” Ecovadis-97 [Company name] Authors: Min Lin, Ying Luo, White paper Sylvain Guyoton Copyright © EcoVadis 2015 White Paper The Anti-Corruption Campaign in China: An Unending Hunt For “Tigers and Flies” Overview Soon after he was elected to the post of General Secretary of the Communist Party of China (CPC) in November 2012, Xi Jinping signaled that anti-corruption would be one of the themes of his tenure. Since then, his anti-graft campaign has grown into one of the largest campaigns against corruption in China’s modern history. Hundreds of officials including both senior leaders (“tigers”) and low-level bureaucrats (“flies”) have been investigated and prosecuted. Corruption has always been a serious issue for many countries. “Failing to tackle corruption will inevitably lead to the downfall of the party and the state”, emphasized Xi Jinping, at one of his first major meetings since taking the role. By highlighting some remarkable events, we hope to present a comprehensive picture of this country-wide anti-graft campaign and its characteristics. Eight-Point Regulation Release Xi Jinping announced the eight-point regulation/code (八项规定) on a Party Central Committee meeting on December 4 2012, less than three weeks after the 18th CPC national congress.1 The document imposes restrictions on official behavior to strengthen the ties between the public and officials, whose malpractice including corruption and power abuse will have disastrous effect on public trust. The code requires officials to keep in close contact with the grassroots organizations, reduce bureaucratic visits, pomp and ceremony, and bans the use of luxury cars and other inappropriate extravagance. 1 Eight-point regulation, China Daily, http://cpcchina.chinadaily.com.cn/2012-12/05/content_15992256.htm Page 1 © EcoVadis 2015 White Paper The implementation of an eight-point code has achieved a remarkable outcome. According to the Party’s Central Commission for Discipline Inspection (CCDI, 中纪委), in 2013, 24,521 cases were reported for violation of the eight-point code, involving 30,420 officials, of whom 7,692 (≈25%) were given Party or State disciplinary punishment.2 The data from 2014 are 53,085 cases, 71,748 officials and 23,646 punished.3 China Anti-corruption Campaign is Accelerating: Cases doubled, Disciplinary actions tripled 80,000 70,000 71,748 60,000 50,000 53,085 40,000 30,000 30,420 20,000 24,521 23,646 10,000 7,692 - 2013 2014 Cases reported #Officials implicated # Punished An Interactive Approach: Internet Anti-Corruption The most important challenge about anti-corruption is to detect malpractices. It is impossible to rely solely on government agencies; “bottom up” reporting from grassroots sources is often more effective. Studies have shown that in recent years that the number of Internet-reported cases has increased and exceeded traditional media reporting. The Internet has become the major method of public anti-corruption reporting and inspection. To ensure widespread visibility and engagement by the general public, on April 19 2013, many major Chinese websites such as Xinhua, Remin, CNTV, Sina, Sohu, and 163.com and others set up a Network Supervision Section (网络监督专区) on each of their websites to connect users to the government reporting website. On September 2, 2013, the CCDI website was launched 2 Data source: http://news.cyol.com/content/2014-01/09/content_9547988.htm 3 Data source: http://news.sina.com.cn/c/2015-01-07/151931371416.shtml Page 2 © EcoVadis 2015 White Paper providing a clear description of CCDI, the latest news on anti-corruption, and procedures for public reporting of corruption incidents. One of the most influential cases is about Liu Tienan, former deputy head of National Development and Reform Commission (NDRC). He was denounced by Luo Changping, deputy Chief Editor of Caijing Magazine, via Weibo (the Chinese equivalent of Twitter). Later in December 2014, Liu Tienan was sentenced to life imprisonment on charges of bribery. The upper right corner is the “Network Supervision Section”, shown here on the Sina website screenshot: Leveraging the Internet for anti-corruption is promising; it is enabling “shock and awe” (震慑) -style exposure tactics to dissuade officials from corrupt activities, as reported by Guangming Online.4 Downfall of Dozens of “Big Tigers” Following Xi’s proclamation that the CCDI would be “striking tigers and flies at the same time” - a reference to both high-ranking corrupt officials and those at the local and grassroots levels - the commission has become one of the Communist Party’s most powerful organs. China has adhered to a “zero tolerance” policy to fight corruption. By the end of November 2014, more than fifty vice-minister level or above senior officials had been removed, including one State-level and two vice-State level officials.5 The scope of the anti- graft campaign is ever-expanding, ranging from the People’s Liberation Army (PLA), provincial and central Party-state bureaucracy, to state-owned enterprises. 4 Guangming Online, Nov 8 2014, http://news.gmw.cn/2014-11/08/content_13789256.htm 5 People.cn, Dec 3 2014 http://politics.people.com.cn/n/2014/1203/c1001-26137426.html Page 3 © EcoVadis 2015 White Paper Former security chief (State-level official) Zhou Yongkang was brought down; he was China’s third most powerful politician and served on China’s Politiburo Standing Committee, the highest decision making body, until his retirement in November 2012. Another very recent case is the downfall of Ling Jihua, vice-chairman of the Chinese People’s Political Consultative Conference; Ling was put under investigation for suspected “serious discipline violations” by CCDI on December 22 2014, and was removed on December 31 2014. Chasing the Fox 2014 – International Help Apart from domestic investigations, China carried out the Fox Hunt Project 2014 (猎狐行动), an operation to hunt down those who fled the country after committing economic crimes. With international help, more than five hundred fugitive corrupt officials have been captured from overseas, and more than three billion yuan ($483 million) were recovered in 2014. China also has inked deals with several countries to cooperate in fighting corruption, including the United States, Canada and Australia. A Pay Raise for Chinese Civil Servants Critics argue that the main cause of the endemic corruption within government is the particularly low salary of civil servants in China, which results that officials are forced to seek other sources of income, using their position power. For the past few years, Chinese Government salaries have had no significant increase. Considered with inflation, the wage level has been especially challenging for those in junior ranks. As part of the campaign to fight corruption, the first pay raise documented in eight years for mainland Chinese civil servants was released in January 2015. The document emphasizes more in junior rank officials and clearly specifies that in principle, civil servants salary level should be adjusted every year or every two years. Nevertheless, it is probably not enough to have any significant impact on graft and corruption. There also have to be mechanisms in place to ensure honesty and transparency, for example, a property disclosure policy for mid-to-senior-level government officials. 2015 Moving Forward So far, the results of the anti-corruption campaign is impressive: Nearly 72,000 officials were punished last year, including 68 “tigers” – leaders who serve as vice minister officials, provincial bosses or in other senior posts, reported by Xinhua this January. As the anti-corruption campaign moves into the third year, it appears there is “no end is in sight” in the near future. Since the beginning of 2015, China has broadened the anti-corruption activity into an ever larger scope, including energy, the financial sector and the entertainment industry, Page 4 © EcoVadis 2015 White Paper which are traditionally dominated by state-owned enterprises. Wang Qishan, chief of CCDI, announced that this year’s first round of disciplinary inspection would focus on twenty-six centrally-run/state-owned businesses. It is clear that the campaign is going to be a signature of Xi’s tenure as China’s top leader, reining in corruptive practices by discouraging extravagant official spending and power abuse. Opinions are mixed about the anti-corruption campaign. Supporters say that Xi is addressing a prime concern of Chinese society. Corruption has spread and grown everywhere in China’s bureaucratic system, which has resulted in a bad image for the party, and a government with low credibility. The unprecedented campaign sends out a signal of the government’s determination to solve the problem and rebuild the party’s image and public faith. This effort, however, is also subject to some significant skepticism. The unprecedented scope, depth and intensity of the campaign have raised cynical questions that Xi is using the anti-graft campaign as a camouflage, which Xi uses to remove political opponents, and consolidate power. Regardless of the motivations, without systemic change, including greater transparency and a free press, unscrupulous behavior will re-emerge, as the New York Times argued in this article. The results of the anti-corruption campaign will continue to be closely scrutinized as we move ahead through 2015. But there is no question that the way of “getting business done in China” has drastically changed from what people used to think of as the status quo. As the anti-corruption campaign’s scope expands horizontally and vertically, it is only a matter of time before it begins to impact those “outside the system” the same as what’s happening now to those “within the bureaucratic system”. Authors: Min Lin, Ying Luo, Sylvain Guyoton 17/2/2015 About EcoVadis EcoVadis is the CSR rating platform for supply chains, spanning 150 sectors and 110 countries, trusted by Global-500 enterprises like Verizon, Coca Cola Enterprises, Johnson & Johnson and 120 others.