Corruption Crackdown Broadens Into New Industries

The ongoing corruption crackdown in China is broadening out into new industries as it takes down more officials. The ongoing investigation into China National Petroleum Corporation has uncovered a questionable deal involving one of the company’s smaller oil fields, according to a report from Caixin reposted on ChinaFile:

CNPC usually signs a production-sharing contract with its partners in which the partner invests in the early exploration and development facilities and then shares the revenue with CNPC after production starts.

Niandai Energy gets eighty-eight percent of the oil sales revenue generated by the Wangtai wells. But a source close to the situation said the company did not invest in facilities, and the block started stable operation before the partnership.

“They didn’t invest in anything,” the source said. “What they did is to extend the cooperation contract one year earlier and counted the non-existent revenue sharing for that year as investment. Niandai Energy got the payment settled regularly, but management and operations were mainly conducted by the No. 3 plant.”

Niandai Energy closed after the investigation at CNPC started. [Source]

Disgraced former security chief Zhou Yongkang headed CNPC in the 1980s and his son Zhou Bin, who is currently detained, is implicated in the current CNPC investigation, according to the Caixin article.

Corruption accusations have also hit China Resources, a group of companies run in China and Hong Kong. From Keith Zhai, Zhang Hong and Eric Ng at the South China Morning Post:

China Resources Capital Holdings chief executive Wu Ding, 49, was taken away hours after the Communist Party’s anti-graft agency said last Thursday that it was probing Song, two sources said on condition of anonymity.

Wang Hongkun, the executive director of China Resources Land, was detained the same day, different sources said. The detentions of Wu and Wang showed the investigation into China Resources was widening, the sources added.

The anti-graft agency said Song was “suspected of grave violations of discipline and law” – a form of words it often uses to describe corruption.

A company statement released by China Resources Land on Tuesday said Wang, 46, had resigned because of ill health. A company spokeswoman said she was not aware of the “rumours” about his detention. [Source]

And members of the media are facing their own corruption accusations, which may in fact be the result of a personal disagreement between an editor and the current anti-corruption chief in Guangzhou. Mimi Lau reports for the South China Morning Post:

Dai Yuqing, the former president of the official Guangzhou Daily, is standing trial accused of taking 2.5 million yuan in bribes over several years.

At his trial in Dongguan late last month, however, Dai retracted his confession, claiming it was made under duress. He said his former superior, Wang Xiaoling, who is now Guangzhou’s anti-graft chief, was framing him for past disagreements.

The affair drew renewed attention following a regular press conference by the city’s anti-graft watchdog on Monday that attracted unusual media questions and coverage about Dai’s case.

Meanwhile, the influential business news outlet Caixin reported on Tuesday that Dai’s wife, Yang Lanling, had contacted Communist Party discipline inspectors in December. She accused Wang of insider trading, among other violations. [Source]

When officials are detained or put under investigation for corruption-related offenses, authorities use a variety of terms that imply corruption or other unethical behavior, without directly stating what activity is under suspicion. This is especially true when officials are suspected of having affairs or other personal transgressions. Amy Qin at Tea Leaf Nation parses the phrases used to indicate exactly how corrupt or immoral an official is accused of being:

A somewhat tongue-in-cheek analysis published by the liberal state-owned newspaper Beijing News on April 16, which has been republished by multiple Chinese media outlets since, attempts to decipher the disciplinary commission’s code, focusing specifically on parsing the meaning of the four charges listed above. If all of them seemed to cover the same misconduct of extramarital sex, asked the newspaper, “What truly is the difference?”

Drawing from examples of fallen officials, the Beijing News showed there has been little rhyme or reason to the way in which such charges are assigned. The accusation of “moral corruption,” the Beijing News found, seems reserved for those adulterers with particularly wandering gazes. Looking at news reports and internal memos, the newspaper deduced that the lowest common denominator linking officials facing this charge was the keeping of at least three mistresses. Included in this category are Liu Zhijun, the former railways minister, Liu Tienan, a former senior economic policymaker, Ni Fake, former provincial deputy governor ofcentral Anhui province, and most recently, Guo Yongxiang, the former deputy governor of western Sichuan province who was charged in April 2014.

Unsurprisingly, “serious moral corruption” is a bit more severe. To be charged with this, concluded the Beijing News, an official generally would not only have kept multiple mistresses, but his actions would also have brought about harmful effects, possibly because the affairs were carried out in the open. This at least appears to have been the case with former Wenzhou vice mayor Ye Jiren, sentenced by the Intermediate People’s Court of Taizhou City to three years in prison for abuse of power in a land deal as well as “serious moral corruption leading to harmful effects.” (Specifics of what such “harmful effects” may have been were not released.) [Source]

On the Wall Street Journal’s China Real Times blog, Stanley Lubman offers advice for how the government could take more concrete action against corruption, if they are serious about its eradication:

Today, with corruption so entrenched in Chinese society, the system needs to be reformed.

This could be done by creating special prosecutorial units, as well as a separate court with exclusive jurisdiction over officials who violate established laws and regulations, whether or not they are party members. The personnel in these units would, of course, have to be vetted, and internal reviews of their conduct established.

The party will undoubtedly resist any attempts to loosen its grasp on control of officials’ behavior, despite the fact that the current system is being threatened by citizens questioning its legitimacy. But disciplining officials who are party members based on the rule of law rather than on party rules or campaigns could begin a step toward controlling corruption.

Such a step could also begin to take on the most difficult challenge: fostering public opinion to address the current moral vacuum. [Source]

But as Andrew Browne at the Wall Street Journal points out, if Xi Jinping is serious about fighting corruption on a systemic level, he will have some hard choices to make:

[I]f Mr. Xi is indeed declaring war on the country’s elites in the name of cleansing the party of corruption, the consequences could be grave in terms of political stability.

Chinese society is among the most unequal on earth. Wealth and power are highly concentrated at the top, which means that the stability of the whole system depends on keeping the elites contented and, thus, united behind the party.

China’s political system has in recent history allowed elite families, through common understanding rather than any formal arrangements, a stake in the economic success of the country. Families of many top leaders have become immensely wealthy in the process of China’s rapid modernization. Snatch away these opportunities, or remove leaders’ unwritten immunity from prosecution, and the environment in which the elite families operate suddenly changes.

At a minimum it creates uncertainty as networks built around families try to guess who may be next in line for attack. Pushed far enough, the anticorruption campaign may even strain political loyalties to the regime. [Source]

Many observers, including human rights lawyer Teng Biao, have expressed skepticism that Xi’s anti-corruption campaign is aimed at making fundamental changes in the system.

April 25, 2014 5:36 PM
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Categories: Economy, Law, Politics