Are Xi Jinping’s Austerity Measures Working?

Andrew Jacobs of The New York Times reports that China’s free-spending government elites – and the businesses that cater to them – are feeling the squeeze under new president Xi Jinping’s austerity directives:

While the power of the nation’s elite remains unchallenged, the symbols of that power are slipping from view. Gone, for now, are the freshly cut flowers and red-carpet ceremonies that used to greet visiting dignitaries. This month, military officers who arrived here for the annual National People’s Congress were instructed to share hotel rooms and bring their own toiletries.

“Car-pooling feels so good because it provides a way to bond and chat with each other while saving money and increasing efficiency,” one senior military official told the People’s Liberation Army newspaper.

So far, most victims of the frugality drive have been purveyors of the good life: high-end caterers, abalone wholesalers, five-star hotels and makers of Yellow Pavilion cigarettes, the $300-a-carton brand coveted by up-and-coming bureaucrats.

The ripple effects have reached all corners of the economy. First-class airline ticket sales have dropped by a tenth in recent months, and luxury goods dealers have reported a 20 percent to 30 percent decrease in sales. Moutai, the $600-a-bottle gut-searing grain alcohol that is an omnipresent intoxicant at official , has also seen its growth slow recently.

Jacobs adds that while Xi’s campaign “seems aimed ad curtailing the most conspicuous displays of wealth by people in power,” some doubt whether the calls for moderation will really make government less corrupt and more accountable. Furthermore, according to Patrick Boehler at the South China Morning Post, the drop in consumption has proved painful for Beijing businesses:

The clampdown on official’s luxury spending has led to a “significant drop” in high-end food and alcohol consumption, the 21st Century Business Herald wrote on Wednesday. Reporting on an internal meeting at the National Development and Reform Commission, the country’s top economic planning agency, last week, the daily said the drop in luxury consumption due to measures would drag down overall consumption figures, even though ordinary consumption is growing at a normal rate.

As an unintended consequence, luxury restaurants in downtown Beijing have had to change their business model, the Economic Observer wrote on Tuesday. Restaurants that previously catered exclusively for officials, who cherished their sumptuous privacy, now cater to the public. Some restaurants abolished expensive seafood dishes. For fear of repercussions, officials now head to Beijing’s suburbs outside the fourth ring-road for their cherished banquets, the weekly reported.

Keith Zhai and Minnie Chan of the South China Morning Post, however, report that some officials have dodged the austerity curbs by moving their lavish banquets underground:

Two officials in Fujian province said many canteens in government departments had been renovated and had hired chefs from the region’s finest restaurants after outside banquets were banned as part of the Communist Party leadership’s anti-corruption and austerity drive.

“Such renovation is not only happening in Fujian, but in many provinces around the country,” one of the officials said. “There are plenty of ways at the local level for cities to get around rules from the top.”

The official said the renovated canteens were as luxurious as five-star restaurants, with private rooms and fine-dining chefs, and there was “no need for officials to go out to dine under the eyes of the public because everything can be done within the government compound”.

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