Much of the world is watching Chinese President Xi Jinping (習近平) with concern. Not only has he been reconcentrating power in the hands of the Chinese government; many believe that his radical anti-corruption campaign is a fig leaf for a political purge. They worry that Xi is building a cult of personality, much like the one that surrounded Mao Zedong (毛澤東) and fueled the Cultural Revolution.
The truth is far less sinister. While it is true that Xi is, to some extent, amassing power, his motivation is the need to strengthen China — both its government and its economy. To succeed, he must bring a bureaucracy that has spun somewhat out of control back in line.
Over the past three decades, power in China has been decentralized considerably, with provincial and municipal governments receiving, in an incremental fashion, substantial autonomy to experiment and test reforms aimed at attracting foreign investment and spurring GDP growth. Moreover, they have been granted direct control over resources — such as land, finance, energy and raw materials — and local infrastructure development. As a result, subnational governments accounted for an average of 71 percent of total public expenditure from 2000 to 2014 — a far larger share than in the world’s largest federal countries. For example, US states’ share of public spending is 46 percent.
The goal was to spur overall economic growth by encouraging competition among regions. Local party bosses knew that their career paths depended on their municipalities’ economic performance. By working hard to spur growth, they have fueled China’s rise to become the world’s second-largest economy — and by some measures, the largest — and secured the Chinese Communist Party’s (CCP) legitimacy in the post-Mao era.
Decentralization has had its downsides. It has led to substantial waste, exemplified in local governments’ massive debts, and it has spurred large-scale corruption, with local officials striking special deals with businesses to provide tax breaks, cheap credit or land at below market prices.
In a country with stringent regulations and underdeveloped financial markets, private entrepreneurs face high barriers to starting and operating businesses. If illicit deals are what it takes to gain access to the resources and markets they needed, private firms have been more than willing to strike them, offering cash or other payments to officials who bent or broke rules on their behalf.
Such arrangements facilitated the entry of hundreds of thousands of growth-enhancing private firms into the market in the late 1990s. In an era when economic growth was the top priority, the corruption that fueled it was tacitly accepted, and even blithely condoned.
However, corruption has spun out of control, and now threatens both China’s stability and the CCP’s legitimacy. Over three decades of lax governance, some local authorities have formed political cliques that work together to protect their illicit gains and economic interests. Embezzlement and misappropriation of astronomical sums of public funds would have been impossible without accomplices to provide protection and help one another ascend the political ladder.
The stealth political networks became virtually impenetrable, with many officials, by default, becoming the central government’s rivals, fiercely defending their economic interests by safeguarding their official posts and perquisites. Unless it reined in the municipal satraps, the central government could essentially kiss its reform plans goodbye.
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