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Economic Consequence Of Anti-Corruption

Anti-corruption movement has been one of the core features of Mr Xi's leadership, since he takes the office. Some economists resort recent economic downturn to this movement, and label this movement as political percecution. Others argue that anti-corruption benefits economy in the long run. They explain the downturn in GDP as a more healthy economic growth.

Anti-corruption comes with mixed economic consequence. Those corrupted officials and associated firms would face costly sanction and punishment. This is the direct economic cost. Yet, there are other factors need to be reviewed.

First factor is the incentive system of local goverment. Suppose in County A, mayor AAA is an ambitious man. For years, he contributed a lot to local economic growth, which give birth to numerous millionaires. In this process, the businessmen reward him a little, in order to fund his political lobbying, such as fighting for good projects. However, the anti-corruption movement took him down, and a less capable and ambitious person BBB took his place as mayor. Well, BBB decide that aggressive work style is not a good option. As a result, BBB cares less about good opportunities and more about the political right of his leadership. Well, this should say something about the hidden cost of anti-corruption.

Second factor is the the relationship between government and enterprise. In the past, if a firm want to win a auction, the best option is not to offer the best proposal, but to bribe the people in charge, typically government officials. Anti-corruption will correct this distortion in economic resources. On the other hand, the costs to maintain bonds with government are huge burdens on many firms. This movement will surely relieve some of them.

Third factor is the relationship between government and normal people. Since the political cost of corruption becomes so huge, government officials are less likely to expose themselves to such circumstances. Many evidence of corruption comes from normal people directly to top authority. Government will respect and care more about what normal people have to say. In the long run, normal people will trust their government more, and place more confidence on the system.

After all, anti-corruption is a must move. Corruption has give birth to great tensions among the party, also between government and people. The economic shock in the short run can be absorbed by a more healthy market economy in the long run. In the special period, China do need strong leadership to correct what we have done wrong and guide the country to a more balanced and lasting development mode.