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By:

Laurence Westwood

31 August 2024 at 3:34:58 pm

Corruption and the Party

In Xi Jinping’s China, the fight against corruption has become inseparable from the struggle for political control. Since the 1990s, there has been a popular saying in China: If the Communist Party doesn’t fight corruption, it will destroy China. But if it does fight corruption, it will be the end of the Communist Party. This then is the paradox that has faced the Communist Party of China since Deng Xiaoping instituted the Reform and Opening Up Era during the 1980s, where unprecedented...

Corruption and the Party

In Xi Jinping’s China, the fight against corruption has become inseparable from the struggle for political control. Since the 1990s, there has been a popular saying in China: If the Communist Party doesn’t fight corruption, it will destroy China. But if it does fight corruption, it will be the end of the Communist Party. This then is the paradox that has faced the Communist Party of China since Deng Xiaoping instituted the Reform and Opening Up Era during the 1980s, where unprecedented growth in the Chinese economy also saw unprecedented growth in corruption. Somehow the Party has to perform a delicate balancing act: to uncover and punish corruption wherever it can, and yet not give the impression that it is so hopelessly corrupt that its governing legitimacy is fatally undermined. Expedient Tool In 2012, Xi Jinping began his tenure as paramount leader of China by basing his leadership legitimacy on the most extensive anti-corruption campaign seen anywhere in the world in modern times. He pledged to ‘catch the tigers’ (corrupt senior officials) and ‘swat the flies (low-level offenders). Party members were instructed to abide by the ‘Eight-Point Regulations’ aimed at reducing the more visible instances of Party cadre excess, such as banqueting, the use of official cars, and expensive and unnecessary public receptions. Tens of thousands of officials were disciplined or prosecuted for corruption in the first few years of the campaign. And yet there remains a lingering sense that Xi Jinping is only using the anti-corruption campaign to remove political rivals and replace them with allies who may be just as corrupt. There is also the problem that the Party is in effect investigating itself, the Party basically positioning itself as the only body that can root out corruption in China when the Party is itself at the root of that corruption. The relationship between the Party and state institutions in China is complex. What is clear, however, is that the Party uses the written law as a way of regulating society, but – and this is most important – it is itself, when it suits, beyond the law. Historically, in terms of investigating instances of corruption, these investigations were conducted by both the procuratorates (prosecuting authorities) which were required to follow the written criminal procedure law, and the Party’s Discipline Inspection Commissions (DICs) which did not. For instance, DICs could effectively utilise extra-legal measures and ‘disappear’ suspects for months on end without access to legal counsel and without even their families and friends knowing where they were. In a nutshell, the DICs existed to enforce discipline within the Party and assert the final authority of the Party. Often, this caused conflicts between the procuratorates and the DICs as they had differing aims and motivations. It should be noted, however, that the procuratorates and the DICs were both vulnerable to interference from local Party committees whose ‘local priorities’ often differed from that of the leadership in Beijing. This interference might involve the protection from investigation of important local officials whether they were corrupt or not. In 2018, the situation changed with the creation of the National Supervision Commission (NSC), which became China’s sole anti-corruption agency. The stated aim of the NSC was to resolve the conflicts between the procuratorates and the DICs, and put in place, in essence, a single-track system for corruption investigations. The anti-corruption function was completely taken away from the procuratorates, such investigations in effect becoming the sole preserve of the Party. Suspects would only be handed over to procuratorates – if at all – at the end of the investigation process to take them to trial. Despite the stated aim of resolving conflicts between the procuratorates and the DICs, the creation of the NSC should probably be seen as a vertical strengthening of the Party’s hold not only upon itself but also upon China’s legal institutions – the supremacy (and survival) of the Party being far more important than the rule of law. Endemic Phenomenon Corruption has haunted China throughout its long history. It remains endemic within all of its political, economic, and social systems. Personal social networks and patronage networks sometimes increase the efficiency of the political and commercial machines but, more often than not, they become just vehicles for corruption. Guanxi is complicated to define, but in general it refers to personal connections or networks that can be utilised to gain resources. It is rooted in traditional Chinese cultural concepts such as renqing (affection), mianzi (social face), and yiqi (personal loyalty and obligation). Guanxi provides safe and secret channels of communication, not only in exchange for benefits. It also promotes a culture of mutual dependence and moral obligation, as well as potentially an official’s self-justification for engaging in corrupt behaviour. As we started with a paradox, then perhaps it is only right that we finish with another. From 2012 to 2022, approximately 4.5 million Party cadres were placed under investigation. Between January 2018 and March 2025, 344 Party cadres at vice-minister level were punished for violations of Party discipline. The political volatility created by these anti-corruption investigations has not only encouraged Party cadres to better hide their ill-gotten gains among friends or family members, thereby making it much harder for investigators to prove a case against them, but also to rely more heavily on their guanxi for protection. It remains the case in China that the better connected you are, the less likely it is you will be investigated – or at least receive a lesser punishment. Perhaps the effectiveness or not of the anticorruption campaigns in China does not really matter. This could be just all about politics: the Party demonstrating that it can effectively police itself and therefore retain its governing legitimacy. And perhaps also for Xi Jinping to remove potential competitors, promote allies, and strengthen his hold over the Party and the political machinery of the country. The Purging of the Generals In January this year, Zhang Youxia, China’s top general, was removed from his post, expelled from the Chinese Communist Party, and placed under investigation for ‘political and corruption problems that threaten the Party’s absolute leadership over the armed forces and undermine the Party’s governance foundation’. What has made Zhang Youxia’s purging so surprising is that he had been seen as a longtime political ally of Xi Jinping. Not only had he survived numerous other purges of the military and had been allowed to continue far beyond the usual mandatory retirement age of 68, but he was the last surviving senior officer with actual war-fighting experience, having fought in the Sino-Vietnamese War of 1979. Add to Zhang Youxia’s purging, the removal, expulsion, or disappearance of perhaps up to one hundred other 2-star and 3-star officers since 2022, it seems that in his third term in office Xi Jinping is very serious about getting the People’s Liberation Army (PLA) under control. Despite getting a bloody nose during the Sino-Vietnamese War, when Deng Xiaoping instituted the ‘Reform and Opening Up Era’ to transition China from a centrally planned economy to a more market-driven model, the PLA was more or less left to its own devices in its efforts to modernise. With the rising cost of commodities during the 1980s and a military budget that could not keep pace, the PLA was told to find ways to pay for itself. What this meant was that the PLA was allowed to go into business. Deng Xiaoping had persuaded the PLA to accept a political bargain: in exchange for promising never to become a threat to civilian Party leadership of China, the PLA could do whatever it liked. By 1994, the PLA owned more than 10,000 business enterprises, mostly concerned with the provision of food, equipment maintenance, mining, and transportation. More problematic than this, individual PLA officers and units, often aided by family relations, also set up business ventures. Unlike in democracies where there is usually a requirement for civilian oversight over military budgets and expenditure, in regards to the PLA there was a complete lack of transparency and government accountability. The potential for corruption was extraordinary, and it has remained so ever since. And not only in regard to commercial activity. The buying and selling of posts in the PLA is rife. This is not just up and down the chain of command, but also to achieve lateral postings in different PLA departments where there is more potential for graft. There is bribery as well, with applicants willing to pay as much as $16,000 to pass the PLA entrance examination. Family connections and guanxi remain as important within the PLA as anywhere else in Chinese society. Prior to Xi Jinping’s elevation to paramount leader of China, investigations into corrupt activities within the PLA were few and far between, and the purging of senior officers a distinct rarity. But with Xi Jinping staking the legitimacy of his premiership on his anti-corruption campaigns, and with his wanting to be portrayed as the strongest Chair of the Central Military Commission since Deng Xiaoping, things were about to change. In 2014, Xi Jinping made a speech accusing the PLA of indiscipline and of being too focused on personal aggrandisement rather than on doing their duty of preparing to fight and win wars. And yet Xi Jinping did nothing at the time to change the essential bargain that had been made between Deng Xiaoping and the PLA, to leave the PLA to its own devices. Moreover, as Xi Jinping insisted the PLA prepare for future war, and with the defence budget effectively doubling between 2012 and 2022 to fund its massive procurement programmes, the opportunities for graft only increased. What has happened then during the last few years to change the political calculus for Xi Jinping, for him to crack down hard on the PLA, to oust so many senior officers, including Zhang Youxia, his former political ally? Was it General Xu Caihou, found with a tonne of cash hidden in his house? Was it the allegations of water being discovered in missiles rather than the expected rocket-fuel? Was Xi Jinping just feeling politically more secure at the beginning of his third term in office? Or was it the simple fact that Xi Jinping has finally run out of patience with the PLA managing its own affairs, deciding that it was worth taking the risk to strip the PLA of many of its senior officers and their many years of experience just to finally create a modernised, efficient, and effective war-fighting machine that the Party can rely on to project power where needed? Only time will tell. A Fallen Red Star On the 15th November 2011 the body of Neil Heywood, an English businessman with links to MI6, the British Secret Intelligence Service, was discovered in Room 1605 of the Lucky Holiday Hotel about five miles from downtown Chongqing. The police chief of Chongqing, Wang Lijun, was first on the scene. Blood samples were taken, a conclusion quickly reached that death was due to alcohol poisoning, and the body cremated without an autopsy. But Neil Heywood’s spirit would not rest easy. The reverberations from his death were soon to bring about a corruption trial the likes of which China had never seen. It would also bring about the political demise of the unusually charismatic and influential Party Chief of Chongqing, tipped by some to become the next paramount leader of China: Bo Xilai. Like Xi Jinping, Bo Xilai was considered a ‘princeling’ – a man born into elite political circles. His father, Bo Yibo, was one of the ‘Eight Immortals’, a group of elderly officials who held tremendous political sway in China during the 1980s and 1990s. Unlike the other ‘princelings’, however, Bo Xilai cultivated a suave and casual style that would soon set him apart from the other candidates for high office. Bo Xilai’s first prominent posting was in 1993, as mayor of Dalian in the North-East of China, where he gained a reputation for presiding over the ecological rejuvenation of the city. While there he also developed a reputation as a ruthless political operator and an incorrigible womaniser. It is possible that it was in Dalian that Bo Xilai and his wife Gu Kailai first came across Neil Heywood. By 2007, Bo Xilai had been appointed Party Chief of Chongqing. He soon came to national prominence for his ‘singing red’ and ‘strike black’ campaigns. ‘Singing red’ meant the singing of revolutionary songs, begun as a way to celebrate the Communist Party’s 90th birthday and ‘red’ culture. In China, criminal gangs are known as ‘black societies’. The ‘strike black’ campaign was aimed at rooting out corruption in the city. By 2011, 5618 suspects had been arrested, including 77 government officials, and their considerable assets seized. Where those seized assets went, no one knows. Regardless, Bo Xilai very quickly developed a cult-like following in Chongqing and across China, enough to worry his competition for the leadership of China. Meanwhile, Bo Xilai’s wife, Gu Kailai, had developed a close relationship with Neil Heywood. An alumnus of Harrow school in England, Heywood had helped Gu Kailai’s son gain admission there. But in 2011, Heywood and Gu Kailai were to fall out over a failed business deal. Heywood demanded compensation and supposedly threatened to ruin both Gu Kailai and Bo Xilai by revealing their financial activities to the world if he was not paid. A ‘disturbed’ Gu Kailai invited Heywood to meet at the Lucky Holiday Hotel to discuss the matter. There, Heywood was to die, not by indulging in too much alcohol but by imbibing actual poison. As Gu Kailai grew increasing paranoid, police chief Wang Lijun slowly realised that Heywood had indeed been murdered and he might be the next to die for knowing too much. He fled to the American Consulate in Chengdu, offering to tell all. Wang Lijun was handed over to China’s State Security and Bo Xilai and Gu Kailai placed under immediate investigation. At trial, Gu Kailai admitted to murder and received a suspended death sentence. Bo Xilai was found guilty of abuse of power and for corruption dating back to his time in Dalian. He was sentenced to life imprisonment. Ever since, China has presented this lurid case as a purely criminal matter. But with Bo Xilai out of the way, Xi Jinping’s path to power had become that much clearer.

Loss Aversion Is Why Your Good Idea Fails

Mar 3
4 min read

Your upgrade is their loss until you prove otherwise.


Last week, Rahul wrote about a simple truth: you’re not inheriting a business, you’re inheriting an equilibrium. This week, I want to talk about the most common reason that equilibrium fights back even when your idea is genuinely sensible.


Here it is, in plain language:

People don’t oppose improvement. They oppose loss disguised as improvement.

When you step into a legacy MSME, most things are still manual, informal, relationship-driven. People have built their own ways of keeping work moving. It’s not perfect, but it’s familiar. When you introduce a new system, a new rule, a new “professional way,” you may be adding order but you’re also removing something they were using to survive.


And humans react more strongly to removals than additions.


Behavioral economists Daniel Kahneman and Amos Tversky called this loss aversion where we feel losses more sharply than we feel gains. That’s why your promised “future benefit” struggles to compete with someone’s immediate fear.


Which seat are you stepping into?

  • Inherited seat: People assume you’ll change things quickly to “prove yourself”. They brace for loss even before you speak.

  • Hired seat: People watch for hidden agendas: “New boss means new rules, new blame.” They protect themselves.

  • Promoted seat: Your peers worry the old friendship is now replaced by authority. They fear loss of comfort and access.


Different seats, same emotion underneath: don’t take away what keeps me safe.


Weighing Scale

Think of an old kirana shop. The weighing scale may not be fancy, but it’s trusted. The shopkeeper has used it for years. Customers have seen it. Everyone has settled into that comfort.


Now imagine someone walks in and says, “We’re upgrading your weighing scale. This is digital. More accurate. More modern.”

Sounds good, right?

But what does the shopkeeper hear?

  • “My customers might think the old scale was wrong.” (loss of trust)

  • “I won’t be able to adjust for small realities.” (loss of flexibility)

  • “If the digital scale shows something different, I’ll be accused.” (loss of safety)

  • “This was my shop. Now someone else is deciding.” (loss of control)

So even if the new scale is better, the shopkeeper will resist or accept it politely and quietly return to the old one when nobody is watching.

That is exactly what happens in companies.


Modernisation Pitch

Most leaders pitch change like this:

  • “We’ll become world-class.”

  • “We’ll digitize.”

  • “We’ll improve visibility.”

  • “We’ll build a process-driven culture.”


But for the listener, these are not benefits. These are threats, because they translate into losses:

  • Visibility can mean exposure.

  • Process can mean loss of discretion.

  • Digitization can mean loss of speed (at least initially).

  • “Professional” can mean loss of status for the old guard.

So the person across the table is not debating your logic. They’re calculating their losses.


Practical Way

Watch what happens when you propose something simple like daily reporting.

You say: “It’s just 10 minutes. Basic discipline.”

They hear:

  • “Daily reporting means daily scrutiny.”

  • “If numbers dip, I will be questioned.”

  • “If I show the truth, it will create conflict.”

  • “If I don’t show the truth, I’ll be accused later.”

In their mind, the safest response is: nod, agree, delay.

Then you label them “resistant.”

But they’re not resisting change. They’re resisting loss.


Leader’s Job

If you want adoption in an MSME, don’t sell modernization as “upgrade”. Sell it as

protection.

Instead of: “We need an ERP.”

Try: “We need to stop money leakage and order confusion.”

Instead of: “We need systems.”

Try: “We need fewer customer escalations and less rework.”

Instead of: “We need transparency.”

Try: “We need fewer surprises at month-end.”

This is not manipulation. This is translation. You’re speaking the language the system understands: risk, leakage, blame, customer loss, cash loss, fatigue.

Field Test: Rewrite your pitch in loss-prevention language

Pick one change you’re pushing this month. Now write two versions:

Version A (your current pitch):

What you normally say: upgrade, modern, efficiency, best practices.

Version B (loss prevention pitch):

Use this template:

  1. What are we losing today? (money, time, customers, reputation, peace)

  2. Where is the leakage happening? (handoffs, approvals, rework, vendor delays)

  3. What small protection will this change create? (fewer disputes, faster closure, less follow-up)

  4. What will not change? (no layoffs, no humiliation, no sudden policing)

  5. What proof will we show in 2 weeks? (one metric, one visible win)

Now do one more important step:

For your top 3 stakeholders, write the one loss they think they will face if your change happens. Don’t argue with it. Just name it.

Because once you name the fear, you can design around it.


The close

If you remember only one thing from this week, remember this:

A “good idea” is not enough in a legacy MSME. People need to feel safe adopting it.

You don’t have to dilute your standards. You just have to stop selling change like a TED talk and start selling it like a protection plan.

Next week, we’ll deal with another invisible force that keeps companies stuck even when they agree with you:

the status quo isn’t a baseline. It’s a competitor.

(The writer is CEO of PPS Consulting, can be reached at rashmi@ppsconsulting.biz)

 

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