Anti-graft drive supports resilient growth

The claim that China's growth deceleration is a result of the anti-corruption campaign is absurd. Amid industrialization, most advanced economies－including the United States, Western European countries and Japan－enjoyed higher growth, which decelerated with the transition to post-industrial society.

China is no exception to the rule of growth deceleration. But the challenge is of an entirely different magnitude because of its more than 1.3 billion people.

The CCDI began its campaigns in 2013 with the sacking of several regional leaders. Then came the fall of several "big tigers". Concurrently, investigations expanded to ministries, media, State-owned enterprises and telecom giants.

Unsurprisingly, then, as anti-corruption investigations were stepped up in financial institutions after last summer's market meltdown, financial criticism against anti-corruption measures escalated. Nevertheless, the CCDI's targets include a dozen executives of China's biggest brokerage Citic Securities, hedge fund executive Xu Xiang and the chief of a Hong Kong arm of giant brokerage Guotai Junan Securities. Even regulators, including the vice-chair of the China Securities Regulatory Commission, have been investigated and removed.

Interestingly, financial institutions' concern about the anti-corruption drive increased at a time when the People's Bank of China issued notices to several foreign banks－reportedly, Citigroup, Deutsche Bank, HSBC, Standard Chartered and BNP Paribas－asking them to suspend certain foreign exchange activities until March 2016. The PBoC worries about currency speculation, which has contributed to increased capital outflows from China and does pose a threat to the country's growth.

In China, corruption, left unpunished, would doom the State, society and growth.

In the short term, the anti-corruption drive may contribute to uncertainty and occasionally volatility. In the long term, however, it is critical to resilient growth.

The author is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore).