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Anti-graft campaign freeing up money for growth

Updated: 2014-09-26 08:07
By Bloomberg (China Daily)

The champagne has stopped flowing in Beijing, and Joerg Wuttke couldn't be happier about it.

President Xi Jinping's crackdown on everything from gift giving to excessive wining and dining is leveling the business playing field, said Beijing-based Wuttke, president of the European Chamber of Commerce in China. Even as antitrust probes zero in on foreign companies from Microsoft to Qualcomm, the government's anti-corruption campaign is making one aspect of business easier in the world's second-biggest economy.

"It takes the stress away," said Wuttke, head of a chamber whose members include Airbus and BMW. "You're not afraid that somebody gets an order because he found a better champagne or something like that. It's not Singapore yet, but it's a very positive development."

Economists forecast Xi's crackdown will boost GDP growth by one-tenth to one-half of a percentage point in 2020 as the drag on business from greased palms eases, according to estimates from 17 economists surveyed by Bloomberg News.

Anti-graft campaign freeing up money for growth

"Anti-corruption helps the economy in the long run, as it reduces business costs," said Chang Jian, chief China economist with Barclays Plc in Hong Kong. "Just like a corporate restructuring, it brings short-term effects but has benefits in the future."

So far, Xi's campaign to net both "tigers and flies," parlance for cadres from the top to bottom ranks, has ensnared more than 480 officials, spanning all of China's provinces and largest cities.

Among those embroiled in the campaign is Zhou Yongkang, a tiger who was a onetime member of the Party's Politburo Standing Committee.

The immediate impact of Xi's crackdown is hitting revenue at Macao blackjack tables, Hong Kong luxury boutiques and high-end hotels and restaurants in China's biggest cities. Growth will be 0.1 to 0.4 percentage point lower than otherwise due to the campaign this year and next, according to economists surveyed.

China's luxury spending grew by about 2 percent last year, the slowest pace since at least 2000, as more shoppers traveled abroad and the anti-corruption campaign bit, according to advisory firm Bain & Co.

Companies from Australia's Treasury Wine Estates, maker of the $700-a-bottle Penfolds Grange, to Hong Kong listed Chow Tai Fook Jewellery Group, have cited the crackdown on gift giving and corruption as a brake on sales.

(China Daily 09/26/2014 page1)

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