China Economic Bulletin | No. 24 (27 January 2025) 

The Impact of Xi Jinping’s 2012 Anti-Corruption Campaign on Foreign Companies in China

Author: Anke Klara Helbig

Introduction: Corruption and China: A relentless campaign for reform

Recent years have seen China’s relentless battle against corruption captivate global attention, characterised by a sweeping corruption crackdown on high-ranking officials, influential industry leaders, and grassroots bureaucrats. In 2024 alone, a record number of examples were conducted, exposing figures such as a former vice governor of the central bank and the chairman of a leading oil and gas enterprise (Business Standard 2025). Even the military sector was not spared, with Admiral Miao Hua’s downfall highlighting the ongoing purge within the People’s Liberation Army (PLA) during a critical phase of modernisation (Business Standard 2025). This unwavering anti-graft drive, led by the Chinese president Xi Jinping and the Central Commission for Discipline Inspection (CCDI), has become a defining feature of contemporary Chinese governance.

As professor Andrew Wedeman observes, “[a] dozen years after Xi [Jinping] set out to cleanse the senior ranks, Xi is still finding widespread corruption at the top of the party-state and the PLA” (Business Standard 2025). Yet, as corruption tactics evolve into more sophisticated forms — as for example concealed stock transfers or benefits funnelling through family members — the challenge of rooting out misconduct becomes even more complex. Fan Yifei, a former vice governor of the People’s Bank of China, admitted, “[a] businessman might offer me money directly, and I [would] refuse. But if he gives it in the form of stocks or other assets, not directly to me but to my family, [that is] a whole different matter” (Business Standard 2025).

This article looks at China’s unyielding commitment to transparency, the profound societal impacts of its anti-corruption measures, and the challenges that lie ahead in this ongoing struggle. Despite significant progress since 2012, China’s 2012 anti-corruption campaign until today raises questions about its true motives and effectiveness, especially concerning the role of foreign businesses and the broader political and economic landscape.

Xi Jinping’s anti-corruption campaign, launched in late 2012, marked one of the most comprehensive efforts to combat corruption in modern China (Jin 2023). The 2012 anti-corruption campaign sought to address pervasive issues of existing bribery and embezzlement within not only government and state-owned enterprises (SOEs) but also foreign businesses in China. In their paper Personal Ties, Meritocracy, and China’s Anti-Corruption Campaign Lorentzen and Lu explain that the 2012 corruption crackdown was declared as a fight against corruption, not only of “tigers” (high-ranking government officials) but also “flies” (lower-level bureaucrats) (Lorentzen/Lu 2018).

The campaign has made significant progress, with millions of officials disciplined by the Central Commission for Discipline Inspection (CCDI). However, even more than a decade after its launch, doubts remain about the true motives behind the 2012 anti-corruption campaign and its ability to bring real change and progress. Is there still the genuine effort to establish clean governance, or a tactic in internal power struggles within the Chinese Communist Party (CCP) (Diallo 2021)? And overall, which role do foreign companies play in this game?

A key perspective in this debate centres on the interplay between governance reforms, institutional development, and the role of corruption in the Chinese economy, often framed through the Sand and Grease in the Wheels hypotheses (Mauro 1995; Méon and Weill 2010; Ella et al. 2021).

Scope and objectives of the 2012 anti-corruption campaign

“Does corruption grease or throw sand onto the wheels of economic growth?” (Wang and Yan 2020) Scholars as Méon and Weill (2010) argue that the Chinese 2012 anti-corruption campaign could be viewed as a necessary step to address inefficiencies stemming from corrupt practices in China. Therefore, the Sand in the Wheels hypothesis suggests that corruption affects economic efficiency by distorting market mechanisms, misallocating resources and eroding investor confidence (Méon and Weill 2010). In contrast, the Grease in the Wheels hypothesis suggests that corruption under certain conditions may facilitate economic activity. It is argued that in highly regulated economies, such as China, bribery can serve as a mechanism for businesses to circumvent bureaucratic obstacles, expedite administrative processes, and obtain preferential treatment (Leff 1964; Huntington 1968). 

No matter from which perspective, the 2012 anti-corruption campaign in China is unprecedented in terms of both its scale and duration. From its initiation in 2012 until 2019, the number of officials subject to investigation steadily increased from 173,000 to 485,000. To date, more than 2.9 million officials have been investigated, with over 1.7 million having been prosecuted (Diallo 2021).

By 2022, the campaign had led to investigations of over 1.5 million officials, with several high-profile arrests, such as Zhou Yongkang or Bo Xilai, former members of the Politburo Standing Committee (Jin 2023; Pei 2016).

Impact on foreign companies

Short-term observations

Overall, the short-term observations show that as of 2016 the 2012 anti-corruption campaign in China negatively impacted foreign businesses in China. Through limited communication with Chinese officials and the creation of uncertainty, bureaucracy increased and led to delays. Consequently, delays in securing permits, disruption in operations and financial losses were present. Trust between foreigners involved and local entities eroded, making the already existing partnerships difficult and causing foreign companies to reconsider their future in China. The 2012 anti-corruption campaign’s regulatory challenges highlighted the need for a more transparent legal framework. Overall, its short-term effects were harmful to foreign businesses (Helbig 2024).

Long-term opportunities?

Against all scientific expectations that the 2012 anti-corruption campaign would have a positive effect in the long term, the long-term effects of the 2012 anti-corruption campaign in China were not positive for foreign companies. Not only did corruption become more covert, making it harder for foreign entities to navigate the regulatory environment in China. Compliance challenges also increased. For example, the replacement of experienced officials, led to inefficiencies and delays in decision-making. Further, a climate of fear and bureaucratic passivity, coupled with increasing centralisation under the leadership of Xi Jinping, made negotiations more difficult and introduced greater regulatory consitency and reliability. These factors contributed to a less predictable and more challenging environment for foreign companies until today (Helbig 2024).

Conclusion

The anti-corruption campaign introduced in 2012 reshaped China’s political and economic environment, with significant implications for foreign companies. While the 2012 anti-corruption campaign reduced corruption and seemed to create opportunities for fair competition, it also introduced new compliance challenges and further regulatory uncertainties. Foreign businesses operating in China have had to adapt by emphasising transparency, restructuring their networks and local partnerships and adopting certain cautious market strategies. As the 2012 anti-corruption campaign continues and also China nowadays further prioritises governance reforms, foreign companies must remain vigilant and adaptable to navigate in the existing evolving landscape. In which way the future for foreign companies in China might stabilise and how they might adapt depends on a variety of factors: the domestic power vacuum in China, the ongoing governance reforms, and the complex global challenges shaping the world today.

References

• Business Standard (2025): “After 2024’s big corruption crackdown, china vows more probes, retribution”, Business Standard, 6 January (online at https://www.business-standard.com/world-news/after-2024-s-big-corruption-crackdown-china-vows-more-probes-retribution-125010600193_1.html, last visited on 27 January 2025).
• Diallo, Fatoumata (2021): “Xi jinping’s anti-corruption struggle”, Institute for Security and Development Policy (ISDP), 9 April (online at http://isdp.eu/wp-content/uploads/2021/04/Xi-Jinpings-Anti-corruption-Struggle-IB-09.04.21.pdf, last visited on 22 January 2025).
• Lorentzen, Peter L.; Lu, Xi (2018): “Personal Ties, Meritocracy, and China’s Anti-Corruption Campaign” (online at http://dx.doi.org/10.2139/ssrn.2835841, last visited on 27 January 2025).
• Mauro, Paolo (1995): “Corruption and Growth”, The Quarterly Journal of Economics 110(3), pp. 681 ff.
• Méon, Pierre-Guillaume; Weill, Laurent (2010): “Is Corruption an Efficient Grease?”, World Development 38(3), pp. 244 ff.
• Pei, Minxin (2016): China’s Crony Capitalism: The Dynamics of Regime Decay. Cambridge (MA): Harvard University Press.
• Wang, Peng and Yan, Xia (2020): “Bureaucratic Slack in China: The Anti-Corruption Campaign and the Decline of Patronage Networks in Developing Local Economies”, The China Quarterly 243, p. 611 ff.