An increase in anti-corruption activity in the second quarter of 2017, including the most reported violations of President Xi Jinping’s Eight Point Regulation of the Centre (Eight Rules) since 2014 in June, is raising concerns that another crackdown on VIP spending could be on its way.
In a report released on Tuesday by brokerage Sanford C Bernstein titled “China Premium Tracker: The good times continue – but could anti-corruption rear its head again?”, analysts note a 25% year-on-year increase in violations of the Eight Rules in Q2 following three consecutive quarters of decline. The number of investigations announced by the Chinese Communist Party’s Central Commission for Discipline Inspection (CCDI) has also been rising since March on a three-month moving average, while the public’s focus on anti-corruption activity seems to be following the same upward trend based on Bernstein’s tracking of anti-corruption references on Chinese search engine Baidu.
Relevant Baidu searches showed a direct correlation to increased anti-corruption activity in China during the recent crackdown that saw gaming revenues in Macau plummet between 2014 and 2016.
Bernstein said there appeared to be a number of similarities to the anti-corruption events that kick-started the previous decline.
“Earlier this month, Sun Zhengcai, a high ranking Politburo member, Communist party secretary of the important region of Chongqing and widely considered to be a top candidate for the next generation of top leadership, was placed under investigation and stripped of his positions,” analysts said.
“Prior to this event, only three other serving Politburo members were similarly reduced since 1990 – and none since 2012. The official pronouncements on, and ultimate outcome of, Sun’s investigations may be significant in getting a better read on the medium-term direction of the anti-corruption campaign.
“Sun’s likely purge feels mildly reminiscent of the takedown of Bo Xilai in 2012, which preceded a significant increase in anti-corruption activity nationwide. At this point it may yet prove to be a one-off occurrence. The opposite, if it were to occur, could have a negative impact on premium consumer spend.”
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