Why Chinese Anti-Corruption has Not Yet Promoted Economic Growth?

Abstract

Economists always have disputes over the relationship between corruption and economic growth. From the end of 2012 to the present, the Communist Party of China has launched a fierce anti-corruption campaign so that a large number of officials suspected of corruption were investigated. Anti-corruption, however, did not actually promote economic growth. To explain this, we build a framework based on government regulation and mixed oligopoly. The basic views are as follows: First, on the premise of meeting the government's budget balance, fighting against corruption accompanied with removing inefficient regulation is the optimal anti-corruption policy, which will facilitate economic growth. Second, given there are inefficient regulations, lower cost of corruption and superior employment pressure; no anti-corruption is a better choice than anti-corruption. Current Chinese anti-corruption campaigns focusing solely on anti-corruption rather than removal of regulation are useless to economic development. These movements contribute to the development of the state-owned enterprises at the cost of private sectors’ growth. As a result, the whole economic growth has been dragged down.