HONG KONG (MarketWatch) — A dependable investment theme for China has long been to invest alongside government policy. But first you need to decipher which policies will see the light of day and which will end up in the “too difficult” pile.

On taking office last year, President Xi Jinping had a sizeable in-tray of problems to fix — from a slowing economy and worries over debt, to toxic pollution and a dangerous property bubble.

Chinese President Xi Jinping. Reuters

And after last November’s Party Plenum, hopes were raised for an epochal policy overhaul to match Deng Xiaoping’s reforms three decades earlier. Yet so far, President Xi’s big idea appears to be reining in bad behavior. But could this be a reform program in disguise?

The anti-corruption campaign started out as merely curbing government officials’ extravagance through gift-giving and grand banquets. But later it extended far wider and began to net some more unlikely targets, from the foreign drug company GlaxoSmithKline GSK, -0.53% GSK, +0.31% (accused of bribery) to retired Standing Committee member and former security czar Zhou Yongkang (accused of corruption).

Investors quickly learned not to underestimate this policy shift, as the end of the good life on the state tab hit luxury goods hard. Scottish whisky sales were down 41% last year in China, while Hong Kong has seen trade in watches, jewelry and other high-end products fall by more than a quarter. Fiat SpA’s IT:F US:FIATY Ferrari was reportedly forced to close a string of dealerships in China.

Now, with no signs of the corruption campaign abating, it may be possible to argue the moves are part of wider reform.

Rather than an old-fashioned political purge as a new leader takes office, perhaps the graft fight goes hand-in-hand with reforming state-owned enterprises?

One of the big ideas of reform this time around was to introduce more market-based prices and private competition in order to boost efficiency.

But take a step back, and you can see how this would be difficult in practice.

The first problem is the scale of the graft problem: A survey in 2012 by the China Society of Economic Reform estimated that gray income accounts for $1 trillion, or 12% of China’s economy.

Secondly, if you start with a mixture of state and crony capitalism, where bribes and connections determine who gets business, introducing new players may make little difference.

Alibaba cracks down on gray-market goods

If you don’t first tackle these non-market distortions, bribes will remain a barrier to entry, or just be paid by someone else.

So the priority of this policy is understandable, although the downside risk is that its unpopularity could expose the new leadership to a challenge. Indeed, this was alluded to last week by President Xi, as he was quoted as saying that he had decided to disregard “life and death, as well as reputation, in the combat against corruption.”

One area where the anti-corruption campaign could help in supporting policy rebalancing is in energy.

A policy shift is badly needed to tackle pollution as China seeks to reduce its dependence on coal, which currently accounts for almost three-quarters of its energy mix. This requires China to step up its oil and gas exploration, as well as to look at unconventional resources.

One reason China has been slow to emulate the U.S. with its shale-gas success, despite China’s own substantial reserves, has been a domestic industry plagued by corruption and rent-seeking behavior.

A series of recent arrests targeting graft in the petrochemical industry can be interpreted as a first step towards allowing a more level playing field to encourage investment.

Meanwhile, as China steps up its offshore energy exploration, a related industry we can expect to get a lift is offshore engineering. China has signaled its intent to be rig builder to the world, and already last year, it has surpassed Singapore as the world’s No. 1 builder of jack-up drilling rigs.

Meanwhile, some other problems in Xi’s in-tray appear to have been left in the “too difficult” or “too dangerous” pile.

Policies aimed at curbing high property prices and levels of debt in the economy also appear to have little support. Dozens of cities have now removed curbs on multiple home purchases, while credit has kept flowing.

The calculation here appears to be that the potential fallout for local authorities’ finances from a weak property market outweighs the wider need for affordable housing. There also seems to be no stomach for the pain that goes with a tightening credit cycle, meaning these potentially serious problems have been kicked down the road for now.

Yet overall, this suggests China’s reform program is unlikely to look like what we might expect in the West — or what the IMF might recommend. It is likely to be somewhat messy, but there are still some parts which could pay dividends.