The Communist Party’s anti-graft campaign has had a surprising impact, but a new report shows how far there is to go

FOR a sense of how President Xi Jinping’s anti-corruption campaign is doing, a recent report by Xinhua, the official news agency, is a good place to start: it said that 56 five-star hotels in China had asked to be downgraded last year in order to survive, as local governments have been prohibited from using luxury hotels. Chen Miaolin, chairman of New Century Tourism Group, told Xinhua that revenues at his group’s (mostly five-star) hotels fell by 18% last year.

In big cities business is down at many of the best private clubs and restaurants. A number of luxury brands have reported sharp falls in revenues. Rémy Cointreau saw sales of its flagship cognac fall by more than 30% in the last three months of 2013 over the previous year, mostly owing to falling Chinese demand.

The campaign begun more than a year ago by Mr Xi has been surprisingly broad and sustained, and is intensifying as it enters a second year. The Central Commission for Discipline and Inspection, the party’s watchdog, says that 182,000 officials were punished for disciplinary violations in 2013, an increase of more than 20,000 over 2012, and of nearly 40,000 over 2011. Thousands of officials have been disciplined for extravagances such as hosting lavish banquets, weddings and funerals, spending public funds inappropriately on travel, the improper use of government vehicles and constructing luxurious government buildings. But two recent developments illustrate the difficulty and sensitivity of the task the party has set itself.

On January 21st a report by a team of media outlets led by the International Consortium of Investigative Journalists (ICIJ), an American organisation, revealed the secret offshore holdings of close relatives of some of China’s elite, including Mr Xi’s brother-in-law and the son of Wen Jiabao, the former premier. Then on January 22nd authorities began criminal trials in Beijing of independent anti-corruption activists who campaigned for, among other things, public disclosure of official assets (see article).

The message from Mr Xi is that the party, and only the party, will patrol itself, and is perfectly capable of doing so. But the ICIJ report hints at the failures during decades of self-policing.

The report is based on a leaked trove of documents of two offshore-finance firms and identifies nearly 22,000 clients from mainland China and Hong Kong who have offshore holdings. Such assets are often legitimate—many Chinese firms were encouraged to register companies overseas to help with investing abroad or to list on foreign stock exchanges—but their secrecy can also enable China’s rich and powerful to move around their cash and conceal how much they earn.

ICIJ found that close relatives of at least five current or former members of the Politburo’s standing committee have incorporated companies in the Cook Islands or British Virgin Islands (BVI). Executives of Chinese state-owned companies connected to corruption investigations are also among those with unexplained offshore companies, the report says, as are some of China’s wealthiest entrepreneurs. ICIJ was due to release all 37,000 names of people in China, Hong Kong and Taiwan with offshore holdings, which may lead to more revelations.

Of chief concern to China’s leaders will be disclosures about their extended family. Deng Jiagui, who is married to Mr Xi’s older sister, owns 50% of a BVI company, Excellence Effort Property Development, according to the leaked files. Bloomberg, a financial-news service, reported in 2012 that Mr Deng has amassed millions of dollars in property holdings and investments in rare-earth metals. Wen Yunsong, the son of the former premier, Wen Jiabao, set up a BVI company in 2006, when his father was in office (it was dissolved in 2008). ICIJ also reports that another BVI-registered firm, linked by the New York Times to the former premier’s daughter, Wen Ruchun, appears to have been set up so as to obscure her role. The paper reported in 2012 on the vast wealth of Mr Wen’s family, and revealed recently that American securities regulators are investigating dealings between Ms Wen and JPMorgan Chase, a bank, as part of an alleged programme to buy influence in China through the children of the country’s leaders.

Chinese authorities have been slow to catch up with the flow of cash overseas. On January 1st, for the first time, they began requiring the disclosure of offshore holdings. On January 17th Xinhua reported that the party had tightened rules for “naked officials”—whose spouses or children have moved abroad, leaving them alone in China—and explicitly barring officials from promotion if their spouses have moved overseas. This desire to emigrate is not limited to officials; a recent survey of China’s wealthy by Hurun, a company which publishes an annual rich list, found that 64% would like to move abroad.

Meanwhile, the campaign for official frugality presses on. With Chinese New Year approaching—a traditional time for giving “gifts” in red envelopes—CCTV, the state broadcaster, announced it would cut back on screening a number of official galas, so the people of China will not get to see the “Power of Rule of Law Gala” and the “Gala for Efficient, Intensive Use of Land Resources”.

The leadership has gained some credibility for its anti-corruption efforts by prosecuting a number of high-level officials. But accusations of corruption are also a convenient way to attack one’s enemies. The ICIJ report, and this week’s trials in Beijing, suggest that a lack of transparency and independent accountability may continue to undermine the party’s efforts. It has ignored calls, including from reformists within its ranks, for broad public disclosure of official assets. For more than a year it has blocked the websites of Bloomberg and the New York Times. And authorities have continued a crackdown on microblogs, which Xinhua once hailed as “an inescapable snare for corrupt officials”. Mr Xi has made clear that the only inescapable snare will be the party’s. The question is whether that will be enough.