The Chinese Communist Party (CCP) will put in place a system of incentives to encourage cadres to take more risks again.
Chief Inspector Jiang Jinquan said new mechanisms are needed to "fully mobilise the enthusiasm, initiative and creativity of the cadres", and admitted that an anti-corruption drive that has punished more than 1.4 million party members since 2012 has had some unintended consequences.
The high-profile, anti-graft campaign that President Xi Jinping began when he came to office in 2012 has made government officials and managers at state-owned enterprises more averse to risk and passive, said observers.
"Since the 18th national congress, the CCP has made great efforts to solve the problem of some cadres who act as they please," said Mr Jiang, who works for the Central Commission for Discipline Inspection, China's top anti-graft watchdog.
"Under this backdrop, there arose the problem of cadres who choose inaction so they don't get in trouble," he added.
The party wants to change such thinking with a better performance assessment system for officials.
Mr Xi had also outlined a "fault tolerance" plan in his work report to the congress last week. The plan will protect cadres who take risks that do not pan out because they are inexperienced or are first movers, as long as there was no personal gain.
"We will be both strict and caring, and place an emphasis on providing incentives and imposing constraints," Mr Xi had said.
Yesterday, Vice-Minister of Supervision Xiao Pei said China will remain unrelenting in fighting corruption, including clamping down on "foxes", or corrupt officials who have fled overseas. Only four officials have managed to flee this year, compared with 101 in 2014.
China is also moving to codify and roll out a national supervisory commission. It will work closely with the CCDI but will cover all public servants, not just party cadres.
Also on the cards is a new law, now being formulated, which sets out the commission's powers and investigation procedures to ensure the safety and well-being of suspects, said Mr Xiao.
Lim Yan Liang