|Chinese president Xi Jinping’s four-year war on corruption has led to the|
incarceration of dozens of senior Party officials
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The pattern wasn’t hard to spot. An interview request was lodged with the public relations team at a Chinese bank or brokerage. A few dates were knocked back and forth, a time and place agreed. All seemed fine. Then the threads would unspool. An interview set for early Tuesday would switch to Monday afternoon, then to a Thursday lunch date, before it became a floaty ‘sometime next week’.
Other factors also proved as changeable as the weather. Take location. A meeting might be arranged to take place in the CEO’s office, later to be swapped for a quiet restaurant or, in one case, a hotel lobby. Duration might be cut, to, say 15 minutes from an hour. Then came the killer blow: cancellation. The bank chief would, alas, be unavailable. The reason? Take your pick from the usual suspects: a busy diary or business trip; a summons from a regulator; an upcoming public holiday.
During the preparation and publication of this magazine, Asiamoney placed formal requests for interviews with more than 120 financial institutions scattered across mainland China, not to mention a plethora of asset managers, wealth managers, brokers and trust firms.
Some applications were ignored; others, summarily rebuffed. The rest suffered the aforementioned death by a thousand cuts. No one, it seemed, was willing to meet up and speak – certainly not on the record – with a magazine with impeccable financial contacts in the world’s second-largest economy.
And for good reason. The head of one of the bad banks set up in 1999 to house the banking sector’s toxic pool of non-performing loans – an institution that last year posted profits of more than Rmb20 billion ($2.9 billion) – cancelled a meeting in Beijing at virtually the last moment. Why? Because he feared becoming the latest victim of Xi Jinping’s four-year war on corruption, which has led to the incarceration of dozens of senior Party officials.
At first, this crackdown, launched in the early days of Xi’s presidency, was a pure political power-play. Corrupt officials at provincial and local level, including several of Xi’s personal enemies, were either brought into line or jailed.
More recently, the president’s gaze has turned to the sprawling and often murky world of high finance. The mainland is packed with seriously capable regulators and bankers, from People’s Bank of China governor Zhou Xiaochuan to the no-nonsense Guo Shuqing, a former chairman of China Construction Bank and an ex-PBoC vice-governor, who has recently taken the reins at the China Banking Regulatory Commission.
Big names are in their sights. In January, Xiao Jianhua, a tycoon who made his money managing the fortunes of ‘princelings’ – descendants of the Party’s first generation of war heroes – was taken in Hong Kong and spirited away to the mainland by Chinese security agents. In mid April, chief insurance regulator Xiang Junbo was detained on suspicion of ‘severe disciplinary violations’ – a common euphemism for corruption. After the arrest, premier Li Keqiang called on authorities to “root out corruption in the financial sector”.
Eyebrows were also raised in May when Caixin, a supremely well-connected investigative magazine, published claims of financial irregularities at Anbang Insurance, once one of the country’s rising corporate stars. Many saw the article and its allegations as signs of an intensifying power struggle that pits Beijing against powerful vested interests in the financial sector.
What happens from here is pure conjecture. It doesn’t pay to second-guess the Party, which marches to the beat of its own drum. A five-yearly congress slated for October will likely see Xi and Li tighten their grip on power. But it is unclear if either is willing to really rock the boat and, say, arrest the army of speculators and insider traders who make the mainland’s stock markets such a wild and unpredictable ride.
Or indeed to enact legislation the financial sector really needs, from overhauling the IPO system to cracking down on excessive and unregulated grey-market lending. These reforms are vital to China’s financial future. NPLs are rising again in the banking sector, while a host of negative factors – from a lack of progress on reforms to Moody’s decision in May to downgrade China’s sovereign rating a notch due to rising debt levels – are restraining stock prices. The main bourses in Shanghai and Shenzhen are down 1.64% and 8.8% respectively in the year to May 23, even while most global indices have gained ground.
An old Chinese proverb says it is the big tree that attracts the wind. That may explain why so many officials across China’s financial sector – powerful individuals with skin in the game – are suddenly so silent and unavailable, content to hunker down and wait out the storm.