President Xi Jinping Is Now Going For A Crackdown Against China's Financial Sector

China's financial sector is experiencing multiple investigations into corruption and an unexpected increase in audits of venture funds.

President Xi Jinping is emphasising a reform of the industry to better serve the nation's economy.

As Chinese officials are investigated for corruption, the Central Commission for Discipline Inspection (CCDI) has cautioned against luxury living while banks reduce executive pay and bonuses.

Over a dozen executives have been investigated or punished since February in the latest crackdown on misconduct in the financial sector by China’s top anti-corruption agency, the CCDI.

Efforts have been made to get rid of executives' "wrongful pursuit" of becoming financial elites, as they called it. In the most prominent case, Liu Liange, a former chair of Bank of China, is being investigated since March-end, as reported by Financial Times.

CCDI investigations have also targeted financiers involved in leasing deals, equipment loans, and logistics in industrial sectors. Cong Lin, a former head of leasing at Industrial and Commercial Bank of China, is among those under scrutiny.

He now works at China Renaissance, whose founder Bao Fan has been missing since February and is believed to be in state custody.

Former ICBC colleagues, Cong and Li Xiaopeng, now face different fates as the CCDI announced this month that it is investigating Li for "serious violations of discipline and law”.

Li Li, a former Shanghai president of China's Export-Import Bank, faces bribery charges of around $14 million in the Yunnan province for approving financial leasing loans for companies.

CCDI's inspections now include the Shanghai Gold Exchange, and venture capital investors in Beijing are facing new tax audits due to the sector's growing pressures.

Over 75 per cent of mainland financial brokerages have reduced their management's pay, an analysis by the Financial Times has revealed.

CICC, a top investment bank, has reportedly cut their salaries by more than 10 per cent in 2022, and bonuses are expected to decrease by up to 40 per cent, according to the report.

Recent reforms will lead to a demotion for financial regulators and a subsequent decrease in their salaries.

In October, Xi pledged to deepen structural reform and regulate all types of financial activities as he believes the financial sector should better serve the real economy.

Turns out, the Chinese President has a deep distrust of the financial sector. The current campaign against high-profile financial figures reflects the new Chinese leadership, which is flexing their muscles over the industry after being selected by Xi following his successful securing of a third five-year term as party leader late last year.

Xi assumed party leadership in 2012 and focused on targeting over 4 million government officials for corruption. Initially, members of the CCP were targeted, but since 2017, state-linked and private-sector organisations have also been investigated by the CCDI.

Xi's "common prosperity" push in 2021 compelled the watchdog to check over 20 financial institutions, like the central bank, stock exchanges, commercial banks, and asset-management firms, in a bid to combat excesses and inequality in Chinese society.

Also Read: Why Xi Jinping Is Cracking Down On Big Businesses — Insights From His Own Speeches