According to reports, the Chinese Communist Party is intensifying its supervision of 8,700 domestic investment bankers. Several securities firms are requiring investment bankers to submit their passports, obtain permission for all travel plans, and even need approval to resign.
On September 12, Bloomberg quoted insiders as saying that the Chinese Communist Party is increasing its supervision of investment bankers. Since August, at least three top investment bankers from different securities companies have been detained by authorities, sending chills through the entire industry. One former Hai Tong Securities investment banking manager fled abroad about two weeks ago and was subsequently arrested overseas before being deported back to China.
Hai Tong and other state-owned securities firms have recently requested many investment bankers to hand over their passports. Regardless of official or personal trips, all travel plans must be approved in advance, in compliance with guidelines informally issued by Chinese regulatory agencies. Employees have been informed that regulatory authorities are reviewing initial public offerings (IPOs) and other financing activities, making it possible for bankers to be summoned at any time.
Insiders said securities firms have tightened approvals for overseas trips and informed employees that even resigning from their positions needs approval. One source mentioned that employees approved for business trips must be accompanied by a colleague, and activities outside of the pre-approved itinerary will be restricted.
The report pointed out that state-owned enterprise executives and Chinese Communist Party committee officials are required to submit their passports, a practice that has been widely known. However, it is uncommon for lower-ranking employees like those at Hai Tong and other securities firms to be asked to surrender their passports.
The report also mentioned that the detention of investment bankers and the initiation of investigations by regulatory authorities have raised concerns about the future of China’s $1.7 trillion securities industry and domestic capital market activities. State-owned financial institutions have capped the annual salary of senior employees at 2.9 million Chinese yuan. Recently, China International Capital Corporation reduced the basic salary of domestic bankers by up to 25%.
As of early September, China’s 147 securities companies have over 8,700 investment bankers, many of whom are involved in capital market activities including IPOs and subsequent issuances. Official data shows that in the first half of the year, Chinese securities companies achieved operating income of 203.3 billion yuan, a 9% year-on-year decrease.