The Chinese Communist Party’s anti-corruption efforts in the financial industry continue to intensify. Since the beginning of this year, there have been frequent reports of investigations and penalties against financial executives, with a recent flurry of officials falling from grace. Experts analyze that in the context of declining tax revenues in the Chinese economy, anti-corruption has become a means for the government to increase revenue, with various political considerations behind it.
So far this year, the CCP’s anti-corruption stance in the financial sector appears to be under high pressure, with at least 61 individuals (within the banking system) under investigation as of the end of July. In just the month of July, at least 12 individuals at the senior level of central party and state institutions, state-owned enterprises, and financial units were investigated.
Moving into August, the anti-corruption efforts in the financial industry continue, with the high level and wide scope of individuals involved causing shock.
On August 26th, the official website of the Supreme People’s Procuratorate of the CCP announced that the investigation into Li Jiping, former member of the Party Committee and former Deputy Director of the China Development Bank for suspected bribery, has concluded and has been transferred to the procuratorate for review and prosecution.
“The China Development Bank is the CCP’s ‘money bag’, a big fat piece of meat. From the sentencing of former Deputy Director Wang Yi to death with reprieve in 2010, to the recent arrest of former Deputy Director Li Jiping in August, corruption at the China Development Bank has never ceased,” noted senior current affairs commentator Wang Youqun in an article for The Epoch Times.
“Thus far, the China Development Bank has had one chairman cum Party Committee secretary and six deputy directors investigated. Under their leadership, from the headquarters to the branches, a large number of corrupt officials at the China Development Bank have fallen.”
In addition, on August 21st, the CCP’s National Supervision Website reported that Ding Wei, former member of the Party Committee and former Deputy Director of China Merchants Bank, is suspected of serious violations of law and discipline. A few hours later, China Minsheng Bank issued a statement indicating that Ding Wei, as an independent director, will not participate in the company’s daily operational management.
On August 13th, Wang Chen, Assistant to the Chief Executive Officer of the Investment Banking Department and General Manager of the Investment Bank Division of Guoyuan Securities, was reportedly taken away for investigation by the disciplinary inspection and supervision department. Wang Chen was previously awarded the title of one of the first batch of “Top Ten Outstanding Financial Youth in Anhui Province” in April 2004, becoming one of the first 609 recommended representatives in China.
On August 2nd, Dong Guoqun, member of the Party Committee and Deputy General Manager of the Shanghai Stock Exchange, was investigated; and Chen Xiaopeng, former member of the Party Committee and Director of the Shenzhen Regulatory Bureau of the China Securities Regulatory Commission who retired four years ago, was also investigated.
At the end of July, Jiang Chengjun, Deputy General Manager of Haitong Securities, was taken away for investigation, with certain department heads of the company also cooperating with the investigations.
As of mid-August, a total of 75 recommending representatives have been punished in 2024, involving 24 securities firms, with regulatory authorities issuing over 200 penalty tickets to securities firms.
In response to this, mainland capital market veteran Xu Zhen analyzed for The Epoch Times that the CCP’s anti-corruption efforts since the 18th National Congress can be seen as two stages. The first stage from 2012 to 2020 focused on strengthening the anti-corruption efforts with the aim of protecting power, such as the anti-corruption in the military to grip the gun, and the anti-corruption in the political and legal system to hold onto the knife handle, in other words, selective anti-corruption.
In the second stage, Xu Zhen said from 2020 onwards, due to factors such as the pandemic, the economy continues to decline, tax revenues have significantly decreased, leading to a selective anti-corruption to make up for local fiscal deficits, granting a lifeline to local governments. The crackdown on corruption in different sectors is aimed at stripping funds from corruption, and local governments can obtain revenue through methods such as central fiscal transfers, special fund support, and fiscal budget arrangements.
“In reality, the current anti-corruption has become a means for local governments to generate revenue, and the government’s enthusiasm is high. Since Jiang Zemin’s rule, the CCP’s corruption has been systemic, which is a consensus among all. It is widely believed that to eliminate corruption will save the party, failure to do so will lead to the downfall of the nation. Along with the policy of reform and opening up for over thirty years, it is now the process of fulfilling the policy,” Xu added.
“Whether it is selective anti-corruption or systemic anti-corruption, in the past, it was for the sake of protecting power, while now it is to grant a lifeline. In other words, the process of the CCP’s anti-corruption is the process of the CCP’s demise, gradually destroying the party’s ruling foundation layer by layer,” Xu stated.
Since Xi Jinping came to power in 2012, he has been consistently cracking down on corruption. To date, millions of officials have been investigated. At the 20th National Congress in 2022, the CCP announced that in the previous decade, nearly 5 million officials and party members at all levels had been investigated under the so-called “anti-corruption” campaign, with 553 central managing cadres facing inspection. “Central managing cadres” generally refers to officials at the deputy minister level and above.
Why does corruption worsen with more anti-corruption efforts? Lai Rongwei, Executive Director of the Taiwan Inspiration Association, analyzed for The Epoch Times, “I believe that (corruption) is a systemic problem!”
“After the CCP came to power, the so-called socialist economic system adopted by the CCP is a system where politics prevail over the economy. After the 1980s, in order to improve the economy without abandoning the so-called ‘Four Upholds,’ this political predominance has provided the CCP aristocracy with rent-seeking opportunities,” stated Lai.
“That is to say, using the position granted by the system, they have the power to take advantage of the opportunities for corruption when faced with the development of the capitalist market. This has led to corruption across the entire financial industry in China.”
Engaged in research on Chinese affairs for a long time, Lai pointed out, “Those of us who study China know that in the Chinese financial industry, they place great emphasis on relationships.”
“Taking banks as an example, because a bank’s performance is equal to the future political career performance of these CCP aristocrats. Therefore, they place great importance on clients, the so-called clients for payments and loans, which means improving performance. For China’s banks, they especially favor state-owned enterprises, making this relationship very important.”
According to Lai, this relationship arises from the power granted by the position of the CCP aristocracy, allowing them to wield power in the development of the economy. This leads to the formation of a so-called power network of relationships and results in the emergence of the aristocracy.
“As China operates under the system led by the party, with the entire CCP’s power being the most centralized, and with no external mechanism to balance the party’s power, without a mechanism for power balance, the party controls the national machinery, dominates society, and of course, will potentially act recklessly,” added Lai.
However, anti-corruption cannot save the economy. From the perspective of the entire institutional design of the CCP, it lacks a mechanism outside the one-party leadership system to balance the power of the party.
Since the implementation of reform and opening up by the CCP in the 1980s, over the past 40 years, disparities in wealth not only exist between urban and rural areas but also among various ethnic groups and regions in China. Lai mentioned that the anti-corruption measures had the effect of slightly alleviating public dissatisfaction with the CCP’s governance, acting as a diversion of focus through anti-corruption.
With the current downturn in the Chinese economy, and the CCP’s crackdown on corruption in full swing, some industry insiders speaking privately to journalists admitted that the poor economic environment and sporadic anti-corruption news have cast a shadow over the entire industry, leading many to either “learn or lie flat” now.
Lai stated, “Of course, in light of emerging economic issues, people’s incomes are decreasing, and if the finance industry was a lucrative field in the past, by pressing down on the financial industry, the CCP can deflect people’s anger towards the party and state. This is a consideration for social stability by the CCP.”
“In addition, it is apparent that Xi Jinping is sending a message through cracking down on the financial industry, that he favors the development he envisions for China, which is not the so-called important industry of capitalism in the financial market, rather, he prefers the manufacturing sector-real economy, aiming for the so-called ‘new qualitative productive forces.’”
Therefore, Xi, by cracking down on the financial industry, can calm public resentment on one hand and on the other hand, hopes to guide the future development of China’s industries towards what he perceives as ‘new qualitative productive forces,’ making China competitive with major global powers, emphasizing technological competitiveness. Of course, this will affect the employment aspirations of young people after graduation.
A financial observer in Shenzhen, speaking anonymously to VOA, pointed out that there are objective political considerations in the political landscape of financial anti-corruption, stating, “Like Xiao Jianhua, Wu Xiaohui, and others, these ’empty gloves give rise to white wolves’ who obtain various financial licenses to deliver benefits to the aristocracy.”
Feng Chongyi, a professor at the University of Technology in Sydney, Australia, believes that the financial securities sector is the stronghold of red second-generation privileged capital, and Xi Jinping’s anti-corruption efforts in this sector are aimed at cleaning up various privileged groups, marking a showdown between Xi Jinping and the red second-generation privileged class.
Given the downturn in the financial industry, Lai Rongwei believes that there are several trends that may emerge in the future. Firstly, some individuals may leave the financial sector and be forced to transition to other industries, moving away from real estate, banking, and other sectors. Although unemployment in China is severe, this is also a signal that in the future, young people in China may no longer engage in such work.
Secondly, there are those who may continue to linger in the financial industry reluctantly, possibly due to mortgage obligations or for livelihood reasons, continuing to work in the financial industry, albeit with difficulty. This may lead to a phenomenon where individuals lie flat due to the challenging overall environment and performance pressure.
Thirdly, “I personally see that although China’s financial anti-corruption has always emphasized the importance of financial security, we cannot rule out the possibility that due to the financial industry’s irregularities and the challenging overall environment, those working in the financial industry may take risks when faced with a difficult life, selling out more personal information. In any case, where there are policies, there are countermeasures. Everyone is trying to find loopholes, and this situation may arise,” stated Lai.
“Therefore, many of the CCP’s systems, I want to emphasize an important point, many times their financial anti-corruption has the good intentions of their personal systems and policy introductions, but often the results may be contrary to what they expected, and of course, this possibility exists.”
Xu Zhen believes that the process of cleaning up corruption has produced a phenomenon where the vested interests affected by corruption and the general public are increasingly disillusioned with the CCP, losing confidence. This may lead to a form of passive resistance—lying flat, or even capital outflows from the country.
“These pessimistic and disappointed emotions, along with capital leaving the country, will accelerate the economic downturn and exacerbate the government’s fiscal deficits. In order to generate revenue and continue surviving, the government will continue to intensify anti-corruption efforts, tax investigations, and various fines, leading to a vicious cycle that ultimately leads to the demise of the party,” concluded Xu.