Many are wondering whether Chinese President Xi Jinping’s latest anti-corruption campaign is a tool to target the Communist Party princeling group on Wall Street. Also known as the Party’s Crown Princes, princelings are the descendants of prominent and influential communist officials.

Chinese agencies have summoned global financial giants, including Credit Suisse, Goldman Sachs, and UBS, warning these foreign banks not to compensate executives in China too much. Otherwise, they may violate party regulations.

According to Bloomberg, citing unnamed sources, Chinese regulators have warned foreign investment banks at meetings in Shanghai and Beijing this year not to be “overly generous” in paying bank executives. The regulators also ask these banks to reduce the amount of “cash” they give these executives, among other issues.

According to the Financial Times, last Friday, the Asset Management Association of China required the investment bank to defer at least 40 percent of bonus payments to their senior staff for three or more years.

The Securities Association of China also released the same guidelines last month.

For many years, Wall Street and large international investment banks have often hired the sons and daughters of senior Chinese officials for better treatment.

This tactic has helped open a door for these firms to enter the Chinese market. But this strategy has also raised eyebrows and was later investigated by the U.S.

For example, according to an investigation by the New York Times, foreign investment banks may bring in billions of dollars in profits by hiring the son of a Chinese official with a robust background to hold a key position or be the president of the China branch. 

Wen Ruchun, the daughter of former Chinese Premier Wen Jiabao, has held senior or key positions at Credit Suisse and JPMorgan. And Zhu Yunlai, the son of former Premier Zhu Rongji, also worked at Credit Suisse.

In 2013, the Securities and Exchange Commission (SEC) investigated JP Morgan’s business in China. JP Morgan’s Hong Kong office hired Zhang Xixi, the daughter of Zhang Shuguang, the former deputy chief engineer of China’s Ministry of Railways, in 2007. 

The banking giant also hired Tang Xiaoning, the son of Tang Shuangning, chairman of the state-owned China Everbright Group in 2010. Although both left by 2013, China Railway Group and China Everbright Group later became JPMorgan clients.

In 2018, SEC fined JP Morgan 72 million dollars and Credit Suisse 47 million dollars for their corrupt hiring scheme—which means hiring friends and family members of Chinese government officials for lucrative business opportunities. The U.S. securities regulator called this sheer bribery in another form. 

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