The Central Commission for Discipline Inspection or CCDI issued the “Regulations on the Management of Property Involved in Disciplinary Inspection and Supervision Organs” on Dec. 30, 2021. The regulations provide essential compliance for the disciplinary inspection and supervision system to manage property-involved cases.
Li Linyi 李林一, a current affairs commentator, told Chinese media Da Ji Yuan that the regulations might be aimed at corruption in China’s financial sector, which had revealed many problems post-investigations.
Cedar Holdings (雪松控股), for example, failed to repay its more than 3.15 billion dollars debt to its investors in late Feb.
Wang Bin 王滨, the former party secretary and chairman of the China Life Insurance (Group) Company board, was investigated on Jan. 8 during his service as vice president of Taiping Group and Bank of Communications. Caixin Weekly, citing sources close to the supervision, said that after Wang Bin left, Taiping Group had an estimated actual loss of nearly 30 billion Yuan, equivalent to around $4.7 billion, which far exceeded the data disclosed in the annual report.
Political officials that have connections with business enterprises were under a crackdown
According to Li, each powerful family has its own “territory” to make money in mainland China.
For example, the CCP’s former General Secretary Jiang Zemin 江泽民 family’s domination of the telecommunications industry, with his son Jiang Mianheng being the owner of China Netcom (now part of China Unicom). Meanwhile, Former Premier of the State Council Zhu Rongji 朱镕基 and Vice President Wang Qishan 王岐山’s turf was in the financial world. At the same time, many princeling families were involved in the finance sector, including the grandson of Jiang Zemin – Jiang Zhicheng – the owner of the Chinese investment firm Boyu Capital, and the son of Liu Yunshan, Liu Lefei – CEO of CITIC Private Equity Funds Management.
Li said these princeling families offered Chinese private enterprises preferential policies through their political powers. Therefore, these businesses could gain loans, buy properties at low prices, and more with such support. In return, these high-ranking officials later earned money from these enterprises as bribes.
Zhou Jiangyong 周江勇, a former member of the Standing Committee of the Zhejiang Provincial Party Committee and former secretary of the Hangzhou Municipal Party Committee, comes as an example.
According to China’s Central Commission for Discipline Inspection or CCDI’s investigation documentary, Zhou illegally received money from Shi Shihong, the owner of a construction company in the name of loans for various projects in Zhoushan and Wenzhou from 2013 to 2017. The amount was worth more than 90 million yuan (14 million dollars.)
Li Linyi supposed that the so-called private real estate enterprises and networking firms in the mainland had developed to this day only by relying on loans drawn from government-business relations. Officials behind private enterprises come from different factions within the communist party, in which the Jiang Zemin faction dominates.
Xi Jinping’s purpose of cracking down on the financial sector
According to Beijing’s 2021 Central Economic Work Conference, the Chinese economy faces three major challenges: demand contraction, supply shocks, and weakening expectations.
The regime’s mouthpiece Global Times said that “stable” became the most prominent keyword at the conference since the term was repeated 25 times by Chinese officials.
According to Su Ziyun 蘇紫雲, director of the military strategy and industry at the Taiwan National Defense Security Research Institute, the mainland’s economic downturn and terrifying financial turmoil would seriously threaten its political stability before the 20th National Congress.
Su said that by cutting the reserve requirement ratio, the People’s Bank of China intended to turn around Evergrande’s impact. To focus more on the finance sector, these financial institutions had to adjust their financial disciplines.
In his view, the Xi administration focuses on financial stability and fighting against political opponents by tightening control of its financing. He mentioned that in the past few years, several people from different factions of the Communist Party and several of the second generation of the Red Generation have turned to the financial industry. The term “second generation of the Red Generation” refers to children of senior communist officials.
Xi’s administration tightens control of political rivals’ finance accelerated
Beijing launched its inspection of the financial sector in October 2021, the first one since the 19th National Congress.
It has dispatched 15 central inspection teams for two months to inspect 25 financial institutions, the banking and insurance regulator, stock exchanges, commercial banks, and asset management companies, including the People’s Bank of China.
The central inspection’s results found that financial regulators have problems such as “using their supervisory powers for personal gain and the ‘revolving door’ between government and business is more prominent.” The so-called “revolving door” refers to the mechanism by which individuals switch roles between the public and private sectors and cross over to make profits for interest groups.
Li Yuanhua 李元華, a former associate professor at Capital Normal University, supposes that corruption in the revolving door of government and business has always existed.
Li Yuanhua explained that there had been a so-called financial coup since Xi Jinping came to power. His political opponents did not expect his re-election and generally wanted to influence the Chinese economy through financial means to force Xi to step down.
Therefore, Xi’s efforts to tackle financial corruption mainly targeted those who might follow his political enemies before the 20th National Congress.
According to incomplete statistics, in 2021 alone, around 70 people in the financial sector in mainland China were investigated and punished, nearly 20 of whom are leading cadres of central financial institutions and two cadres in central management. Prominent concentration was in the banking industry, financial regulators, and non-bank financial institutions.
Nine officials from the China Development Bank (CDB) were sacked under the probe. The CDB was controlled for many years by the Former Vice Chairman of the National Committee of the Chinese People’s Political Consultative Conference, Chen Yuan 陈元.
Lai Yongtian 賴永添, deputy director of the Department of Asset Management at the Ministry of Finance, was investigated on Jan. 11, 2022. Before him, rarely any officials from the department were investigated other than Vice Minister of Finance Zhang Shaochun 張少春.
Su Ziyun said that Xi Jinping’s recent crackdowns on the political and legal systems highlight the challenges he was likely to face in his quest for a third term. However, the financial turmoil might be his most unfavorable part.
Australian jurist Yuan Hongbing 袁紅冰 said Xi Jinping’s crackdown on these anti-Xi factions would still be carried out in the name of anti-corruption and financial consolidation. One of his primary strategies is to eliminate the finance of his political opponents. In the run-up to the 20th Communist Party Congress, the struggle within the party will become more intense.