The latest casualty is Xiang Junbo, the former China Insurance Regulatory Commission chief who brought chaos to a sleepy sector in just a few years. The downfall of Xiang, who had extensive ties to banking and ­insurance businesses, could ­herald a new stage in the financial clean-up, with a social media ­account run by party mouthpiece People’s Daily saying “a more ­exciting show” would ­follow.

While Xiang’s wrongdoings were not made public, there are some clues in a speech Premier Li Keqiang gave in late March but was not made public until the same day Xiang was taken away. In it, Li said the authorities were punishing those who “stole what they had been ­entrusted to guard” or who had “collaborated with financial big crocodiles”, a term for tycoons.

Zhuang Deshui, from Peking University’s Clean Government Centre, said the financial industry was “a stronghold of China’s ­interest groups” and Xi was determined to break that hold.

“Beijing has definitely put cleaning up financial markets and regulators on its agenda,” Zhuang said.

The campaign has huge implications. Since Xi came to power in late 2012, the anti-corruption movement has become his hallmark project, winning him public support and sweeping aside his political foes.

In the last 4½ years, Xi has ­fortified his power in the military, or “the gun”, by bringing down two former Central Military Commission vice-chairmen; he has tightened his grip on the police and security apparatus, or “the knife”, by putting a former security tsar in jail and arresting a deputy state security minister; and is now ­tackling the financial industry, or “the money bag”, to eradicate challenges.

Xiang’s dismissal shows Xi is picking his battles, and targeting the old financial power brokers.

Beijing-based political commentator Zhang Lifan said the financial industry was a haven for “princelings” and their “white gloves” – those who manage ­assets for the elite – and Xi wanted to rein them in before the 19th party congress in autumn.

“Like Vladimir Putin in Russia, as Xi concentrates his own power base ... he needs to knock out a few old oligarchs,” Zhang said.

A well-connected minority have rapidly amassed huge wealth under the country’s model of state capitalism.

Among those to benefit has been Zeng Wei, son of former vice-president Zeng Qinghong. Helped by tycoon Xiao Jianhua, Zeng Wei was involved in the privatisation of a state energy business in Shandong for a fraction of its value a decade ago, Caijing magazine reported in 2007. Xiao was taken back to the mainland from Hong Kong to ­“assist in investigations” this year and has not been seen since.

At the same time, the financial industry is generating huge risks for the country. The central bank has boosted broad money supply to 160 trillion yuan (HK$180 trillion), or about twice the size of the US Federal Reserve’s total, but a lot of the funds are just being moved between different financial products and creating ­bubbles, instead of flowing into projects and factories to help ­economic growth.

​

Financial matters came into the leadership’s radar after the stock market rout in 2015, when the dangers of an unchecked financial sector were laid bare to Xi. The rout not only evaporated trillions of US dollars in wealth but also tarnished Beijing’s image as a capable market manager at home and abroad.

The public security authorities took the lead on investigations and various senior securities officials were detained, including Yao Gang, former vice-chairman of the China Securities Regulatory Commission, and Zhang Yujun, former assistant CSRC chairman.

At an agenda-setting conference in December chaired by Xi, the leadership said financial risk control would be a high priority in 2017, a clear statement that Beijing would ramp up its control.

The wind began to change at the end of last year when Liu Shiyu, head of the securities watchdog, labelled forces behind hostile bids in the stock markets as ­“barbarians” and “monsters”.

An eye-catching takeover bid for a listed company by Zhao Wei, a popular Chinese actress, was also publicly and repeatedly questioned by the Shanghai Stock Exchange, and Zhao was forced to give up her attempt.

Yao Zhenhua, the chairman of Baoneng, was barred from the insurance industry for 10 years after a high-profile fight to take control of China Vanke, China’s flagship property developer.

A succession of high-fliers have fallen to earth but Xiang’s ­descent will have a much wider impact than the others. Xiang was once regarded as a capable technocrat. He was a state auditor and defied death threats to expose the corruption of local officials. He worked for three years as a deputy central bank governor and, in 2007, was assigned to run Agricultural Bank of China, which was in technical insolvency at the time. Xiang successfully turned the lender into a listed bank.

After taking over the CIRC helm in 2011, Xiang, 60, cut the insurance industry loose to allow rapid growth. The industry’s asset size surged from 6 trillion yuan in 2011 to 15 trillion yuan last year. In the insurance business, whether the regulator issues a licence, to whom it is issued, or even the policies it allows to be sold can make a difference of trillions of yuan.

“The fall of Xiang is opening a can of worms,” said economics professor Hu Xingdou, from Beijing Institute of Technology. “The financial industry is one of the most corrupt in China because of the fat profits involved and excessive state regulation.”

Also, after Xiang scrapped the maximum guaranteed return of 2.5 per cent on investment-type insurance policies in 2015, sales of such policies, similar to wealth management products, ex­ploded. Leading those sales are private insurers such as Anbang Group, and Foresea Life, the insurance arm of Baoneng, according to Chen Long, a Beijing-based analyst with ­research firm Gavekal. “Xiang’s fall is likely to put a check on the aggressive expansion of China’s domestic insurers,” Chen said.

The central bank is now unifying rules to look after the wealth management industry and the China Banking Regulatory Commission, under its new chief Guo Shuqing, is frequently issuing new orders instructing banks to check their books carefully.

CSRC chief Liu went a step further publicly attacking “big crocodiles” and trumping the value of “Communist Party leadership” in corporate governance late last year.

“For now, there’s no financial matter free from politics, and no political course without great attention to finance,” Liu told the Shenzhen Stock Exchange on Monday.

But observers suggest Beijing’s heavy-handed crackdown could be adding fuel to the financial fire.

Zhang said the campaign to address financial irregularities could make the moneyed elite “more willing to flee China”.

Hu said: “To manage financial risks properly, China has to ­respect the market, and China has to follow the rule of law.”

Additional reporting by Sidney Leng