ExplainerWhy has China launched an anti-corruption probe into its finance industry, and how will it defuse risk?
- China’s top anti-corruption agency has launched a new round of inspections into some of the nation’s leading financial institutions
- The disciplinary campaign could exert more pressure on financial institutions already haunted by bad assets and a slowing economy
China’s financial regulators and state-dominated financial industry are facing a new round of party discipline, which will have major implications on the income prospects of state-owned enterprises, the country’s de-risking efforts and funding for businesses.
Finance is among China’s most profitable sectors, with the combined profits of China’s six largest state-owned banks rising 6 per cent year on year to 1.36 trillion yuan (US$197.8 billion) in 2022. But the sector’s high exposure to property developers and local financing vehicles show they are prone to big risks, which regulators are keen to get on top of.
How different is this disciplinary campaign from previous ones?
China’s most recent anti-corruption campaign, which started in 2013, is believed to have been partly about political manoeuvring.
The crusade helped President Xi Jinping consolidate his power base, with more than 500 senior officials – vice-minister level and above – investigated and punished.
This time around, the Central Commission for Discipline Inspection (CCDI), China’s top anti-corruption agency, is focused on defusing domestic financial risk, dampening external shocks on the country and laying the groundwork for economic recovery and tech innovation.
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Who has been affected so far?
The five financial institutions being probed include China Investment Corp, the country’s US$1.35 trillion sovereign wealth fund, China Development Bank and China Everbright Group.