With the takedown of a powerful investment company head, Chinese leader Xi Jinping stepped up his anti-corruption campaign in the financial sector after the Communist Party held its plenary session this October.
China’s Wujie News reported that Xu Xiang, known as the “number one boss of Private Funds,” was apprehended by Chinese authorities on Nov. 1 following a dramatic highway chase near the southeastern port city of Ningbo.
Xu is the latest target of the Party’s crackdown on insider trading and other unwanted activity.
The Communist Party’s Central Commission for Discipline Inspection (CCDI), a secretive, internal agency responsible for carrying out Xi Jinping’s anti-corruption campaign, said it has dispatched eight teams to work in the offices of 14 major financial agencies until Oct. 31, among them China Securities Regulatory Commission and China CITIC Bank.
Xu Xiang was one of their earliest, most prominent scalps. On Nov. 1, police in Shanghai raided the office of Zexi Investment, the hedge fund that Xu headed. According to Bloomberg, Zexi is named for communist leader Mao Zedong and Qing Dynasty Emperor Kangxi, two men whom Xu admired. But the Communist Party, which believes that illicit trading has exacerbated the stock market crash, sees Xu and his ilk as “malicious short sellers.”
According to official police tweets on Chinese social media, Xu was caught by officers who blocked off all highway exits for more than half an hour.
Also on Nov. 1, China’s Southern Weekly reported that Zhang Yun, head of the state-run China Agricultural Bank, had been taken away by police, and was not present at a conference held at the bank by the Party’s anti-corruption agency, the CCDI.
According to sources in contact with Southern Weekly, Zhang Yun was sent back to his office on Nov. 3, but had been demoted and expelled from the Communist Party.
Xinhua, a state-run mouthpiece, reported that in addition to Zexi Investment, executives at Yishidun International Trading and Huaxin Futures had been detained. According to police, two arrested executives had made $316 million in “illegal profit.”
The Party’s sweep of the financial industry, the first of its kind since Xi took power in 2012, was preceded by the crash of the Shanghai stock exchange this summer. This downturn has had a catastrophic effect in wiping out an estimated $5 trillion in stock market gains, according to a Bloomberg report.
Xinhua claimed that Yishidun and Huaxin had used “foreign technological support” to develop advanced trading software.
Hu Xingdou, a prominent economic scholar and professor at the Beijing Institute of Technology, told Bloomberg, “The biggest-ever storm is brewing for China’s financial industry and more heads will roll.”
The anti-corruption investigations have targeted executives from the country’s biggest securities firm, CITIC, this August and September. Those apprehended are suspected of having engaged in insider trading and other illicit financial activity, undermining instructions from the central government to prop up the sputtering stock market.
Other firms have been unwilling hosts to the disciplinary commission: in 2014, anti-corruption officials set up shop in China Unicom, the world’s third-largest telecommunications provider, revealing widespread bribery, embezzlement, and sexual misconduct at the firm.