Xi’s Crackdown on China’s Financial Sector Reveals His Political Predicament

November 3, 2021 Updated: November 3, 2021

News Analysis

Nearly 100 high-level Chinese officials in the financial sector have been investigated since the beginning of this year, ranging from banks, insurance companies, asset management companies, and financial regulatory agencies. The scope is unprecedented as previous disciplinary campaigns in China mostly targeted a small number of officials who were found suspicious.

This aggressive new campaign is an indication that Chinese leader Xi Jinping has had great difficulties controlling the Chinese financial sector ever since taking power in 2012, according to a Chinese financial analyst.

Jiang Zemin and Zeng Qinghong

Mike Sun, a U.S.-based Chinese investment strategist, previously told the Chinese edition of The Epoch Times that China’s financial sector has long been controlled by a political faction opposing Xi—a faction led by former Chinese leaders Jiang Zemin and Zeng Qinghong.

Jiang won Deng Xiaoping’s favor during the 1989 Tiananmen Square Massacre as he supported Deng’s decision to open fire on the student demonstrators. Soon after the pro-democracy movement was strangled, Deng made Jiang the general secretary of the Chinese Communist Party (CCP) and leader of the country.

Zeng, a notable princeling—whose father, Zeng Shan, was a Party elder—has been a staunch supporter and handler of Jiang. Before Jiang became the Party’s top leader, he served as the Party boss in Shanghai and worked closely with Zeng, the then deputy Party boss of Shanghai. As soon as Jiang took office in Beijing, he promoted Zeng and brought him to Beijing as well.

During the more than 10 years of Jiang’s rule, he and Zeng were the most powerful political figures in China, and together they turned the country’s financial sector into their cash cow. This situation did not change after Xi took power in 2012.

Xi’s sweeping anti-corruption campaign over the years has always been a political campaign directed at the Jiang-Zeng faction. Many important members in this political clique were removed from their posts during Xi’s first 5-year term—in the name of fighting corruption. However, as Xi’s second term is about to end next year, he still hasn’t been able to fully control Jiang and Zeng’s cash cow operations.

Xi’s Latest Anti-Corruption Campaign

Presently, Xi is again using his anti-corruption campaign to try to turn things around in the financial sector, and at the same time seeking to remain in office for a third term.

The Central Commission for Discipline Inspection (CCDI), the CCP’s anti-corruption watchdog, said on its website on Sept. 13 that the number of officials in the financial sector who were taken down after Xi began his second term was three times greater than during Xi’s first term. The CCDI warned that the momentum would only get stronger to ensure the safety of the financial industry.

One month later, on Oct. 12, the CCDI sent inspectors to 25 financial institutions, including major state-owned banks, stock exchanges, and investment companies.

Senior officials disciplined during this round of crackdowns include Zhang Qin, president of the Inner Mongolia branch of China Construction Bank; He Xingxiang, vice president of China Development Bank; Cai Esheng, vice chairman of the China Banking Regulatory Commission; Li Guorong, deputy director of Sichuan Banking and Insurance Regulatory Bureau; and Wang Junxiang, vice president of Jilin Financial Holding Group Corporation.

In Shanghai, China’s financial center and the Jiang-Zeng faction’s political base, nearly 70 high-ranking local officials have been sacked since the beginning of this year. During the October crackdown, at least 10 high-level officials in the industry were investigated, including Xiang Jie, the financial department general manager at Shanghai Pudong Development Bank’s Shenzhen Branch; Jin Rongzhong, branch president of Shanghai Rural Commercial Bank; and Ge Qiwei, project manager of the business department of Shanghai Yangpu Financial Guarantee Co., Ltd., and others.

Avoiding Another Stock Market Crash

During Xi’s first term, China experienced a major stock market crash in June 2015, when a third of the value of A-shares on the Shanghai Stock Exchange was lost within one month, wiping out more than $3 trillion in wealth.

A few senior officials were sacked after that financial crisis, including Yao Gang, the vice chairman of the China Securities Regulatory Commission, but the scope was quite limited compared to this year’s crackdown.

Sun explained that Xi is making big moves in his present anti-corruption campaign, and he obviously hopes to complete the regulation of the financial sector before elections next year. He needs to firmly have the financial power in his own hands to avoid another major stock market crash, as the 2015 market crash directly threatened his rule.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Justin Zhang
Justin Zhang has been analyzing and writing articles on China issues since 2012. He can be contacted at guihang1996@gmail.com