Days after Zhao Kezhi, a trusted ally of Xi Jinping, was appointed as head of China’s Ministry of Public Security, the law enforcement authority announced that it would double down on efforts to tackle financial crimes. In particular, the Ministry would focus on crimes such as illegal fundraising, internet financial crimes, securities and futures markets, and financial systems.
- Based on our research, the China financial crisis of 2015 was an economic coup by a coalition of financial interest groups with links to the Jiang Zemin faction. After the crisis, the Xi Jinping leadership started to target financial sector corruption. Over a dozen leading financial officials, hedge fund managers, and securities officials have thus far been arrested or probed, including Liu Lefei, the vice chairman of CITIC Securities and the son of former Politburo Standing Committee member Liu Yunshan.
- With the rise of internet financing in the past two years, illegal fundraising cases on the mainland also skyrocketed, with over 10,000 cases in 2015 alone. Companies like Ezubao, Fanya Metals Exchange, and Shanghai Kuailu Investment carried out financial crimes involving tens of billions of yuan. Many of the investors in the companies as mentioned earlier who lost their life savings and continually petitioning the authorities to help them recover their investments.
- In the first half of 2017, the Xi leadership moved against several prominent financial personnel. Tomorrow Group owner Xiao Jianhua and Anbang Insurance Group chairman Wu Xiaohui were investigated, while Wanda Group chairman Wang Jianlin was compelled into selling assets to repay loans. According to reports, Xiao and Wu are “white gloves,” or money launders for many families in the Jiang faction, while Wang has close ties with Jiang faction members.
- This August, the Supreme People’s Court and the Supreme People’s Procuratorate issued legislation on strengthening judicial and procuratorial work in the financial sector, a move which pre-empts anti-corruption probes in the financial sector.
Our take: We wrote in our Oct. 27 brief that Xi Jinping would step up anti-corruption efforts in the financial sector after the 19th Party Congress. Many Communist Party princelings and Jiang faction members in public and private sector are known to abuse their official connections to get wealthy. One such individual is Alvin Jiang, the grandson of Jiang Zemin who helped Alibaba Group’s United States IPO in 2014.