Share on facebook
Share on twitter
Share on telegram
Share on whatsapp
Share on linkedin
Share on print
Share on email

Risk Watch: China’s Law and Security Apparatus Calls for ‘Vigorous’ Financial Risk Prevention

◎ The Xi administration considers financial affairs and risks to be a matter of national security.


The Central Political and Legal Affairs Commission (PLAC) stressed the need for “vigorous” safeguards against financial risks during a work conference held in Beijing from Jan. 22 to Jan. 23. Domestic security officials were told to carry out “stability maintenance”—Communist Party parlance for repressive law enforcement measures—in cases of “economic crime” involving masses of people.

Instructions from Xi Jinping were also broadcast during the meeting.

The backdrop: China’s legal and law enforcement apparatus has increasingly been involved in financial affairs and meetings since 2017.

In the second half of 2017, the Ministry of Public Security, Supreme People’s Court, and Supreme People’s Procuratorate issued circulars on the need to crackdown on financial crime and make safeguards against financial risks.

On Aug. 4, the Supreme People’s Court issued a circular on “strengthening financial adjudication work” that provided guidelines on the legal handling of financial cases. Judges were required to take strong measures against those who committed internet financial crimes or other internet related illegal financial activity. Judges also had to guard against the transmission of financial risks that may result from bankruptcy cases.

On Aug. 22, the Supreme People’s Procuratorate issued a circular on learning from the National Financial Work Conference in July and improving financial prosecution work. Procuratorates were required to investigate and handle “financial crocodiles” (large Chinese conglomerates who go on investment sprees abroad) and deal with “moles” who trade money for power. Procuratorates were also told to crackdown on “innovative” investors who run Ponzi schemes and investigate crimes that could shake up the financial sector.

On Nov. 7, the Ministry of Public Security announced that it would take further steps to clamp down on financial crime. The Ministry said that it would target illegal fundraising, internet financial crimes, as well as criminal activity in the securities and futures markets, and in various financial systems.

Senior officials from the PLAC, the military, and the military police attended the July National Financial Work Conference and the Central Economic Work Conference in December.

Why it matters: The Xi administration considers financial affairs and risks to be a matter of national security. In other words, the CCP believes financial issues to be directly connected with its political legitimacy.

Our take:
1. The PLAC emphasizing the need to curb financial risks suggests that the Xi leadership is making preparations for the worst-case scenario. For instance, a debt crisis could be triggered in China if substantial investments return to the West. In this scenario, the CCP will need its domestic legal and security officials to “maintain social stability.”

2. The exposure of massive Ponzi schemes in recent years have already stirred sizeable social unrest.

On Jan. 10 2016, over 100,000 people who invested in the Ezubo online lending scam journeyed to Beijing to submit petitions. Local security officials struggled to handle this mass petition. The Ezubo scam involved over 900,000 people.

Ever since the Qianbao.com Ponzi scheme was exposed in 2017, hundreds of protesters have taken to the streets to demand a solution from the authorities. Clips of policemen grappling with masses of Qianbao protesters have surfaced on social media. Qianbao had 200 million users in 2017.


Search past entries by date
“The breadth of SinoInsider’s insights—from economics through the military to governance, all underpinned by unparalleled reporting on the people in charge—is stunning. In my over fifty years of in-depth reading on the PRC, unclassified and classified, SinoInsider is in a class all by itself.”
James Newman, Former U.S. Navy cryptologist
“Unique insights are available frequently from the reports of Sinoinsider.”
Michael Pillsbury, Senior Fellow for China Strategy, The Heritage Foundation
“Thank you for your information and analysis. Very useful.”
Prof. Ravni Thakur, University of Delhi, India
“SinoInsider’s research has helped me with investing in or getting out of Chinese companies.”
Charles Nelson, Managing Director, Murdock Capital Partners
“I value SinoInsider because of its always brilliant articles touching on, to name just a few, CCP history, current trends, and factional politics. Its concise and incisive analysis — absent the cliches that dominate China policy discussions in DC and U.S. corporate boardrooms — also represents a major contribution to the history of our era by clearly defining the threat the CCP poses to American peace and prosperity and global stability. I am grateful to SinoInsider — long may it thrive!”
Lee Smith, Author and journalist
“Your publication insights tremendously help us complete our regular analysis on in-depth issues of major importance. ”
Ms. Nicoleta Buracinschi, Embassy of Romania to the People’s Republic of China
"I’m a very happy, satisfied subscriber to your service and all the deep information it provides to increase our understanding. SinoInsider is profoundly helping to alter the public landscape when it comes to the PRC."
James Newman, Former U.S. Navy cryptologist
“Prof. Ming’s information about the Sino-U.S. trade war is invaluable for us in Taiwan’s technology industry. Our company basically acted on Prof. Ming’s predictions and enlarged our scale and enriched our product lines. That allowed us to deal capably with larger orders from China in 2019. ”
Mr. Chiu, Realtek R&D Center
“I am following China’s growing involvement in the Middle East, seeking to gain a better understanding of China itself and the impact of domestic constraints on its foreign policy. I have found SinoInsider quite helpful in expanding my knowledge and enriching my understanding of the issues at stake.”
Ehud Yaari, Lafer International Fellow, The Washington Institute
“SinoInsider’s research on the CCP examines every detail in great depth and is a very valuable reference. Foreign researchers will find SinoInsider’s research helpful in understanding what is really going on with the CCP and China. ”
Baterdene, Researcher, The National Institute for Security Studies (Mongolian)
“The forecasts of Prof. Chu-cheng Ming and the SinoInsider team are an invaluable resource in guiding our news reporting direction and anticipating the next moves of the Chinese and Hong Kong governments.”
Chan Miu-ling, Radio Television Hong Kong China Team Deputy Leader
“SinoInsider always publishes interesting and provocative work on Chinese elite politics. It is very worthwhile to follow the work of SinoInsider to get their take on factional struggles in particular.”
Lee Jones, Reader in International Politics, Queen Mary University of London
“[SinoInsider has] been very useful in my class on American foreign policy because it contradicts the widely accepted argument that the U.S. should work cooperatively with China. And the whole point of the course is to expose students to conflicting approaches to contemporary major problems.”
Roy Licklider, Adjunct Professor of Political Science, Columbia University
“As a China-based journalist, SinoInsider is to me a very reliable source of information to understand deeply how the CCP works and learn more about the factional struggle and challenges that Xi Jinping may face. ”
Sebastien Ricci, AFP correspondent for China & Mongolia
“SinoInsider offers an interesting perspective on the Sino-U.S. trade war and North Korea. Their predictions are often accurate, which is definitely very helpful.”
Sebastien Ricci, AFP correspondent for China & Mongolia
“I have found SinoInsider to provide much greater depth and breadth of coverage with regard to developments in China. The subtlety of the descriptions of China's policy/political processes is absent from traditional media channels.”
John Lipsky, Peter G. Peterson Distinguished Scholar, Kissinger Center for Global Affairs
“My teaching at Cambridge and policy analysis for the UK audience have been informed by insights from your analyzes. ”
Dr Kun-Chin Lin, University Lecturer in Politics,
Deputy Director of the Centre for Geopolitics, Cambridge University
" SinoInsider's in-depth and nuanced analysis of Party dynamics is an excellent template to train future Sinologists with a clear understanding that what happens in the Party matters."
Stephen Nagy, Senior Associate Professor, International Christian University
“ I find Sinoinsider particularly helpful in instructing students about the complexities of Chinese politics and what elite competition means for the future of the US-China relationship.”
Howard Sanborn, Professor, Virginia Military Institute
“SinoInsider has been one of my most useful (and enjoyable) resources”
James Newman, Former U.S. Navy cryptologist
“Professor Ming and his team’s analyses of current affairs are very far-sighted and directionally accurate. In the present media environment where it is harder to distinguish between real and fake information, SinoInsider’s professional perspectives are much needed to make sense of a perilous and unpredictable world. ”
Liu Cheng-chuan, Professor Emeritus, National Chiayi University
Previous
Next