Checks on banks and regulators amid revamp of industry
China has initiated a new round of inspections on major economic and financial regulators, as well as the big four state-owned banks, marking the latest step in Beijing’s revamp to keep close tabs on the sprawling industry.
The 34 targets of the discipline inspections – a routine tool to identify corruption and ensure government agencies toe the Communist Party line, included China’s central bank, its banking, securities and foreign exchange regulators, the top economic planner and the finance ministry, the state-backed Xinhua News Agency said.
The five largest state banks – the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, China Construction Bank and the Bank of Communications – two state-owned insurers and the Export-Import Bank of China will also open their doors for reviews by the country’s top anticorruption body.
They are the first inspections since President Xi Jinping said fending off financial risks were the “eternal theme” for Beijing and brought forward his financial superpower vision – with a variety of regulatory criteria and requirements in the pipeline – at the central financial work conference in October.
The financial sector, including regulatory bodies and financial service firms, has traditionally been a key target for Beijing’s anti-corruption drive. The top leadership has also embarked on a sweeping remoulding of the world’s second-largest financial market and its 461 trillion yuan (HK$499.1 trillion) asset pool.
Anti-corruption body chief Li Xi on Monday said the inspections would focus on vital finance and economy-related entities. He told inspectors to check the functions, responsibilities and performance of financial units to “enforce discipline, tackle risks, find deviations from the party’s political course and rectify problems”.
Under Xi’s superpower ambition, China’s financial market is duty-bound to marshal resources to serve national endeavours, prop up growth and the real economy and surmount risks at home and abroad, even at the expense of their profits.
Financial officials and executives have reported pay cuts and have been told to ditch “character defects”, including greed and elitism, to align more closely with the Communist Party.
“Upcoming inspections ram home the message that financial officials and managers must discipline themselves and deliver on Beijing’s demands and they will be checked and appraised,” said Li Xuenan, a finance professor with the Cheung Kong Graduate School of Business.
Li compared the Communist Party’s stronger oversight with the Western solution of environmental, social and governance (ESG). “How to align the interests of the financial industry with the greater good of the public is a global issue,” she said. “Incorporating party leadership into the running of financial institutions can also be a unique method of implementing ESG in China.”
Many financial officials and executives have been caught in corruption and discipline probes since last year. High-profile cases involved ex-deputy central bank governor Fan Yifei, former Bank of China chief Liu Liange and former chairman of China Everbright Group Tang Shuangning.
“The impression is that the financial sector is the key realm for the party’s discipline apparatus going forward,” said a Beijing scholar who declined to be identified due to the sensitivity of the issue. “The banking sector is always a focus for graft-busters, but now the new inspections are part of stricter, more intrusive, pervasive party supervision of the entire financial sector.”
Beijing is also eyeing deeper penetration into financial entities, with stricter organisation and moral guard rails to weed out corruption and poor performers.
On Monday, the Central Financial Commission and Central Financial Work Commission – the top Communist Party organs overseeing the sector – urged for more party committees and units in more banks, insurers and security brokers.
“Efforts should be made to expand the party’s organisational coverage and penetration,” said a co-written article published in the Study Times, a newspaper affiliated with the Central Party School that trains party officials.
The article also reiterated Xi’s directives on eradicating erroneous thoughts and defects, including hedonism, extravagance and “latent, hidden” rules condoning unscrupulous practices and “hidden deviations”.