China's top anti-corruption agency is conducting an investigation into 25 financial institutions, examining ties between state-owned banks and big companies.
Officials in the Ministry of Finance have been pushing, for some time, for salary cuts in banks because the banking sector pays higher wages than other sectors.
The question that must be answered is why would bankers make decisions that do not maximize the bank's return on capital? Xi claims that these decisions are the result of corruption and that bankers are receiving kickbacks from developers, which is certainly a possibility.
The People's Bank of China claimed this would maintain a "Healthy property market."
If the debt crisis was largely the result of non-market forces-the government encouraging banks to ignore credit risk when lending to developers-then what are regulators actually looking for? An implication that these investigations are politically or ideologically motivated, rather than motivated by economic factors, is that Zhao Leji, head of the anti-corruption body, stated that the investigators will "Thoroughly search for any political deviations."
Until now, the anti-corruption campaigns have investigated numerous sectors of the economy, but not banks.
The scrutiny of banks, cutting executive salaries, and anti-corruption purges all increase the amount of control the CCP has over the economy.
Sunday, October 17, 2021
Beijing Investigates China's Financial Industry as Xi Solidifies His Power
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