Beijing’s corruption crackdown is threatening to derail efforts to boost confidence in the world’s second largest economy. On Monday, courts handed the former president of China Merchants Bank (600036.SS), Tian Huiyu, a suspended death sentence for crimes including accepting bribes and insider trading. The same day, the securities watchdog threatened to bankrupt and jail those who illegally manipulate the market and engage in malicious short-selling. Meanwhile, Bao Fan, a star banker and founder of China Renaissance (1911.HK), unexpectedly resurfaced to resign from the investment firm after disappearing a year ago.
It’s a stark reminder that President Xi Jinping’s anti-graft campaign in the financial sector is moving ahead full force, even as the benchmark CSI300 (.CSI300) blue-chip index closed at a five-year low yesterday amid a protracted property crisis and slowing economic growth. The president recently declared that regulators need to have “teeth and thorns”, as part of his goal of turning the country into a financial power.
The problem is, the added scrutiny, plus threat of jail terms or worse, will probably deter bank executives from extending fresh credit to struggling property developers, which face a funding shortfall of 3.2 trillion yuan ($445 billion) in delayed or unfinished housing projects. Domestic confidence in real estate and stock markets are already flagging. More teeth and thorns will hurt. (By Ka Sing Chan).
Follow @Breakingviews on X
Capital Calls – More concise insights on global finance:
Estée Lauder's makeover covers up only so much read more
European banks re-enter Iran sanctions hurt locker read more
Ferrari burst closes gap with luxury king Hermes read more
Volvo Cars is doing its Chinese owner a favour read more
Paramount’s dubious suitor serves a useful purpose read more
