China has intensified its anti-corruption efforts in the financial sector this year, targeting regulatory bodies and industries such as banking, insurance, and securities. This move is aimed at safeguarding economic security and addressing potential financial risks.
Anti-corruption efforts
The country’s top anti-graft watchdogs, the Communist Party of China Central Commission for Discipline Inspection (CCDI) and the National Commission of Supervision (NCS), have disclosed investigations or penalties for approximately 90 cadres in the financial system. High-ranking officials, including former vice-presidents of the Industrial and Commercial Bank of China (ICBC) and the China Development Bank, were among those investigated.
Investigations have extended to officials from all five State-owned banks — ICBC, Agricultural Bank of China, Bank of China, Bank of Communications, and China Construction Bank. The scope also includes insurers, securities institutions, financial groups, banking regulatory bodies, the central bank, the securities regulatory system, and local financial management departments.
Addressing financial risks
The central financial work conference held in Beijing last month emphasized the need to address intertwined contradictions and problems in the financial sector. Prominent issues include potential financial risks, low-quality and inefficient financial services to the real economy, repeated financial crimes and corruption, along with weak financial supervision and governance capacity.
Authorities were urged to adopt a solid and prudent approach to resolving risks, resolutely punish illegal activities and corruption, and guard against moral risks.
Expert opinion
Zhuang Deshui, deputy head of the Research Center of Public Policy at Peking University, said recent announcements about investigations into financial sector officials were closely related to work arrangements made by the CCDI earlier this year. He added that the financial conference raised even higher requirements for combating corruption in the financial sector, aiming to use anti-corruption efforts to drive financial system reform and prevent financial risks.
Future directions
In January, a CCDI communique announced a resolute crackdown on corruption combining political and economic issues. It emphasized intensified efforts to combat corruption in key areas, and deepen rectification in sectors with concentrated power, intensive capital, and abundant resources, such as finance, State-owned enterprises, political and legal affairs, and grain procurement and sales.
The Political Bureau of the CPC Central Committee also called for intensified supervision of top leaders at all levels of State-owned enterprises and increased efforts to combat corruption and rectify undesirable work conduct.
The central authorities’ moves have set a stringent tone for how anti-corruption efforts will proceed in the financial sector, with Zhuang saying anti-corruption initiatives will continue to deepen.
A recent article published by the CCDI and NCS said systemic risks in China’s financial system primarily stemmed from the systematic impact of macroeconomic changes on the financial system, the ongoing accumulation of risks within the financial system, and the spillover of external risks. It said the three types of risks did not exist in isolation and could easily resonate due to risk accumulation, triggering more extensive and widespread systemic financial risks.
Summary
China’s intensified anti-corruption efforts in the financial sector are a strategic move to safeguard economic security and address potential financial risks. The crackdown has targeted regulatory bodies and various industries, including banking, insurance, and securities. High-ranking officials from state-owned banks and other financial institutions have been investigated, signaling a stringent tone for future anti-corruption initiatives. These efforts are not isolated but are part of a broader strategy to drive financial system reform and prevent financial risks. The focus on sectors with concentrated power, intensive capital, and abundant resources underscores the commitment to combat corruption and rectify undesirable work conduct. As systemic risks continue to pose challenges, these anti-corruption initiatives are expected to deepen, resonating with the ongoing accumulation of risks within the financial system and the spillover of external risks.