China’s Bureaucrats Have Their Own Crackdown Under Way

Opinion

October 1st, 4:37am

Shuli Ren

Shuli Ren -

In the US, central bankers trade stocks and federal judges hear cases of companies in which they hold financial interests. The first is legal (but controversial); the second is illegal but not uncommon. In China, however, the official position on such issues is: No. As President Xi Jinping reins in business tycoons and tightens regulations, his own bureaucrats aren’t spared scrutiny. The message is clear: Don’t mix business and government. The high-profile corruption cases that dominated the news earlier this year were just the beginning of the campaign. Lai Xiaomin, former boss at China Huarong Asset Management Co., majority-owned by the Ministry of Finance, was executed in January for receiving 1.8 billion yuan ($278 million) in bribes. In September, Yuan Renguo, former chair of state-owned liquor giant Kweichow Moutai Co., got life in prison for taking bribes of 112.9 million yuan. In August, China said it was investigating Hangzhou’s top government official for serious disciplinary violations, sending shockwaves at the tech hub, home to Alibaba Group Holding Ltd. and its affiliate Ant Group Co. On Sept. 20, China’s top graft watchdog issued its first set of detailed guidelines listing 101 types of crimes it will investigate. The potential charges are far-ranging, from bribery and dereliction of duty to insider trading and signing off on suspect commercial bills. In fact, anyone can be subject to a graft probe, not just government bureaucrats: workers at a public hospital or a state-owned steel mill, or a state-appointed director of a company. In the first-half of 2021, the government opened 321,000 probes and penalized 265,000 personnel, the most since a similar public disclosure of such figures in 2017, the watchdog said. Anyone who handles money needs to be extra careful. Anti-corruption officials will soon start inspecting 25 financial units, including the banking watchdogs, the policy banks, the giant state-owned financial institutions, distressed loan managers and insurers. It will be the widest in scope since 2016, according to Caixin, an influential local media outlet. With scandal after scandal, Beijing’s patience is running thin. For example, it came up against a near-Lehman moment in May 2019. Regulators had to take over Baoshang Bank Co., a regional lender based in the western province of Inner Mongolia. Funding costs in the interbank markets shot up, while lending froze. Baoshang was contagious despite its smallish size because it had been doing business across China. Two years on, China charged Xue Jining, former head of the banking regulator at the Inner Mongolia branch, for taking in 400 million yuan in bribery. Without Xue advocating for Baoshang, the regional bank would not have gotten the nod to open branches in bigger cities such as Beijing and Shenzhen, thereby creating a “regulatory vacuum,” the graft watchdog concluded. In his confession, Xue said he had “shut his eyes” and allowed Baoshang to expand outside the province, leading to severe consequences. Then there was CEFC China Energy Co., which shot to global fame for buying a $9 billion stake in Russia’s Rosneft PJSC in 2017. After an equally spectacular default a year later, Hu Huaibang, former chair of China Development Bank, was named by China State Central Television as helping facilitate a $4.8 billion credit line for the obscure energy trader, which had no apparent state links. The policy lender, which gives out billions of dollars of fiscal loans, has recently been hit with graft probes. Hu was sentenced to life imprisonment. The graft watchdog will only get busier. One focus will be state-owned distressed loan managers, because of their official mandate to offload government-owned assets for cheap. It’s often tempting to package a few prized bites into a jumbo deal and sell them to family and friends. Bureaucrats — ranging from loan bankers to financial licensing officers to insurers’ portfolio managers — can take advantage of the many gray areas in China’s sprawling financial system if they chose to be unscrupulous. On its website, the watchdog complains about lost souls a lot: Wanting to be “rich and powerful,” unprincipled officials have “lost their idealism,” “indulged in feasting,” “pursued inferior hobbies,” and were “surrounded” by lobbyists. The anti-graft watchdog hopes that the crackdowns teach China’s bureaucrats to “dare not, cannot, and not want” to be corrupt. The loopholes in China’s labyrinthine system are tempting to exploit. But with so much harsh sentencing, who would dare? Bloomberg

from Asharq AL-awsat https://english.aawsat.com/home/article/3219851/shuli-ren/china%E2%80%99s-bureaucrats-have-their-own-crackdown-under-way