China purged a number of senior bankers who allegedly misused power to grant loans and business contracts in exchange for money. Analysts say these were scapegoats of the collapsing Chinese economy which the upper echelon is heavily involved in but cannot be dealt with.
On Oct. 9, China announced that Li Xiaopeng, former party chief and chairman of China Everbright Group, was expelled from the Chinese Communist Party (CCP) and his post for severe violations of party discipline and Chinese laws including accepting bribery, illegally holding stakes in non-listed companies, and power abuse.
China Everbright Group is one of China’s biggest financial conglomerates and owns listed units including China Everbright Bank, Everbright Securities, and China Everbright.
On Oct. 7, CCP expelled Liu Liange, the former chairman of the state-owned Bank of China from the party, accusing him of illegal activities in granting loans and causing significant financial risks and taking bribes.
Prior to September, there were also three other senior bankers under investigation by the anti-graft organ, the Central Commission for Discipline Inspection, including former central-bank deputy governor Fan Yifei, former Shenzhen head of China Construction Bank Wang Ye, and China Huarong Asset Management Beijing branch’s Party secretary Huang Xianhui.
In March, a total of eight senior executives from large state-owned banks were put under investigation, according to Chinese media reports.
Scholar Li Hengqing told The Epoch Times the regime’s financial system is nearly totally tainted. The authorities only hope to cover up the fact that problems lie in the policies and the central leadership, “These so-called corrupt officials are its scapegoats,” said Mr. Li.
He said the cover-up is the biggest issue of the regime.
Mr. Li explained that the presidents of banks can’t shirk off their responsibility in approving loans or getting loans through any related accounts. He believes these relevant illegal activities must involve orders from members of the Political Bureau of the Central Committee, or even higher-ranking members of the Politburo Standing Committee. “Can they afford to offend people of this level or even their relatives?” Mr. Li said.
He doesn’t believe there’s any turning point for China’s finances in the next few years. His best advice to ordinary Chinese is to cut losses as soon as possible by relocating their assets elsewhere.
China expert Wang He told The Epoch Times that as high as 40 percent of bank loans in China is associated with real estate, which imposes a great financial risk, “The rampant corruption is the true cause of the Chinese financial crisis, and major figures of the financial institutions getting sacked are the sure consequences,” said Mr. Wang.
Beijing initiated a “three red lines” policy that set limits on bank borrowings by developers: a liabilities-to-assets ratio (excluding presales) of no more than 70 percent, a net debt-to-equity ratio of less than 100 percent, and cash holdings at least equal to short-term debt.
Following the policy was the investigation of 25 financial institutions in 2021, but none of these stopped the series of Chinese real estate defaults that started that year, according to Mr. Wang.
China’s real estate giant Evergrande Group’s total liabilities had reached 2.4 trillion yuan at the end of 2022.
The company posted net combined losses of $81 billion for 2021 and 2022, according to the notice it sent to the Hong Kong Stock Exchange.
On Sept. 28, China arrested Xu Jiayin, the chairman of Evergrande, on suspicion of breaking the law and committing crimes.
Mr. Wang said the concomitant probes on financial institutions and real estate show the high correlations of the two.
“The dire situation with financial risks, real estate collapse, and high local debt, the CCP can only cover up for as long as it can,” said Mr. Wang, and the anti-corruption acts are simply to maintain a false and superficial image of governing.
