China Tightens Grip on Financial Sector

Government of China has detained Investment Bankers and Confiscated their Passports in a move to tackle corruption. 

Chinese authorities have detained three top investment bankers from different securities firms since August, this year.

Following the imposition of significant salary reductions and the implementation of other austerity measures during President Xi Jinping's extensive campaign for common prosperity, the nation's business negotiators are now facing scrutiny from the country's leading anti-corruption crusader.

Employee Arrested Abroad

Two weeks ago, an employee of Haitong Securities Co., who was in charge of negotiating transactions escaped the nation and was arrested abroad, before being returned to China following a highly publicized event on state-run media.

Haitong and other government-supported brokerage firms have recently requested numerous of their investment professionals to surrender their passports and obtain approval for both their business and personal travel itineraries, as per individuals acquainted with the situation. These demands came after receiving direct instructions from Chinese authorities, as mentioned by the individuals, who also requested anonymity due to the sensitive nature of the discussion.

The brokerage firms have made it more difficult to secure permission for international travel, and have also informed employees that they must obtain consent to resign, according to the individuals with knowledge of the matter. Employees who receive permission for business travel must travel with a colleague, and any activities not listed in the approved travel plans will be limited, as one of the individuals mentioned.

President Xi Jinping's Regulation to Tackle Corruption

In 2021, President Xi declared his intention to tackle corruption within China's US$66 trillion financial sector. Since then the Chinese government has been actively working in the industry. Extensive investigations have resulted in the imprisonment and capture of many financial experts from banks, brokerages, asset management firms, and insurance companies. 

“All these crackdowns and restrictions will hurt the morale of financial workers,” Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co. Shen mentioned that the objective of the government is to deeply alter how the wealth is shared across the financial sector.

In addition to Jiang, who previously worked for Haitong, Chinese officials have also taken into custody Wang Zhaoping. 

As of early September, China boasted over 8,700 investment bankers working at 147 different firms. A significant portion of these professionals engage in activities related to the capital markets, such as initial public offerings (IPOs) and subsequent share sales.