China’s financial industry is currently facing a wave of resignations by chiefs and executives from listed companies and banks, as Beijing intensifies its crackdown on the sector. Over the past month, more than a thousand senior leaders from A-share listed companies, banks, and financial institutions have resigned for personal reasons, according to Chinese state media reports.
This wave of departures coincides with Beijing’s intensified purge in the financial sector. As of September 18th, the Central Commission for Discipline Inspection had listed at least 67 senior finance officials being investigated, disciplined, or expelled from the Chinese Communist Party (CCP) this year.
U.S.-based economists Du Wen and Li Hengqing argue that these high-level finance officials are insiders of the CCP system, and their resignations indicate their waning confidence in the economy and anticipation of heightened political risks. Resignations do not happen easily, as they require approval from the CCP, which has been reluctant to approve most of them due to financial stability concerns.
Some brokerage firms have implemented new measures to retain investment bankers, such as requiring them to hand in their passports and impose conditional restrictions on outbound travel, while others suspended reviews of resignations. Financial executives and bosses of state-owned enterprises are caught in a difficult situation, unable to leave China or their jobs due to the current management system that requires them to submit their passports to authorities.
Beijing has stepped up its “anti-corruption” efforts in the financial sector, with Tian Huiyu, former president of China Merchants Bank Co., receiving a suspended death sentence over bribes and insider trading in February. The CCP’s efforts have led to a series of high-profile arrests and deportations of officials who fled the country.
The financial system, a central pillar of the Chinese economy, has long been plagued by astronomical local debt, property bubbles, shadow banking, and repayment crises. With the nationwide crackdown on corruption and the ongoing turmoil in the financial sector, many high-ranking officials are increasingly concerned about the stability of their positions and the potential for a market collapse.
