Chinese President Xi Jinping tightens control over China’s financial industry

President Xi Jinping is poised to strengthen his control over China’s vast financial industry, worth $61 trillion, by convening a gathering of state leaders and top bankers to chart its course for the next five years. This comes amidst a backdrop of historically low profit margins in the banking sector and an extensive anti-corruption campaign that has ensnared over 100 officials and executives throughout the year. In Beijing, President Xi is hosting the Financial Work Conference, which occurs twice a decade and is known for its closed-door nature. Xi, who holds a level of power in China not seen since Mao Zedong, is expected to prioritize the centralized and unified leadership of the Communist Party and increase scrutiny over the sector, placing these concerns at the forefront of policy objectives, according to experts and academics.

Xi Jinping

A crucial goal of this conference is to promote financial stability, given concerns regarding a slowing economy and issues within the property sector that could potentially affect the banking industry. The urgency of addressing these issues is underscored by the presence of a debt-laden property sector that poses a risk to the financial system’s stability. This highly anticipated event occurs at a significant moment for China, characterized by growing uncertainty regarding the nation’s political and economic future. President Xi’s crackdown on various segments of the private sector has contributed to this uncertainty. Foreign investors have been swiftly withdrawing their investments from the country, and major Wall Street players such as Goldman Sachs Group Inc. have scaled back their ambitious expansion plans.

The Financial Work Conference, initially established in 1997 in response to the Asian financial crisis, was postponed by a year due to China’s strict “Covid-zero” policy. Its primary aim is to advocate for financial reforms that support economic growth and ensure stability. In recent years, its significance has grown, with President Xi himself presiding over the 2017 meeting, marking a departure from earlier editions overseen by China’s premiers. Xi is expected to use the upcoming meeting to underscore recent changes within the financial industry. Earlier this year, significant reforms in oversight were implemented, including the creation of a larger national regulatory authority and the transfer of certain responsibilities from the central bank to a body under the control of the Chinese Communist Party.

The Communist Party of China (CPC) has solidified its influence over the financial sector through a combination of an anti-corruption campaign and regulatory adjustments, as noted by Sheng Songcheng, a former director of the People’s Bank of China’s statistics and analysis department. The meeting is anticipated to emphasize the leadership of the Party’s Central Committee in all financial matters. Xi has also been promoting reforms within the finance industry, advocating for reductions in salaries and addressing what one prominent organization termed as “hedonistic” practices, in line with his overarching goal of advancing “common prosperity.” Furthermore, the Chinese leader has expanded the Party’s presence in the sector through an ideological campaign that mandates bankers to study numerous volumes of books containing his thoughts.