Flash and brash are out. Sober and serious are in.
With China’s wealth gap resembling the Three Gorges, the ruling Communist Party has launched a massive “austerity drive” as the world’s second-largest economy tanks.
Caught in Beijing’s crosshairs is the US$57 trillion financial sector, a target for President Xi Jinping’s corruption clampdown.
Staff at big banks and mutual funds have been told that they face “salary and bonus cuts” and warned “not to wear expensive clothes and watches at work,” the Reuters news agency reported on Monday.
Travel, entertainment expenses, and staying at “flashy hotels” have also come under the microscope at Chinese financial firms.
“It is necessary to punish harder … corruption in areas such as finance [and the] financial elite [for copying] Western ways,” the Party’s top anti-graft agency, the Central Commission for Discipline Inspection, said.
Stagnation and stealth:
- The economy is in a mess as consumer spending fails to take off.
- Manufacturing has stalled amid dwindling business confidence.
- Trade has shrunk as exports and imports shrivel.
- To cap it all one in five young people are unemployed.
Delve deeper: Eye-watering government debt of $23 trillion has only added to the toxic mix as the economy struggles to recover from Covid-19 lockdowns and a property crash.
Between the lines: “The Chinese economy may be reopening, but it’s not going to be reactivating. [The recovery is a] head fake,” Leland Miller, the founder of China Beige Book, told Insider last week.
Big picture: Still, the latest crackdown on the financial sector has been described as another power grab by Chairman of Everything Xi, dressed up as ante-corruption gobbledygook.
What they said: “The finance [industry] is the last of the three key areas for Xi to assert complete control,” Chongyi Feng, of the University of Technology Sydney, told the CNN media group in April, adding that the sector is the “money bags” of the Party.
China Factor comment: Control, not corruption is the driving force behind Beijing’s latest move as China’s economic miracle evaporates.