Xi Jinping "Conduct a Comprehensive Investigation into Financial-Private Enterprise Relations"

Chinese President Xi Jinping [Image source=AP Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Chinese President Xi Jinping has ordered a thorough investigation into the relationships between financial institutions and private companies.

According to the Wall Street Journal (WSJ) on the 11th (local time), since the end of last year, President Xi has strengthened regulations on private big tech companies and ordered a comprehensive investigation into financial institutions and their ties with these companies.

WSJ, citing internal sources, reported, "This investigation focuses on whether state-owned banks, investment funds, and financial regulatory authorities have excessively close relationships with private companies."

In particular, the investigation will focus on the relationships with Evergrande, a real estate developer facing a liquidity crisis with a record debt of 350 trillion won, Didi Chuxing, the world's largest ride-hailing service, and Ant Group, the operator of Alipay.

The investigation will be led by the Central Commission for Discipline Inspection, China's top anti-corruption agency, and 25 financial institutions are mentioned as targets. WSJ described it as "the most extensive investigation since President Xi took office."

WSJ explained that this investigation is part of a broad effort to move China's economic system away from Western-style capitalism ahead of the 20th National Congress of the Chinese Communist Party (Party Congress) scheduled for next fall, which will be a milestone for President Xi's long-term rule.

According to sources, the Central Commission for Discipline Inspection plans to review loan, investment, and regulatory record files from 25 financial institutions starting this month and verify how specific transactions or decisions related to private companies were made. Officials said that if inappropriate transaction allegations are confirmed through the investigation, the parties involved will face an official investigation by the Chinese Communist Party and may subsequently be prosecuted.

WSJ quoted some officials saying, "President Xi's goal is to fully control the Chinese economy and prevent powerful private companies and other power holders threatening state power from dominating the financial sector."

Sources said that loans from China Construction Bank to HNA Group and loans from China CITIC Group to Evergrande will be among those reviewed in this investigation.

China CITIC Group provided more than $10 billion to Evergrande despite repeated warnings from the Chinese government about real estate loans. Besides China CITIC Group, state-owned banks including Agricultural Bank of China, one of the four major state-owned banks, the Chinese sovereign wealth fund China Investment Corporation (CIC), large insurers, and state-owned funds will also be investigated regarding their investment processes in Chinese big tech companies, WSJ reported.

An official related to this matter told WSJ, "The key question of the investigation will be whether (the financial institutions' investments) represent the interests of the state or the interests of a few individuals."

This content was produced with the assistance of AI translation services.