China picks awkward time to strike fear in markets

China Renaissance Holdings

06/02/2024 23:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
       HONG KONG, Feb 6 (Reuters Breakingviews) - Beijing’s
corruption crackdown is threatening to derail efforts to boost
confidence in the world’s second largest economy. On Monday,
courts handed the former president of China Merchants Bank
 600036.SS , Tian Huiyu, a suspended death sentence for crimes
including accepting bribes and insider trading. The same day,
the securities watchdog threatened to bankrupt and jail those
who illegally manipulate the market and engage in malicious
short-selling. Meanwhile, Bao Fan, a star banker and founder of
China Renaissance  1911.HK , unexpectedly resurfaced to resign
from the investment firm after disappearing a year ago.
    It’s a stark reminder that President Xi Jinping’s anti-graft
campaign in the financial sector is moving ahead full force,
even as the benchmark CSI300  .CSI300  blue-chip index closed at
a five-year low yesterday amid a protracted property crisis and
slowing economic growth. The president recently declared that
regulators need to have “teeth and thorns”, as part of his goal
of turning the country into a financial power. 
    The problem is, the added scrutiny, plus threat of jail
terms or worse, will probably deter bank executives from
extending fresh credit to struggling property developers, which
face a funding shortfall of 3.2 trillion yuan ($445 billion) in
delayed or unfinished housing projects. Domestic confidence in
real estate and stock markets are already flagging. More teeth
and thorns will hurt. (By Ka Sing Chan).
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 (Editing by Robyn Mak and Katrina Hamlin)