Only 12 months ago the financial headlines in China were dominated by the opportunities opening up in the wake of Shanghai’s stock connect scheme Hong Kong. If you’re working in Chinese banking today, however, you’re more likely to be reading about compliance and corruption crackdowns rather than financial liberalisation and market opportunities.
This weekend, for example, Chinese police announced a clampdown on a foreign-exchange network that reportedly handled up to $64 billion in illegal transactions, some of them allegedly settled by mainstream banks such as HSBC. And over the past few months authorities in China have put the financial sector under the microscope like never before. China’s financial professionals are now living in what Bloomberg describes as a “climate of fear” as the government expands a campaign to assign blame for the recent stock market rout.
The police are investigating the president of Citic Securities, China’s biggest broker, and at least six other of the firm’s staff for alleged insider trading. Earlier this month police arrested legendary billionaire hedge fund manager Xu Xiang – a man once likened to both Warren Buffett and Carl Icahn – following a high-speed car chase. Even the regulators themselves aren’t immune from investigation – Yao Gang, a vice chairmen at the China Securities Regulatory Commission, was accused earlier this month of “alleged serious disciplinary violations”.
Fraser Howie, co-author of Red Capitalism, a book on China’s financial system, told Bloomberg that the scale and scope of these probes is unprecedented. “There have been no shortage of bad practices over the past 20 years, including manipulation and offenses such as insider trading, for the authorities to investigate – had they chosen to do so,” he said. “It begs the question: where were the investigations in past years?”
Hong Kong bankers must “descend back down to earth”. (South China Morning Post)
Morgan Stanley takes a softer approach to broker compensation. (Wall Street Journal)
Citi said to have promoted banker who allegedly knew of Libor rigging. (Bloomberg)
Former ICBC head takes charge of China’s Minsheng Bank. (Reuters)
Singapore is a much better ‘world city’ than Hong Kong, says PwC survey. (South China Morning Post)
The most important people moves in Asian asset management last week. (Asian Investor)
India’s ‘rockstar’ central bank governor says he shares China’s pain. (South China Morning Post)
Hong Kong Exchange looking to launch China share arbitrage products. (Wall Street Journal)