Chinese President Xi Jinping has vowed to deepen an anti-corruption campaign against several sectors of the economy, a move that risks hurting market sentiment, hampering China’s economic recovery, and further driving away foreign investors. On Monday, President Xi singled out the finance, energy, pharmaceutical, and infrastructure sectors and state-owned enterprises as targets of fresh scrutiny for anti-corruption.
President Xi is taking a hardline to fight corruption within Chinese society as he told state broadcaster China Central Television that China will clean up “hidden risks” in sectors where “power is concentrated, capital is intensive, and resources are rich and that there’s no turning back, no relaxing and no mercy in fighting corruption.” Xi’s comments put large parts of the economy on notice for more crackdowns ahead, potentially undermining his efforts to bolster investor confidence and woo foreign investors back to China.
Some analysts are concerned that President Xi’s fresh crackdowns will spook industry leaders, stifle economic activity, and drive away foreign investment. The chief Asia Pacific economist at Natixis SA believes the new measures are damaging confidence and the economy and are unlikely to stop soon. President Xi has made corruption his signature policy since coming to power over a decade ago. Over 100 financial professionals, including former Bank of China Ltd chairman Liu Liange, were ensnared last year in President Xi’s anti-corruption push in China’s financial sector.
Other sectors of China’s economy are now coming under scrutiny. China’s pharmaceutical industry is now in President Xi’s crosshairs after the $1.4 billion healthcare industry was rocked by probes last year, with hospital officials accused of accepting bribes. Eurasia Group warns that Chinese officials risk destabilizing entire sectors if they move too suddenly, saying, “Authorities will have to carry out their anti-corruption campaigns delicately to not introduce too much uncertainty at a time when confidence-building is crucial for the economy.”
President Xi is attempting to perform a balancing act as he tries to cement his control of Chinese society and encourage overseas executives to boost their investment in China’s economy, the world’s second-largest. However, these new crackdowns worry investors who fear the abrupt purges and an intensifying national security campaign will only worsen and further drive away foreign investment in China. The crackdowns have already curbed investment as two official measures of foreign investment into China fell to record lows in 2023, with one marking its first contraction.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
