China Corruption: Fast & Furious crackdown creating opportunities

China Corruption

China Corruption Crackdown

Instead of embracing this as a positive development, the West seeks to transform this into another soap opera-type event. They accuse the current administration of using this crackdown in the guise to get rid of political opponents. Let us stop there and examine that statement.  If the individuals are corrupt, then cracking down on them is justified and if they happen to be political opponents well, it should be viewed as an unintended bonus. The focus should not be on politics but on whether the individuals being targeted have had dealing that could be classified as being corrupt. I suspect the official in the West, especially in the U.S are nervous because if we had a similar crackdown more than half of congress would be under investigation

Nobody can deny that the crackdown is both fast and ferocious and that its scale is massive, to say the least. Such a massive crackdown does not appear to be politically motivated. Instead, it appears that officials have finally understood that they need to clean the house before China takes the reins from America and becomes the World’s largest economy. In that sense, this government is taking the right approach and should be commended for their efforts at controlling corruption which until the crackdown was rampant and thriving.

The crackdown on “bribery, dereliction of duty and other duty-related crimes” has resulted in the investigation of a mindboggling 54,000 officials last year alone.

The scope of China Corruption Crackdown is massive

  • Tallying up anti-corruption efforts in the past year, Wang said disciplinary authorities received more than 2.8 million tip-offs and punished about 336,000 discipline violators in 2015.
  • Investigations into 90 centrally-administered officials for discipline violations were launched or finished in 2015, said the report, adding 42 of them have been transferred to judicial organs for criminal investigation.
  • Graft-busters also probed 49,000 officials for a suspected violation of the eight-point anti-extravagance rules, 34,00 of them were published according to the disciplinary rules.
  • The discipline inspection agencies have been firm in dealing with its corrupt elements. A total of 2,479 discipline inspectors nationwide were punished in 2015, according to the report.
  • An initiative called “Sky Net” unveiled by the Chinese government saw 1,023 fugitives being returned from overseas in 2015, recovering 3 billion yuan (461.5 million U.S. dollars) in criminal proceeds. Full Story

China Corruption crackdown

Will create short-term uncertainty in the markets as China is also trying to transition from an export-based economy to a consumer-based economy and such changes are never easy.  Long story short, we think that these developments will set the bedrock for a very strong bull market in the future. Hence,  individuals should be making a list of key stocks to deploy capital into over the next  6 -12 months. One such company is Netease (NTES), and another is Alibaba (BABA).

At least, China is trying to do something about its corruption problem, in the U.S we are letting super corrupt government officials get away with murder. Instead of Jail time, their banks account seem to be growing larger with the passage of each day.

Corruption in China

The former chairman of a state lender known as “Beijing’s superbank” is being investigated for “a serious disciplinary violation”, according to a statement from the Communist Party’s enforcement agency on Wednesday.

Hu Huaibang, who was chairman of China Development Bank (CDB) for more than five years until his retirement in September last year, is suspected to be the latest in an already long line of heavyweight financial officials toppled by Beijing’s anti-corruption campaign.

Also former party chief within the policy bank, Hu follows the likes of Lai Xiaomin, former chairman of the giant state-owned China Huarong Asset Management who was put on trial on charges of corruption in February 2019, and Xiang Junbo, former head of China Insurance Regulatory Commission, who stood trial last June.

The Central Commission for Discipline Inspection – the party disciplinary watchdog – did not specify what Hu was accused of, but the wording, based on the previous usage, implies corruption.

CDB is one of the Chinese central government’s three policy banks, which issue loans in the direction of Beijing. The others are the Agriculture Development Bank of China and the Export-Import Bank of China. It plays a crucial role in financing the country’s mega infrastructure projects at home and strategic investment deals abroad.
The court heard that Wang had used Hu as a conduit for CEFC Shanghai, a subsidiary of CEFC China, which was controlled by now vanished tycoon Ye Jianming , to take equity positions in the Bank of Hainan. Hu is also alleged to have been involved in a deal whereby Wang helped CEFC Hainan, another subsidiary, to obtain a US$4.8 billion credit line. scmp.com

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