Wall Street Panics as China Clamps Down on Corruption in the Financial Sector

Bloomberg on Wednesday expressed the great angst on Wall Street about Xi Jinping’s expanding crackdown on corruption in the financial sector. Could they be seeing the writing on the wall?

Bloomberg writes:“The high-drama highway arrest of a prominent hedge fund manager. Seizures of computers and phones at Chinese mutual funds. The investigations of the president of Citic Securities Co. and at least six other employees. Now, add the probe of China’s former gatekeeper of the IPO process himself. The arrests or investigations targeting the finance industry in the aftermath of China’s summer market crash have intensified in recent weeks, creating a climate of fear among China’s finance firms and chilling their investment strategies. At least 16 people have been arrested, are being investigated or have been taken away from their job duties to assist authorities, according to statements and announcements compiled by Bloomberg News.”

Bloomberg seems most concerned about the arrest of Xu Xiang, the manager of Zexi Investment, “known as hedge fund brother No. 1.” They note that five funds managed by Xu “yielded an astonishing 249 percent on average this year through September,” while the Shanghai Composite Index fell 5.6 percent in the same period.

On Wall Street, that would be considered genius. In China, it is recognized as corruption and thievery.