China Probes State Banks for ‘Political Deviations’

China’s president is taking a closer look at the connections between his country’s state banks and larger private-sector operators in an effort to clamp down on capitalist forces.

That’s according to a Monday (Oct. 11) report in The Wall Street Journal, which says President Xi Jinping has ordered inspections of financial institutions (FIs) to determine whether state-owned banks, regulators and investment firms have gotten too close to private companies.

These inspections are being led by China’s leading anti-corruption agency, with a focus on 25 key FIs. The Journal notes that this is part of Xi’s larger effort to move China’s economy away from Western-style capitalism as he prepares to leave office.

Read more: China Widens Mobile Payments Antitrust Probe

As PYMNTS reported last month, this regulatory crackdown has also included fines against Big Tech companies, as well as canceled mergers and postponed public offerings.

For example, Alibaba was hit with a $2.8 billion antitrust penalty in April, while the food delivery platform Meituan is under investigation for alleged anticompetitive behavior. Tencent’s merger with Huya and DouYu was halted, as was Ant Group’s initial public offering.

This month, the Central Commission for Discipline Inspection will visit these 25 institutions, reviewing their records and asking questions about how deals and decisions involving private firms were undertaken. These inspections will “thoroughly search for any political deviations,”  Zhao Leji, current head of Xi’s anti-corruption body, said last month.

Sources told the Journal that people suspected of inappropriate dealings could be formally investigated by the Communist Party and possibly charged later, while entities who have gone astray would also face discipline.

The results of these inspections could also determine whether executives at China’s state financial institutions see their compensation cut, something officials at the Ministry of Finance have been pushing.