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As China looks to stabilize its economy, senior finance officials get the boot

SCOTT SIMON, HOST:

China's economy is wobbling. Its stock market is on a slide. Some of its biggest property developers are edging toward bankruptcy, and Beijing is trying to prop it all up. As NPR's Emily Feng reports, that includes a purge of senior financial officials and executives.

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UNIDENTIFIED PERSON #1: (Speaking Chinese).

EMILY FENG, BYLINE: All across China, investments are going bad. Big banks and state-owned firms are piling up big debts, and upper-middle-class residents burdened by the decline are taking to the streets, including here in the southwestern province of Sichuan.

UNIDENTIFIED PERSON #2: (Speaking Chinese).

FENG: This investor says her initial investment of $150,000 was lost after finding out the money had been sunk into failing and fraudulent projects. She declined to be named for fear of legal repercussions. She and other investors are under close state surveillance, so much so that they received warnings within hours from local police telling them not to talk to the media after NPR called them.

She says she was tricked into buying what are called trust products, a more than $3 trillion sector that involves a type of financial product which once offered super-high 10, 20% returns. And they were popular among local governments because they raised much-needed funds. The problem is, when the economy started slowing during the pandemic, many trust issuers defaulted, including at this Sichuan fund, letting down more than 8,000 investors.

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UNIDENTIFIED PERSON #3: (Speaking Chinese).

UNIDENTIFIED PERSON #4: (Speaking Chinese).

FENG: And dozens of these investors decided to stage sit-ins and protests like this one at the offices of the state banking regulator this January.

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UNIDENTIFIED PERSON #5: (Speaking Chinese).

UNIDENTIFIED PERSON #6: (Speaking Chinese).

FENG: Though they were quickly kicked out. Hers is not the only investment gone belly up. Zhongzhi, one of China's biggest trust issuers, also defaulted last year and filed for bankruptcy this January, among hundreds of financial landmines, as China's internet calls them, which have exploded in the last year.

UNIDENTIFIED PERSON #2: (Speaking Chinese).

FENG: The investor says authorities won't abide by the contract she signed or financial insurance she bought. They just tell her, we have no money. This chaos has been accompanied by a raft of detentions and arrests of senior banking officials and executives. According to authorities, they helped oversee the period that regulators now see as a time of dangerous financial speculation. Among those nabbed is this man...

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FAN YIFEI: (Speaking Chinese).

FENG: ...Fan Yifei, a former people's Bank of China vice governor, on charges of corruption.

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UNIDENTIFIED NEWS ANCHOR #1: (Speaking Chinese).

FENG: Plus Tang Shuangning, the former chairman and party secretary of the Bank of China, and four other senior state banking officials on corruption-related charges. One was even given a suspended death sentence earlier this year. This past January, China's leader, Xi Jinping, gave a speech illustrating just how important he thought the financial sector was to national security.

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UNIDENTIFIED NEWS ANCHOR #2: (Speaking Chinese).

FENG: Saying China needed high quality development of finance.

GABRIEL WILDAU: President Xi is skeptical of financial speculation.

FENG: This is Gabriel Wildau, a managing director at advisory firm Teneo. He says China's leader, Xi, believes...

WILDAU: That there may be fundamental contradictions or tensions between various kinds of transactions that may benefit an individual financial institution or an individual banker and actions that benefit China overall.

FENG: And so this round of purges of finance officials is a correction after years of excess. The problem, Wildau says, is the campaign is also spooking remaining finance officials. They now may not dare take more substantive actions to restart China's plateauing economy.

Emily Feng, NPR News. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Emily Feng is NPR's Beijing correspondent.