FirstFT: Xi’s anti-corruption push hits China’s financial sector

Today we look at how the expansion of Chinese president Xi Jinping’s anti-corruption drive is sending the country’s financial sector reeling, with a series of new corruption probes and a surge in surprise audits of venture funds.

With Beijing’s graft-busting Central Commission for Discipline Inspection warning against “hedonism” and “high-end lifestyles”, banks have also been making deep cuts to executive pay and bonuses as former high-ranking officials come under investigation.

Since February, more than a dozen executives have been investigated or penalised as the CCDI began a fresh push to, in its own words, “resolutely” fight misconduct in the sector and eradicate executives’ “wrongful pursuit” of becoming financial elites. In the most high-profile case, Liu Liange, a former chair of Bank of China, one of the country’s biggest banks, came under investigation at the end of March.

The CCDI’s efforts have also extended to other institutions, such as the Shanghai Gold Exchange, while venture capital investors in Beijing say they have been hit with additional tax audits as pressure on the sector broadens. According to a Financial Times analysis of more than 20 mainland financial brokerages, about three-quarters have cut management pay in the past year.

Xi, who has for years warned that the financial sector should better serve “the real economy”, in October pledged that the party would deepen structural reform and “place all types of financial activities under regulation”.

Here’s what I’m keeping tabs on today:

• Easter Monday: Many financial markets in Europe are closed.

• Economic data: Turkey releases its employment rate data for February and Greece issues last month’s consumer price index.

• Good Friday Agreement: Northern Ireland celebrates 25 years since the deal that ended 30 years of conflict.

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Five more top stories

1. Big Wall Street banks are struggling to respond to rules governing investment research after the main US watchdog brushed aside pleas for a second extension to a temporary waiver that ends in July. Here’s how the new rules will affect lenders such as Goldman Sachs and Morgan Stanley.

• Related: Investors are loading up on protection against a fresh round of turmoil in US regional bank stocks as lenders prepare to reveal how badly their earnings have been squeezed by recent troubles.

• Opinion: Success in dealing with the immediate threat of bank runs has not eliminated all the risks posed by US banking tremors, writes Mohamed El-Erian.

2. The world’s leading economies are showing surprising resilience despite facing a perilous moment, according to research for the FT that suggests the global economy may avoid a sharp slowdown this year. Here are the full findings from the latest Brookings-FT tracking index.

3. Israel’s air force has struck targets in Syria in response to rockets from militants in the neighbouring country. Yesterday’s attack capped a week of tensions ignited by a police raid on Jerusalem’s al-Aqsa mosque. Read more on the escalating tit-for-tat violence.

4. Europe may miss out on new drugs for conditions such as heart disease and cancer if it continues with “troubling” new laws to cut market exclusivity protection, said the chief executive of pharmaceutical giant Eli Lilly, as it may not be worth the industry pursuing such treatments.

5. Croatia’s top central banker has dismissed complaints about the euro’s introduction leading businesses to raise prices substantially, saying its adoption had only raised costs “a little”. More from the FT’s interview with Boris Vujčić.

The Big Read

From Canary Wharf in London to La Défense in Paris and Frankfurt’s Bankenviertel, the logos of major banks adorn Europe’s grandest office buildings. But the cracks in European commercial real estate are starting to show. The recent banking crisis has added to fears that credit will become less available and more expensive, just as prices are slumping.

We’re also reading . . . 

Chart of the day

First-time buyers in the UK are selecting smaller properties in the face of rising mortgage costs, in a sign that many prospective purchasers are compromising on the size of their first home rather than staying in the tight rental market.

Take a break from the news

The chef who brought meze to the masses and somehow managed to create an instantly recognisable brand of transnational cuisine speaks to Tim Hayward about his unusual education, running his business like a kibbutz — and why he’s setting his sights on Paris next. Yotam Ottolenghi has Lunch with the FT.

Additional contributions from Annie Jonas