Corruption Remains A Major Risk For China’s Government, Economy (FXI)

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November 16, 2017 6:37am NYSE:FXI

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From Tyler Durden: Yang Xiadou is the Party’s number two man in Xi Jinping’s crackdown on corruption in the Chinese Communist Party – although some have seen this, in part, as a convenient way for Xi to bolster his power base.


During the 19th Party Congress last month, Yang was asked about the anti-corruption drive and how to achieve a balance between human rights and party discipline. Yang replied that, having worked in the Tibet Autonomous Region for many years, human rights was an “interesting question”. He recounted a conversation he had with a US assistant secretary of state where he likened Abraham Lincoln freeing slaves in America to China’s actions in Tibet.

“I said in the hearts of Chinese people, Lincoln is a hero, because he freed the slaves.

On this point the Chinese people and the American people have the same understanding – this is a human rights issue.

In turn, we freed the serfs in Tibet, how come American friends cannot understand this? From Lincoln’s perspective, he should have supported China’s overturning of the serfdom in Tibet.”

No matter that the Central Tibetan Administration, usually called the “Tibetan Government in Exile” has a starkly different view.

Yang’s ability to “paint broad canvases” was in evidence again when he stated that corruption in China could lead to a collapse similar to the Soviet Union. According to the Times of India.

China must step up its battle against corruption in order to safeguard against a Soviet-style collapse, the country’s second most senior graft buster said in an editorial on Wednesday. Yang Xiaodu, the deputy secretary of the Central Commission for Discipline Inspection, who was promoted to the ruling Communist Party’s 25-strong Politburo last month, said failure would risk the “red country changing colour”.

In unusually direct and strongly worded criticism of previous administrations, Yang said “in a previous period”, corruption had been allowed to fester to such an extent that the party’s leadership had weakened, with supervision soft, and ideology apathetic.

“It had developed to the point where if not rectified, the country could change colour,” Yang wrote in the official People’s Daily.

“The future fate of the party and the country’s people could follow the same old road to ruin as the Soviet Union and the Eastern Bloc.”

It’s well known that senior Party officials warn their underlings of the need to study the collapse of the Soviet Union and the importance of maintaining discipline and tight control. China analysts are viewing these comments by Yang and others as evidence that Xi’s crackdown is not letting up despite the former Secretary of the Central Commission for Discipline Inspection, Wang Qishan, stepping down at the Party Congress.

Writing in the People’s Daily last Saturday, Wang’s replacement and Politburo Standing Committee member, Zhao Leji, warned that if the Party lost the battle against corruption it risked “being erased by history”. Yang emphasised the need to press forward in the eliminating corruption, as the Times of India notes.

Yang said Xi’s anti-corruption achievements had been revolutionary in “turning the blade of the knife inward”.

But he said unhealthy pollutants within the party’s political ecosystem had yet to be completely cleansed, and the anti-corruption fight remained “grave and complex”.

“There is no road for retreat, only forward in attack, and definitely no pause or relax,” Yang wrote. China has plans for a national supervision law and a new commission next year to oversee the expansion of Xi’s graft fight. Yang, who is also minister of supervision, had been Wang’s deputy since 2014 and his promotion to the Politburo is seen as another display of the importance the central leadership attaches to fighting corruption.

In the wake of the Party Congress, we can deduce that Xi means business on deleveraging and cooling the property bubble, stepping up efforts to reduce pollution, in addition to attacking corruption. We continue to believe that China is entering a more risky phase than financial markets are discounting at this point.

The iShares FTSE/Xinhua China 25 Index ETF (FXI) rose $0.73 (+1.59%) in premarket trading Thursday. Year-to-date, FXI has gained 32.68%, versus a 15.78% rise in the benchmark S&P 500 index during the same period.

FXI currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 35 ETFs in the China Equities ETFs category.


This article is brought to you courtesy of ZeroHedge.


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