China is increasing pressure on its army of 8,700 investment bankers.

After being forced to accept hefty pay cuts and other containment measures as part of President Xi Jinping's years-long campaign for shared prosperity, the country's bankers are now in the crosshairs of the country's main anti-corruption campaigner.

The Chinese authorities have been trying to clean up the country's 66 trillion dollar financial sector since at least 2021, when President Xi launched the fight against corruption in the sector. Large-scale financial investigations have led to the arrest and imprisonment of several financial professionals in Chinese banks, brokerages, asset managers and insurance companies. The harshest penalties for financial crimes have included death sentences or life imprisonment for former senior executives of some institutions.

Since August, the Chinese authorities have detained at least three major investment bankers from different securities companies, which has sent a chill through the sector. One of them, who used to oversee transactions at Haitong Securities Co., fled the country and was detained abroad about two weeks ago, before being repatriated to China.

The arrests of investment bankers and regulatory investigations are also raising questions about the future of China's 1.7 trillion dollar brokerage industry and the activities of domestic capital markets, which have already slowed sharply as the overall economy sinks. China's state-owned financial institutions have capped the annual salary of senior management at 2.9 million yuan (400,000 dollars), while recent pay cuts for onshore bankers at China International Capital Corp. amounted to 25% of their base salaries.

Haitong and other state-backed brokerages have recently asked many of their investment bankers to hand over their passports and request permission for all business and personal travel. The bankers could be called in for questioning at any time.

In China, state-owned enterprises are known to hold the passports of their senior staff and Communist Party officials. But now ordinary employees need to get permission if they want to resign or go on business trips and must be accompanied by a work colleague. (Source: Bloomberg)