54 China TheEconomistMay28th 2022
China’s edtech firms. Under what is known
as the “doublereduction policy”, the gov
ernment has tried to cut the burden of
homework and private tutoring on chil
dren and their parents. Many of the 4.6m
people competing to enter graduate school
to consume more education might once
have joined an edtech firm producing it. In
this way a policy to lighten the burden of
education on the young has extended the
education of the slightly less young.
When job prospects turn precarious,
job aspirations turn conservative. College
leavers now crave stable jobs over dynamic
ones. Stateowned enterprises are their
first choice, preferred by 44%, according to
Zhaopin. Private enterprises lost populari
ty. Young people also seem keen to join the
civil service. They have displayed a similar
enthusiasm for the civilservice entrance
exam (or kaogong) as they have shown for
the postgraduate test. There were 46 civil
service testtakers per opening in the most
recent exam, according to the government.
Luo Zhiheng, an economist at Yuekuai Se
curities, describes the rush to take the test
as “kaogongfever”. He contrasts it with the
confidence with which civil servants quit
their safe, dry jobs in the 1990s to dive “into
the sea” of private employment.
China’s restrictions on travel, and its
success last year in containing covid, per
suaded many young Chinese who had been
studying abroad to come home. The num
ber returning may have exceeded 1m, ac
cording to the State Information Centre, a
government thinktank, adding to the
pressure on the labour market. China’s dra
conian lockdowns this year may cause
some to regret their choice.
The hapless protagonist of Qian’s novel
also returns to China at a difficult juncture
in its history, after a spell studying in Eu
rope. In this tale, his foreign education is
not much of an asset. After finding work at
a Shanghai newspaper, he confesses to his
appalled parents that his wife, who works
at a factory, earns twiceasmuch as he does.
The fortress of his marriage,heavily be
sieged, swiftly crumbles.nThe young and the jobless
China, urban youth unemployment rate*, %Source: National Bureau of Statistics *16- to 24-year-olds20151050
2018 19 20 2221CorruptionNo mercy
T
he protesters gatheredoutside the
officeofthebankingregulatorinHe
nanprovincehavea simpledemand:“Re
turnourdeposits.”Thousandsofcustom
ersofthreeruralbanksintheregionre
centlydiscoveredthattheywereunableto
withdrawtheirfunds.Theyhavebeencut
offfromatleast$178m,accordingtoReu
ters,a newsagency.Metwithsilencefrom
localofficials,manyaggrievedcustomers
descendedonZhengzhou,theprovincial
capital,carryingsignsandchantingslo
gans.VideosthathavecirculatedonChi
nesesocialmediashowdozensofpeople
kneelinginthemiddleofa road,disrupt
ingtrafficastheybegfortheirmoneytobe
returned(pictured).
Suchscenes resonatebeyond provin
cialborders.CentralregulatorsinBeijing,
thecapital,oftenviewincidentslikethisas
threatstosocialharmony.China’sleader,
XiJinping,seesfinancialstabilityasun
derpinning the CommunistParty’s rule.
Butbankrunsandothersignsofdistressat
smalllendersareontherise.Andthereis
troubleatthetopofthesector,too.
Thedetailsarefuzzy,buta spateofre
centinvestigations,partofa monthslong
crackdown oncorruption, has ensnared
several prominentbankersandofficials.
WangBin,theformerheadofChinaLife,a
stateownedinsurer,wasarrestedinJanu
ary.WangYe,theformerpresidentofthe
Shenzhen branchofChinaConstruction
Bank(ccb), a statelender,wasdetainedinApril. Shortly thereafter, a probe into Tian
Huiyu, then president of China Merchants
Bank (cmb), a large commercial lender,
was announced.
Regulators have also been targeted. Sun
Guofeng, a former senior official at the
central bank, and his wife were detained
on May 18th. Zeng Changhong, a former of
ficial at the China Securities Regulatory
Commission, was arrested in April. More
than 40 finance officials have been investi
gated or penalised since October, reckons
Bloomberg, a news agency.
China’s financial system is notoriously
opaque. So the damage wrought by
crooked bankers often goes unseen, some
times for years, before exploding into the
open in the form of enormous losses for
investors. Corruption can lead to bad in
vestments, toxic debts and capital out
flows, says Zhu Jiangnan of the University
of Hong Kong. These can quickly become
threats to financial stability.
The arrest of officials sometimes por
tends years of chaos at state firms. Take the
troubles of Huarong, a stateowned invest
ment group that required a $6.6bn bailout
in November. Its chairman, Lai Xiaomin,
was detained suddenly in 2018 and accused
of extraordinary graft and debauchery. It
was later revealed that Lai was at the centre
of a web of bad loans and unrecoverable in
vestments that pushed Huarong to the
brink of collapse. That, in turn, posed a
threat to the financial system. Lai was exe
cuted for his crimes in January 2021.Loans among friends
With many of its cities facing pandemic
related restrictions, China’s economy is
struggling. That has heaped pressure on
poorly run companies and laid bare dodgy
lending. A crisis in the property sector ap
pears to explain at least some of the pro
blems at banks. Those in trouble often
have relations with land developers and
other firms that are far too cosy. The three
banks in Henan are majorityowned by de
velopers (a common arrangement in Chi
na). The authorities there are chasing sev
eral people connected to the deposit crisis,
including a businessman who has fled
abroad, Chinese media reported.
The detained officials from cmb and
ccbare said to be linked to loans granted to
a property company, Tahoe Group, that has
since defaulted on its debt. Tahoe was also
a customer of Huarong. With the economic
situation expected to get worse, dirty deal
ings by other senior bankers will probably
come to light. Mr Xi, meanwhile, is looking
forward to a crucial party congress later in
the year, at which he is expected to launch
a third term as party chief. Stability is the
key, say officials. Expect the government to
continue upholdingitspromise, made in
January, to “shownomercy” in its fight
against corruption.nS HANGHAI
Trouble at the top and bottom of the
financial sectorThey’d like to make a withdrawal