In a notable development reflecting China’s increased scrutiny of financial institutions, China International Capital Corp. (CICC), one of the country’s major investment banks, has issued internal directives prohibiting its analysts from making bearish calls on the economy or markets.
The internal memo, acquired by Bloomberg News, cautions analysts against disclosing compensation details and places restrictions on wearing luxury brands. This move comes in the context of Beijing’s efforts to align the financial sector with President Xi Jinping’s “common prosperity” initiative and curb extravagant behavior among bankers.
Analysts at CICC are now operating under strict guidelines to exercise caution when sharing views with clients outside China, with a specific focus on minimizing national security and political risks. The bank has urged analysts to conduct due diligence on experts invited to conferences and deal pitches.
This development reflects a broader trend, with at least two other major investment banks in China providing verbal guidance to analysts, discouraging negative comments on the domestic economy or discussions about compensation. The prevailing atmosphere has made it challenging for financial conference organizers to secure speakers willing to share candid views on the Chinese economy.
CICC’s internal memo extends beyond market analysis, covering conduct guidelines for various aspects, including client engagement, social media use, and expense reimbursement. Facing slumping profits and a leadership reshuffle, CICC has implemented cost-cutting measures.
The document rigorously controls business-related expenses, discouraging analysts from taking taxis home after road shows and ordering drinks at business banquets. Earlier this year, the bank reduced senior bankers’ compensation by over 40% and scaled back travel perks.
As China’s parliament indicates the possibility of further profit declines in the financial industry and regulators press banks to support the stressed property sector, challenges for bankers in China may intensify. A coalition of 19 Chinese brokerages, including JPMorgan Chase & Co. and Morgan Stanley’s local ventures, recently committed to combating corruption in their investment-bank businesses.
President Xi’s ongoing anti-graft campaign has resulted in the removal of over 100 senior financial executives and officials this year alone. While China aims to restore investor confidence in its economy and markets, its historic crackdown on information deemed harmful is expected to persist.
The memo outlines additional restrictions imposed on CICC analysts, emphasizing discretion in social media commentary, avoidance of politically sensitive content, and active participation in party-building activities. Analysts are instructed to refrain from making comments inconsistent with government policies, sharing unpublished views on social media platforms like WeChat, and ensuring that family members adhere to basic moral standards. Additionally, analysts are cautioned against using their full per diem allowance on meals when working overtime.
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