Chinese officials launch 'witch hunt' amid financial market paranoia

A Chinese investor checking share prices in a stock firm — (Image credit: STR/AFP/Getty Images)

The Shanghai Composite Index has plummeted 37 percent since June, due in part to a period of weak economic data and Beijing's recent currency devaluations. In an attempt to rescue their economy, China's government is now treating investment firms with the same suspicion and scrutiny with which they have traditionally policed their political dissenters. "They seem to be harassing anybody that they thought was selling or was short," one Hong Kong hedge fund manager told The New York Times. "Hello, it's a hedge fund — they are long and short — but China is only looking at the short side."

Nearly 200 reporters have been punished by a special police campaign for "spreading rumors," according to the Times, the most notable of which was financial journalist Wang Xiaolu, who was detained by police and later made to apologize for an article the government believed had the potential to further damage the market. Other instances include police officers downloading trading data, or telling fund managers to stop selling.

Li YiFei, the chief of the world's largest publicly traded hedge fund, vanished for a short period of time, though she denied it was due to police detention, despite widespread skepticism of her alibi. In another instance, a Hong Kong based hedge-fund manager told the Times he was cashing out of close to $500 million invested in mainland China, citing his fear of "the witch hunt that is going on."

Article continues below

The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

"There is, generally, a very nervous atmosphere, as people wait to see the outcome of some of these investigations and how deep the rabbit hole goes," Effie Vasilopoulos, a partner at the Hong Kong office of the Sidley Austin law firm, told the Times. "How wide a net is the government going to cast in terms of looking at foreign firms and their operations — not just onshore, but also offshore as well?"

Explore More

Jeva Lange was the executive editor at TheWeek.com. She formerly served as The Week's deputy editor and culture critic. She is also a contributor to Screen Slate, and her writing has appeared in The New York Daily News, The Awl, Vice, and Gothamist, among other publications. Jeva lives in New York City. Follow her on Twitter.