China's crackdown on graft, media obscures picture for investors

China's burgeoning class of financial elites has long been feted at home and abroad as an embodiment of the country's growing economic might. But they now face mounting scrutiny as part of President Xi Jinping's crackdown on corruption and as the Chinese economy cools.

A case in point was the recent disappearance and reappearance of Guo Guangchang, often described as China's Warren Buffet. The multi-billionaire was detained by Chinese police earlier this month, surfacing last week in New York, after trading in his Fosun International Trading conglomerate was suspended while he was out of circulation.

Guangchang is just one of several wealthy Chinese who have gone missing or been taken into custody in the last year as part of widening government probes into the securities industry and investment practices. Earlier this year, for example, Hanergy chairman Lei Heijun's failure to show up for a shareholder meeting promptly wiped nearly $19 billion off the "clean energy" company's market valuation and caused its stock to plunge 47 percent.

The dragnet comes as the central government seeks to re-instill confidence in China's volatile equity markets, which Beijing has promoted as an engine of wealth-creation for ordinary Chinese. The crackdown also aims to root out corrupt government officials. More than 400,000 civil servants were disciplined in 2013 and 2014 in connection with the anti-corruption drive, a major increase over previous years, according to Capital Economics.

For global investors, meanwhile, the initiative is making it harder to read just what is going on inside the world's second-largest economy. That's a problem given that no question looms larger for 2016 than the trajectory of the Chinese economy.

Veteran China watchers say that as the mainland commits to moving to a free market, with less intervention from Beijing, authorities are also clamping down on reporters trying covering whether Chinese officials are delivering on these commitments.

"Nobody inside China wants to do news or documentaries anymore because the politics are so unsettled," said Peter Kwong, a documentary filmmaker and professor of Chinese-American history at Hunter College in New York. "They are doing very safe things. People are intimidated."

In a recent report, the Committee to Protect Journalists (CPJ) said that for the second year in a row China led the world in the number of jailed journalists, holding a quarter of the the close to 200 incarcerated reporters worldwide.

"As President Xi Jinping continues his crackdown on corruption and as the country's economic growth slows and its markets become more volatile, reporting on financial issues has taken on a new sensitivity," according to the report.

CPJ described the fate of financial reporter Wang Xiaolu, a correspondent for a Beijing-based business magazine. Xiaolu was arrested in late August for "colluding with others and fabricating and breeding false information" about an investigation by regulators into how securities firms were finding ways to withdraw their funds from the mainland's volatile stock market.

Xiaolu later appeared on state television and expressed regret for writing the story and begged for leniency, according to CPJ, which also documented the arrest of family members in China in reprisal for the work being done by Western-based Chinese journalists.

Freedom House, a non-profit civil liberties advocacy group, said this year in a survey that China "was sentencing journalists to long prison terms," "ignoring due process" and shutting down popular Internet based messaging systems "used to disseminate news."

"This level of repression that's now becoming apparent is a tell-tale sign that there are deeper and systemic problems in China's economy and society," said Michael Santoro, author of the book "China 2020" and a professor of management and business at Rutgers. "When China was growing seemingly endlessly at 10 percent [annually], it covered a lot of problems. Now they are up against the limits of growth."

Much of what has transpired this year was presaged back in March when China's 12th National People's Congress convened and Xi Jinping presented his four key goals, which included continuing his crackdown on corruption and stricter discipline within China's Communist Party.

Under the headline "China Unifies Thinking to Withstand Cooling Economy," Xinhua, the state's official news service, described how the agenda would help focus the nation on the economy as well as on "quashing resistance from vested interest groups."