China’s crackdown on capital flight and high leverage has a lot more to do with politics than economics, an independent economist said Tuesday.

“The issue is that the economy is politicized, especially in China in the last few years,” Andy Xie told CNBC’s “Squawk Box.”

Regulators in the world’s second-largest economy have been cranking up the heat on local companies as part of a broader crackdown on financial risk and capital outflows before the Communist Party of China’s 19th national congress in the fall.

In June, media reports said domestic banks had been asked by regulators to review their exposure to foreign debt incurred by some of China’s most prolific buyers of overseas assets, including property developer Dalian Wanda, conglomerate Fosun International and insurance company Anbang.

Acquisitions made by those companies include Anbang’s 2014 purchase of the Waldorf Astoria hotel in New York, as well as Dalian Wanda’s purchase of U.S. cinema chain AMC Theatres and Legendary Entertainment as part of its push into the entertainment business.

Such highly-publicized deals overseas worth tens of billions of dollars were just a small fraction of the $2 trillion that has vacated China mostly “without any sound,” so highlighting them served another purpose, according to Xie.

“China has a tradition of killing a chicken and show it to the monkeys. How do you stop people from taking the money out? You take down the people you know (who are taking money out),” he said.

“China is still in this mode of walling the money inside. Otherwise they will lose control over the game; that is paramount to the government,” Xie added.

Facebook Comments