Minitrue: Securities Regulator Xiao Gang’s Removal

The following instructions, issued to the media by government authorities, have been leaked and distributed online. The name of the issuing body has been omitted to protect the source.

Ahead of the dismissal of chairman Xiao Gang, use only Xinhua News Agency material to report. Do not comment, and do not publish extended reports. (February 18, 2016) [Chinese]

On February 20, Xinhua reported that Xiao Gang, China’s top securities regulator since March 2013, had been replaced:

Liu Shiyu was appointed as Party leader and chairman of the China Securities Regulatory Commission (CSRC), according to decisions made by the Communist Party of China Central Committee and the State Council on Saturday.

Xiao Gang, former head of the CSRC, was removed from his post as the chairman as well as the Party leader of the commission. [Source]

The New York Times’ Keith Bradsher provides context on the economic situation surrounding the removal of Xiao Gang:

The move reflects the increasing pressure on the Chinese leadership to bolster confidence at home, as questions mount about Beijing’s ability to manage the economy, the currency and the markets.

[…] [The CSRC and Xiao specifically] attracted significant criticism for allowing a speculative bubble to form, in which share prices more than doubled in a year. When it burst last summer, those shares gave up all of their gains, hurting millions of families who had borrowed heavily to buy stocks.

As stocks sank, the regulator also intensified the market mayhem. Two measures, intended to stabilize stocks, have been widely blamed for producing a weeklong rout in China’s stock markets during the first week of January that unsettled investors around the world.

Mr. Xiao defended himself in a long statement on his agency’s website in mid-January, analyzing the causes of his country’s recent financial sector difficulties. He said the turbulence in China’s markets, including another nose dive in share prices last summer, was partly caused by the inexperience of investors and the immaturity of the local market.

But he also conceded that recent troubles reflected an “imperfect trading system, flawed market mechanisms and inappropriate supervision systems,” together with an exodus of seasoned personnel from his agency. […] [Source]

Reuters last month reported that Xiao Gang had offered to resign from his position, citing an anonymous source that noted severe disappointment with the former chairman from Party leaders. A recent report from Reuters introduces Xiao’s replacement, and describes the difficult path he must navigate amid continuing economic uncertainty. Adam Jourdan reports:

Investors and analysts said the new chief Liu, 54, a trained economist, would bring in new policies and strategies, but it remained to be seen what direction he would take.

“Liu has a lot of experience in the financial sector, but there will be some policy uncertainty in the short term as it will take at least six months for the former banker to get used to his new role,” fund manager Zhang said.

Andrew Sullivan, managing director, sales trading at Haitong International Securities Group in Hong Kong, said that removing Xiao had been largely expected.

“But by bringing in the AgBank chairman, they are really not bringing anybody with a fresh market perspective but a political insider,” he said. [Source]

As central leaders deal with economic insecurity and the fear of political instability, the Party appears to be further prioritizing control over the media narrative.

真Since directives are sometimes communicated orally to journalists and editors, who then leak them online, the wording published here may not be exact. The date given may indicate when the directive was leaked, rather than when it was issued. CDT does its utmost to verify dates and wording, but also takes precautions to protect the source.