China’s Top Securities Regulator Ousted Amidst Stock Market Meltdown
In a shocking turn of events, China’s main securities regulator, Yi Huiman, has been ousted from his position amidst a massive stock market meltdown. The $5 trillion selloff has severely undermined confidence in the country’s fragile economy, leading to the biggest Communist Party casualty yet. The announcement of Yi’s departure sent shockwaves across the industry and within the China Securities Regulatory Commission (CSRC).
The departure of Yi, which even high-ranking CSRC officials were surprised by, highlights the growing sense of alarm within President Xi Jinping’s government over the speed and scope of the market meltdown. Wu Qing, a close ally of Premier Li Qiang, has been appointed as the new chairman of the regulator. This move may signal additional measures to revive China’s second-largest stock market.
China watchers believe that more efforts will be made to end the market rout. Previous attempts to support the market before the Lunar New Year holiday failed to restore investor confidence. Jiang Liangqing, managing director at Zhuhai Greenbamboo Private Fund Management, believes that a change in leadership could bring about bolder actions instead of mere words.
Anticipation of further measures to stabilize the market had been building up after reports that regulators planned to brief President Xi on the markets. However, it is unclear what role Yi had, if any, in that planned briefing. China’s recent measures, such as curbs on short-selling and purchases by state-owned entities, have had some effect in reducing declines for the year. However, experts estimate that at least 200 billion yuan is needed to stabilize the market.
The past two sackings of CSRC chiefs have resulted in extended equity rallies. After Liu Shiyu replaced Xiao Gang in 2016, the benchmark CSI 300 Index rose more than 40% over almost a two-year span. Similarly, the gauge jumped more than 80% over two years after Liu was ousted for Yi in 2019. However, major market interventions in China have rarely been smooth, and the country’s economy is facing bigger challenges than before.
The CSRC faces constraints in its ability to turn the markets around. It cannot command an intervention by the “national team” or launch a stabilization fund. Additionally, it has limited power to drive economic growth on its own. Therefore, changing the chairmanship at the CSRC alone may not fundamentally change the situation. The stock market’s performance reflects weak growth and poor confidence, which need to be addressed by Beijing.
The responsibility now falls on Wu Qing, who had been tipped to take over the CSRC last year but was promoted to deputy party secretary for Shanghai instead. Wu is well connected in China’s halls of power, having previously headed the Shanghai Stock Exchange and held various roles at the CSRC. Known as a low-key technocrat with zero tolerance for wrongdoing, Wu’s background in financial regulation suggests that he may crack down on malicious short selling and illicit behaviors in the market.
While this may soothe investor nerves in the short term, it will require more policy efforts to create a more favorable environment. The stock market’s struggle is deeply intertwined with weak growth and poor confidence, which need to be addressed comprehensively by Beijing. Only then can China’s stock market regain stability and investor trust.
In conclusion, the ousting of China’s top securities regulator amidst a stock market meltdown reflects the growing concerns within President Xi Jinping’s government. The appointment of a new chairman may signal additional measures to revive the market, but experts believe that addressing underlying issues such as weak growth and poor confidence is crucial for long-term stability. The responsibility now rests on Wu Qing, a well-connected technocrat with a background in financial regulation, to navigate these challenges and restore investor trust in China’s stock market.