CIRCUIT BROKEN

China’s top market regulator may be resigning

Obsession
China's Transition
Obsession
China's Transition

Updated 9:08pm at Hong Kong time

The head of China’s top market regulatory agency, the China Securities Regulatory Commission (CSRC), has offered to step down, Reuters reports, citing market and political sources. Xiao Gang, 57, tendered his resignation last week, but it’s not clear whether it has been accepted, according to Reuters.

CSRC refuted Reuters’ report on Monday (Jan. 18) evening via its official Sina Weibo account (link in Chinese, registration required) and said Xiao didn’t offer to resign. The regulator said it has asked Reuters to correct its report.

Xiao, a former banker, joined China’s market regulator in March of 2013, as part of a new team assembled by Chinese president Xi Jinping to oversee the markets’ opening-up and reform. But that process has been tougher than expected. China’s stock markets recently entered their third “bear market” in less than a year, a sign that investors are extremely pessimistic.

They have good reasons to be. China’s regulators and central bank last summer made heavy-handed attempts to keep markets afloat, which cost more than $1 trillion and were widely criticized. A circuit-breaker—a mechanism that temporarily halts trading when the stock market falls sharply—that Xiao reportedly championed was globally derided for driving investors out of the market, and scrapped days after it went into effect. Foreign investors have all but fled China’s stock markets, and domestic ones who remain are trading tips about how to sell on the bounces.

Over the past weekend, at the CSRC’s annual meeting, Xiao seemed to indicate that the problems China’s stock market faced were overwhelming.

“The abnormal stock market volatility has revealed an immature market, inexperienced investors, an imperfect trading system, and inappropriate supervision mechanisms,” he said, according to a statement published by the official Xinhua news agency (link in Chinese).

Xiao graduated from Hunan College of Finance and Economics, and started his career at China’s central bank in 1981. After more than 20 years there, he joined the Bank of China in 2003. While he was chairman, the bank was publicly listed on the Hong Kong stock exchange. His move from Bank of China to the market regulator in 2013 was described last year as difficult, because of the politically fraught (paywall) role and inexperienced staff.

Unlike other high-ranking Chinese officials, Xiao famously let his hair go gray after he took office at the CSRC. He once said marrying his wife was “the only thing” (paywall) he had done right in his life. Since last summer’s market crash, China’s internet users have been mocking that statement as truer than Xiao thought.

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