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China removes head of market regulator as it battles stock meltdown

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Beijing has removed the powerful Communist party boss and chair of its securities regulator as authorities battle plunging confidence in Chinese stock markets.

The Communist party’s central committee replaced Yi Huiman with Wu Qing, a senior official who made a name for himself cracking down on brokerages, as China Securities Regulatory Commission chair and party secretary, state news agency Xinhua reported on Wednesday.

The terse report did not provide any explanation for the decision to remove Yi. Before leading the CSRC, he was the chair of the state-owned Industrial and Commercial Bank of China, whose past executives have been targeted in widespread corruption probes.

“He’s clearly gone down because of the market slump,” said Chris Beddor, deputy director of China research at Gavekal. “Part of his de facto job as securities regulator was to prevent exactly this from happening: a politically embarrassing market decline.”

A crisis in China’s property sector, which has worsened deflationary pressures, has hit equity valuations and led institutional investors to divest their holdings, further hurting retail investor sentiment.

One banker who has met Yi said he was taking the fall for recent losses in the market, which has suffered a particularly brutal sell-off since the start of this year. The benchmark CSI 300 index is down 44 per cent from its peak in 2021.

“At this point, someone needs to be made the scapegoat,” the banker said

Beijing this week intervened in the domestic stock market to stem prolonged falls with a so-called national team of state-owned institutions buying shares.

The CSI 300, which tracks the largest and most liquid stocks listed in Shanghai and Shenzhen, is up 4 per cent this month following the state intervention, after shedding more than 6 per cent in January.

Yi, who took over as chair of the CSRC in 2019, had become more vocal in recent months in his attempts to reassure investors that the regulator would stabilise the market, but sentiment continued to be volatile.

Analysts said Yi was still a relatively young official at 59 and a member of the Communist party central committee, so another job might be found for him.

“It’s hard to say where he would be appointed next, but the leadership won’t appoint him soon as that won’t look good to angry investors,” the banker said.

Wu, who was previously executive vice-mayor of the city of Shanghai, was tipped early last year to replace Yi.

Wu, 58, headed the Shanghai Stock Exchange for almost two years before becoming Shanghai’s vice-mayor. During his time in the city, he worked alongside China’s number-two leader, Premier Li Qiang, who was then Shanghai’s party secretary.

Before working at the Shanghai Stock Exchange, Wu served at the CSRC, where he specialised in “risk management”.

“During his tenure, he made a reputation for his no-nonsense work approach towards brokerage companies,” said Chinese media outlet Yicai Global, adding that Wu had penalised 31 brokerages for regulatory breaches.

Yi’s removal comes as authorities have also stepped up investigations into former officials of ICBC’s international arm in particular, leading one Chinese media site to recently headline an article: “Former executives at ICBC International are falling one after another”.

In November, the bank’s well-connected former vice-chair Zhang Hongli was detained in a corruption probe. His detention followed action against at least a dozen other former ICBC executives.

Senior Nomura banker Charles Wang Zhonghe, who had been at ICBC’s international arm, was banned from leaving mainland China last year. The president of China’s top tech-focused investment bank, Cong Lin, a veteran banker who had run ICBC International, was detained in 2022.

Gavekal’s Beddor said being a securities regulator in China was a “thankless task”.

They are expected to boost the market at critical moments but lack effective tools, Beddor said, adding that the national team consisted of entities that were controlled by a mixture of other agencies and ministries and was probably outside the authority of the CSRC chair.

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