China replaces head of securities regulator amid market turmoil

Yi's removal comes as Chinese markets are on a knife edge as institutional and retail investors scramble to cut their losses

China has replaced the head of its securities regulator, the official Xinhua news agency said on Wednesday, as policy makers struggle to stabilise the country’s main stock indexes after a plunge to five-year lows.

The cabinet removed Yi Huiman as chairman of the China Securities Regulatory Commission (CSRC), replacing him with Wu Qing, a veteran securities regulator who had led the Shanghai Stock Exchange and served as a key deputy in Shanghai’s municipal government, Xinhua said.

Yi’s removal comes as Chinese markets are on a knife edge as institutional and retail investors scramble to cut their losses, with the sputtering economy and a lack of forceful government stimulus measures weighing heavily on confidence.

Numerous market-focused support moves such as restrictions on short-selling or reductions in trading duties have failed to staunch the selloff, as have a number of government statements promising support but lacking details.

“As a knee-jerk reaction, I can see how this would be viewed as positive. But in addressing the well understood issues of the Chinese economy, it doesn’t address anything at all,” said Tim Graf, the head of EMEA macro strategy at State Street.

The FTSE China A50 Index Futures edged up after the announcement, with a gain of 0.2% as of 1027 GMT. Hong Kong’s Hang Seng futures were little changed on Wednesday evening.

Foreign investors sold a net 18.2 billion yuan ($2.5 billion) in Chinese equities last month to notch a sixth straight month of outflows, and the central bank has been persistently supporting the yuan currency. World stocks (.MIWD00000PUS) went up 20% last year, gold rose 13% and bitcoin 155%. China’s blue-chip CSI300 (.CSI300), fell 11% and collapsed to a five-year low in recent sessions.

Fresh vows of support by state-linked buyers and a Bloomberg report that President Xi Jinping would meet market regulators drove a sharp rally on Wednesday, but the mood remains fragile and investors sceptical.

Yi, a veteran of the Industrial and Commercial Bank of China – which he joined as a junior loan officer at a branch in Zhejiang in 1985 – was appointed to head the CSRC in January 2019.

Chinese markets have been roiled by near constant turmoil since – first by a trade spat with Washington, then by the collapse of developer China Evergrande under debts emblematic of the crisis that has enveloped the real estate market.

A series of regulatory crackdowns on sectors from technology to education has also tested investors’ patience and China’s underwhelming recovery from COVID-19 pushed them to outright flight.

“The selloff is clearly the last straw for Yi – it’s not the first time China fired a CSRC chairman during a market rout. Thus change signals leaders’ willingness to turn the market around,” said Xu Tianchen, senior economist at the Economist Intelligence Unit (EIU).

In 2015, a plunge in China’s stock market and a surprise devaluation of the yuan roiled global markets, and a botched stock market rescue attempt tarnished Beijing’s pledges of reforms and broad policy-making credentials.

In early 2016, China removed Xiao Gang, then head of its securities regulator, appointing a top state banking executive as his replacement, as leaders sought to restore confidence in the economy.

EIU’s Xu said that Wu’s appointment ends the practice where commercial bankers head the CSRC.

“Wu’s previous experience in the securities industry – across regulators and exchanges – will hopefully bring some changes towards ‘leaving it to the professionals,’ said Xu.

Wu also replaced Yi as the Communist Party chief at the regulator, according to Xinhua.

The announcement comes without a common term of “to be appointed to other roles” which usually suggests an outgoing chairman is moving to fill in another position, a former CSRC official said.



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