China’s embattled top securities regulator, Xiao Gang, has offered to resign, sources said, after perceived mismanagement wiped more than $5 trillion off the capitalization of the Shanghai and Shenzhen stock markets since they peaked last June.
The 57-year-old chairman of the China Securities Regulatory Commission (CSRC) tendered his resignation last week after his brainchild, a “circuit breaker” mechanism to limit stock market losses, was blamed for exacerbating a sharp sell-off, a source with ties to the leadership and a financial industry source told Reuters. The “circuit breaker” was deactivated on Jan. 7, just three days after its introduction.
“The (Communist Party) central (leadership) is extremely unhappy with Xiao Gang. It is certain he will change jobs,” the source close to the leadership said, adding it was unclear where he would go next.
“Xiao Gang handed in his resignation last week,” said the financial industry source.
Both sources requested anonymity because they were not authorized to speak to the media.
It’s unclear whether Xiao’s resignation offer has been accepted by the central government. The CSRC did not immediately respond to requests for comment.
On Saturday, Xiao gave a speech at an annual meeting in which he said the stock market rout has highlighted the problems facing CSRC’s regulatory mechanisms. “The abnormal stock market volatility has revealed an immature market, inexperienced investors, an imperfect trading system and inappropriate supervision mechanisms,” he said.
Xiao’s term does not formally expire until end-2018.
The party’s Organisation Department, or personnel ministry, has short-listed three candidates to succeed Xiao, the sources said.
Xiang Junbo, who turns 59 this month and is chairman of the China Insurance Regulatory Commission (CIRC), is the leading candidate, they said.
The CIRC declined immediate comment.
Another candidate is Huang Qifan, 63, mayor of the southwestern metropolis of Chongqing, who is also tipped to become secretary-general of the State Council, or cabinet, and may concurrently serve as CSRC chairman, the sources said.
If confirmed as cabinet secretary-general – Premier Li Keqiang’s right-hand man – Huang would help tackle a stalling economy and market turbulence as well as oversee the entire spectrum of portfolios: from industry to agriculture, energy, the environment, state planning and technology, according to a Reuters report last week.
“The Organisation Department has sounded out all three candidates and completed background checks,” said the source with leadership ties.
The identity of the third candidate is not known.
Xiao, Xiang and Huang could not be reached for comment.
The government campaign to restore confidence in the country’s volatile stock markets has been dented by entrenched market pessimism, with the benchmark Shanghai Composite Index, the most closely watched by Chinese investors, falling through the lows seen during the depths of last year’s crash.
The index closed last Friday at 2,900 points – its weakest closing level since December 2014. The index rose 0.4 percent on Monday.