What began at the weekend as a behind-the-scenes effort by China’s undergunned markets regulator to reassure skittish investors, has become an all-out push by the Communist party to safeguard its 25-year experiment with capital markets reform.
But many financial industry insiders and analysts say the China Securities Regulatory Commission and Xiao Gang, its chairman and a veteran banker, are on the hook if it does not succeed.
So far, CSRC’s gambit does not appear to be working. Fred Hu at Primavera Capital says: “The policy makers face a dilemma. They are trying to do everything at their disposal to stabilise the market, but it has left the impression that they have overreacted.”
One person who deals closely with the regulator says: “The CSRC has evolved enormously over time, but it has a lot of relatively inexperienced people who are not well paid and don’t have a lot of international experience.”
According to CSRC’s 2014 annual report, the average age of its 3,167 employees is 36. In 2012, a state newspaper reported that CSRC department heads, who were paid about Rmb150,000 ($24,150) a year, could earn Rmb1m in the private sector.
Yesterday China’s banking regulator and even its public security ministry officially entered the fray, joining CSRC and the central bank, which on Wednesday committed at least Rmb260bn to stabilise the rout on the Shanghai and Shenzhen stock exchanges.
The China Banking Regulatory Commission announced that it would allow banks to extend loans backed by share collateral, while the official Xinhua news agency reported that the head of China’s internal security forces had visited CSRC’s headquarters as part of a crackdown on “malicious” short selling and other “illegal” market activities.
The double-barrelled display had some effect, with Shanghai and Shenzhen up 5 per cent and 3.7 per cent respectively after the lunchtime break yesterday. China shares remain about 30 per cent below their seven-year high reached just under four weeks ago.
Among the measures backed by the CSRC was a decision by China’s leading brokerage association to draw not a line in the sand so much as a line in the air. The Securities Association of China said its members would support the market until Shanghai returned to 4,500 points — 20 per cent above its current level.
According to people close to China’s financial policy makers, the CSRC did not initially enjoy the full support of its peers — including the finance ministry and Lou Jiwei, its head — at the outset of the crisis.
They note that Mr Lou, who formerly ran China’s sovereign wealth fund, is already preoccupied with the build-up in debts by local governments, which total Rmb22tn. The last thing he wants is involvement in another rescue effort, especially one for investors who recklessly piled into a bull market that rose 150 per cent in the 12 months to June.
Zhou Xiaochuan, the long-serving head of China’s central bank, is also considered one of the country’s most prominent reformers. His institution is pressing ahead with a campaign to internationalise the renminbi and bolster its credentials as a reserve currency, which could be jeopardised by the crisis.
“This is not a homogeneous group,” says one person who advises Beijing
policy makers. “Some were worried about moral hazard and thought the CSRC should have looked at [the
While the CSRC issued a statement on Sunday night that the People’s Bank of China would support brokers after an emergency State Council meeting chaired by Premier Li Keqiang, the central bank did not confirm its involvement until Wednesday morning. The finance ministry also only added its pledge to “protect market stability” on Wednesday.
Ye Tan, an independent financial commentator, says officials who were initially reluctant to join the CSRC’s rescue effort were “only there to get some soy sauce” — a phrase used, for example, by onlookers at traffic accidents to say that the commotion has nothing to do with them.
“This is how China works,” says the person close to policy making circles. “Everyone has their own job description and has a lot on their plate already.”
Above all, the ministries and regulators that have belatedly added their shoulders to the CSRC’s plough want to make sure they are not held accountable if the rescue effort fails.
“I’m expecting that someone will
pay a price for this,” says the person close to the CSRC. “There will be a sacrifice, I’m sure.”
Additional reporting by Wan Li
到目前为止，中国证监会采取的措施似乎并未奏效。春华资本(Primavera Capital)的胡祖六(Fred Hu)表示：“政策制定者面临着两难境地。他们正试图采取一切可以采取的行动来稳定市场，但他们给人留下了反应过度的印象。”
在中国证监会支持的措施中，有一项措施来自中国券商协会，该协会与其说在沙地上画出一条线，不如说是在空气中画出了一条线。中国证券业协会(Securities Association of China)表示，其会员将支撑市场，直到上证综指回升至4500点，比目前水平高20%。