23 May 2019

The country’s powerful anti-graft agency is investigating Mr. Liu Shiyu former head of China Securities Regulatory Commission. In October 2014, he became the Communist Party Secretary of the Agricultural Bank of China. In February 2016, he was named chairman of the China Securities Regulatory Commission. Prior to that he was a reputed central banker and a strong supporter of financial reforms. Communist Party’s Central Commission for Discipline Inspection (CCDI) announced in a statement that Liu has been placed under investigation on suspicion of “violations of laws and discipline”.

He took over securities regulation job in 2016. At that time equity market enjoyed a boom with the support of the government. The boom was followed by a crash. In 2017 there was a slight recovery but the US China trade tension caused a sharp decline in China’s bench mark stock index, CSI300. China’s securities were the worst performer in the world by the end of 2018. Mr Liu cannot be blamed for this poor performance as most of the contributing factors were beyond his control.
During his time margin lending soared. This helped to prop up the market a little. The players also benefited from the margin trading. This also has a negative effect when the players liquidate their positions to clear their debts. This happened and it led to the market slump. Mr. Liu did not effectively control the volatility caused by the leveraged lending.

We do not know whether he is being charged because of the poor performance of the stock market.
Former ICBC chairman Yi Huiman has taken over the top job in the securities regulation and Mr Liu has been demoted as a deputy party secretary of Supply and Marketing Cooperative. Mr. Liu had a successful career in the People’s Bank of China and led the restructuring of the commercial banking system.

During Liu’s tenure as CSRC chairman, IPOs of many urban and rural commercial banks in East China’s Jiangsu Province, where Liu came from, were approved. In September 2016, the CSRC launched an IPO green channel for companies from impoverished provinces.

Some experts say that poor performers as weeded out by the graft busters.
Last year, Yao Gang, the former vice-chairman of the CSRC, was sentenced to 18 years in jail for taking bribes and insider trading. Xiang Junbo, the ex-chairman of China’s insurance regulator, was found to have taken bribes of S$3.9 million. He pleaded guilty last year.