China Central Bank Aide Jailed for Six Years After Leak of Economic Data
Wu Chaoming, a researcher with the People’s Bank of China, was sentenced to six years in prison for willfully revealing secret information to 15 people in the securities industry, Li Zhongcheng, a state prosecutor said in Beijing today. Sun Zhen, a former secretary in the country’s statistics bureau, received five years on similar charges.
Four suspects employed in the securities industry have also been indicted, Li said, without naming them.
The punishments were the toughest measure yet in a government campaign to stop selective disclosures that undermine China’s stock markets and give an unfair edge to some investors. Authorities will continue to “strike hard” against such cases, Li said.
“A message is being sent as a deterrent,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp. who had previously called for China to address the issue. “It’s for anyone who doubts the seriousness with which the issue is being taken.”
‘Handsome’ Lecture Fees
Some of those who leaked information got “handsome” lecture fees for speaking to securities brokerages, while others traded stocks for profit, said Du Yongsheng, a spokesman for the National Administration for Protection of State Secrets.
The government began public efforts to combat the challenge in April and in July brought forward the monthly release dates for some figures to reduce the chance of early disclosure. It followed a series of leaks of inflation numbers, a statistic that can move markets as China battles to control price rises that hit a peak of 6.5 percent in July.
“It is a crime that seriously harms society,” Li said at a press conference in the Chinese capital. “The leaking harms economic operations, prevents fair market competition and affects government credibility.”
Wu, a researcher with the central bank’s Finance Institute, leaked 25 items of classified statistical data 224 times to 15 people in the securities industry between January and June 2010, Li said. Wu learned of the data legally at an advisory meeting of outside experts on price monitoring and analysis, the prosecutor said.
Sun, who was secretary to a director in the National Bureau of Statistics, violated provisions of the law on Guarding State Secrets by leaking 27 items of classified statistical data to employees of the securities industry between June 2009 and January 2011, Li said. The data leaked included numbers on gross domestic product, consumer price inflation, retail sales, new loans and M2, the broadest measure of money supply.
Wu and Sun were both sentenced by the Xicheng District People’s Court of Beijing and neither appealed his sentence, Li added.
The jail sentences are the harshest punishment the government has handed down to date for such violations, said Yang Xiaojun, a law professor at the Chinese Academy of Governance.
The severity is a surprise, said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB.
“I think they did the right thing in order to maintain credibility, especially when you relate that to how Chinese data nowadays are market-moving and influential,” she said.
The punishments go beyond safeguarding national data to ensuring the healthy development of China’s securities markets, Ye Qing, deputy head of the provincial statistics bureau in Hubei, said in a telephone interview.
‘Killing the Chicken’
“It’s like killing the chicken to scare the monkeys,” he said, using a Chinese idiom. “It’s also aimed at those who dig for information and manipulate the stock market.”
The consumer-price index figure was accurately circulated in the market or in the press before the official release for at least five of the six months through April this year.
Such early disclosure has helped move markets in the world’s second-biggest economy.
After rumors circulated on the Internet in February that inflation for the previous month would be a lower-than-forecast 4.9 percent, China’s benchmark Shanghai Composite Index rose 2.5 percent, the most in two months, on speculation China wouldn’t need to raise interest rates further to cool rising prices. After the statistics bureau’s official release a day later, which matched the number, the market ended almost unchanged.
Leaks ‘Dried Up’
China in July brought forward the release date for some key economic data, aiming to reduce the potential for leaks by adopting a new schedule that cuts the time-lag between finalizing data and releasing it. The statistics bureau said it was following the lead of efforts by nations including the U.K.
The measures appear to be working, says Westpac’s Callow.
“It is very telling that data leaks dried up in the past few months,” he said. “People are still asking for whispers, but I no longer expect leaks.”
The bureau now seeks to publish monthly indicators including the producer price index, consumer price index, industrial production, fixed-asset investment, real estate development and retail sales, within 24 hours of the data being produced.
Du, of the state secrets office, said it would continue to clear up the “chronic” problem of classified data being leaked.
“There are still weak links that need to be strengthened” in terms of restricting how widely data is distributed and designating levels of secrecy, he said.
--Dingmin Zhang, Kevin Hamlin, Wenxin Fan. Editors: Neil Western, Nick Wadhams.
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