China Bond Market Probe Said in New Phase as Staff Taken Away

  • Said to involve former or current staff at 5 financial firms
  • Cleanup push comes as China encourages bond market expansion

The Chinese government’s probe of the nation’s bond market is entering a new phase as at least five current or former employees of five Chinese financial institutions’ bond departments have been taken away by authorities, according to people familiar with the matter.

The development includes former or current employees of Haitong Securities Co., Dongxing Securities Co., Industrial & Commercial Bank of China Ltd. and Minmetals Securities Co., said the people, who asked not to be identified because the details haven’t been announced. A current employee at Lianxun Securities Co. was also taken away, according to one of the people.

The Chinese government is making the new push after the bond market more than doubled in size over the past six years, as authorities encourage companies to cut reliance on informal shadowing financing amid the weakest economic growth in a quarter century. In 2013, China’s central bank asked participants in the interbank bond market to examine trading histories as it cracked down on illegal transactions, people with knowledge of the matter said at that time.

“The probe tells the public that the regulators have begun to ‘clean up’ the market for further development,” said Iris Pang, senior economist for greater China at Natixis SA in Hong Kong. “As the bond market is opening up to foreign investors the government must show that existing regulations are good enough to prevent illegal activities.”

Opening Up

Last month, China’s central bank said that most types of overseas financial institutions will no longer require quotas to invest in the interbank bond market, a major step toward giving foreigners free access.

Staff being taken away doesn’t imply they will be charged or have been involved in anything illegal, the people said.

A press officer at ICBC declined to comment. Calls to the mobile phone of Haitong’s board secretary went unanswered. A board officer at Dongxing Securities, who wouldn’t be identified, said the person left the company last year. The officer said she had no information on the person. An operator at Minmetals Securities wouldn’t transfer the call. Su Feng, board secretary at Lianxun Securities, said the company hasn’t been able to get in touch with the person.

Caixin reported earlier that some current and former staff with Chinese firms including ICBC, Minmetals Securities and Lianxun Securities were taken away.

— With assistance by Ling Zeng, Judy Chen, and Steven Yang

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