China's New Securities Chief Said to Urge Strict Supervision

Updated on
  • Liu Shiyu said to request checks on market manipulation
  • First comments since Liu replaced Xiao Gang as CSRC chairman

The new head of China’s securities regulator has indicated that he’ll take a tough stance on misconduct and support the stock market by driving more capital into it, according to people familiar with the situation.

In his first comments since taking over as the chairman of the China Securities Regulatory Commission on Saturday, Liu Shiyu told senior officials at the regulator that its main tasks include strictly supervising the market and checking for manipulation, said the people, who asked not to be identified as the matter isn’t public. Liu also said the regulator should actively guide funds into equities, according to the people.

Liu replaced Xiao Gang, who was removed from his post after less than three years, during which near-unchecked leverage drove a boom in stocks before prices collapsed last summer. The plunge reverberated around the world and triggered unprecedented state intervention as the government sought to prevent the spread of turmoil to an economy already growing at its slowest pace in a quarter century.

“Turbulent market conditions since 2015 have exposed many problems,” said Hao Hong, a Hong Kong-based equity strategist at Bocom International Holdings Co. He agreed that Liu should focus on supervision to “help make the market fairer and more transparent.”

The regulator’s press office didn’t immediately respond to a faxed request for a comment.

Extend Crackdown

Liu, who was previously Agricultural Bank of China Ltd.’s chairman, will be seeking to extend the CSRC’s crackdown on misconduct, which intensified as authorities blamed “malicious” short selling and market manipulation for causing the violent swings in stock prices during last summer’s rout.

The combined amount of fines handed out and illicit gains that were confiscated by the CSRC rose last year to a record 5.4 billion yuan ($827 million), or more than 1.5 times the previous 10 years’ total, according to an enforcement report released by the regulator on Jan. 15.

The agency investigated 71 manipulation cases in 2015, more than four times the previous year, as the CSRC focused on probing the abuse of market information, misconduct involving algorithmic trades and margin finance, the report showed.

The Shanghai Composite Index is still trading 44 percent below its June peak.

As well as needing to rebuild morale among the nation’s 99 million investors, Liu will preside over an overhaul of initial public offerings, the planned expansion of a trading link with Hong Kong and a campaign to get the nation’s shares included in MSCI Inc.’s global indexes.

Liu was a deputy governor at the People’s Bank of China before working at Agricultural Bank. Prior to joining the PBOC, Liu worked at China Construction Bank Corp. and the nation’s economic reform commission. He holds a master’s degree from the economic management school of Tsinghua University in Beijing.