China regulatory chief’s appointment indicates investor confidence, market reforms are top of the agenda

The Chinese securities watchdog’s new head, “Broker butcher” Wu Qing, has lost no time in tackling the turmoil that has rocked the country’s stock markets, after it hit five-year lows this month, unveiling a slew of proposals aimed at reviving market confidence.

The China Securities Regulatory Commission (CSRC) said late on Monday that its newly-appointed chairman Wu Qing led a host of meetings immediately after the Lunar New Year holiday to discuss topics around regulating and preventing risks in the country’s capital markets, as well as promoting their “high-quality growth”.

Wu Qing, a veteran official with experiences across regulators and exchanges, earned his moniker after he cracked down on brokers for regulation breaches during his time as director of risk management office at CSRC in 2005-2009.

He then handled asset management companies’ illegal trading cases as director of the fund department. His background contrasts with that of previous CSRC chairmen who were mostly SOE banking veterans.

The post-holiday meeting was attended by a wide range of participants including academics, officials from listed companies, privately-owned companies that are preparing to go public, brokerage firms, private equity firms, financial and legal advisory firms and foreign-owned companies.

The meeting proposed tightening the vetting process for IPOs, greater regulatory scrutiny of listed companies, and stricter weeding out of unqualified candidates. This will help to “fundamentally improve” the quality of public companies and generate better investment returns, a post-meeting statement said. The healthy development of China’s capital markets is of crucial importance to investors, it said, reflecting the issue of investor confidence.

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The watchdog also vowed to standardise transactions in various asset classes, in a bid to improve the fairness of the trading system. It also proposed to develop the country’s investment institutions and inject more medium and long-term capital into the stock markets.

“The capital market has wide implications, and the more complex and severe the situation is, the more open we should heed advice and pool wisdom,” the CSRC said in the statement.

“The CSRC will treat all feedback, suggestions and criticism with seriousness, and make sure to execute anything that has proven to be feasible. For those that cannot be executed right away, we will make sure to communicate and respond to the market concerns in time. We will join forces to foster the healthy development of the capital markets.”

Wu, a banking and regulatory veteran with a PhD in economics, was appointed the chairman and party chief of the CSRC on February 7, replacing Yi Huiman after he failed to end a rout in the country’s US$8 trillion stock market. The carnage saw around US$5 trillion in market value being wiped off from its peak in 2021, with piecemeal support measures providing little relief.

Before his elevation as CSRC head, Wu ran the Shanghai Stock Exchange and served as the deputy party chief of the financial centre of Shanghai. His earlier stint at CSRC saw him take charge of fund and institutional supervision, as well as risk disposal for securities companies.

“Wu is likely to continue to enhance regulatory tightening in capital markets and the securities industry, considering his experience as well as the key tone of the Central Financial Conference in November 2023,” said Jefferies analysts in a note.

Wu has already indicated he means business. Two days after his appointment, the CSRC imposed a 4 million yuan (US$555,748) fine on S2C Ltd, a Shanghai-based semiconductor company, for inflating its earnings in its listing application. On the same day, the securities watchdog also fined employees at China Merchant Securities a total of 81.2 million yuan for illegal stock trading.

“We think this new appointment suggests China intends to strengthen supervision and crackdown on illegal activities in the capital markets,” said Everbright Securities in a note. “This aligns with CSRC’s 2024 work conference, which prioritised investor-oriented principles and risk prevention. Moreover, we expect Wu to be tasked with further financial reforms and opening up in Shanghai as well as financial support for sci-tech innovation, where the Star Market will continue to be the place for pilot measures.”