Securities regulator shakeup unlikely to bring real change

Securities regulator shakeup unlikely to bring real change

HONG KONG - The replacement of China's chief securities regulator has spurred high hopes for reform, but an entrenched culture of politically motivated staff swaps between government and industry in Beijing suggests that little real change is in store.

Set path

Xiao Gang was ousted Feb. 20 as chairman of the China Securities Regulatory Commission, largely for his role in the turbulence that has plagued the Chinese stock market since mid-2015. Liu Shiyu, chairman of the Agricultural Bank of China, has stepped in from the commercial sector to take his place.

The two chief regulators' career paths are remarkably similar. Xiao came to prominence at the People's Bank of China, working his way up to become the central bank's assistant governor. He then stepped in to head Bank of China, a state-owned commercial bank, before returning to the administration as CSRC chairman. Liu's path, too, took him from assistant central bank governor to the Agricultural Bank and back to a regulatory agency -- a complete rotation of the revolving door between government and industry.

High-level staff changes can sway an organisation's future, and so are typically watched closely by markets. Observers gave Liu a warm welcome when he was named CSRC chair Monday, speculating that his birth in the Year of the Ox and the pronunciation of his name in Chinese could portend a bull market. The Shanghai Composite Index surged 2 per cent, lifted partly by hopes for market reforms such as a registration system for initial public offerings. Agricultural Bank of China rose 1.9 per cent in Hong Kong.

But that could be most of the change the staff shift will bring. Contrary to market hopes for accelerated reform, Liu seems to have little drive to make changes as head of the CSRC, according to information from private conversations that came to light Tuesday.

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