Time For A Poacher Turned Gamekeeper At The Exchanges?

LIU SHIYU, who has replaced the ill-starred Xiao Gang as China’s top securities regulator, is a former chairman of the Agricultural Bank of China. Liu is the China Securities Regulatory Commission’s eighth head, a job he will combine, like Xiao, with being the Party chief in the Commission. Six of Liu’s seven predecessors also worked in state banks.

And therein lies a clue to the innate contradiction in China’s attempts to control the animal spirits of financial markets by old-school administrative measures, which, like Xiao’s ‘circuit breakers’ can end up embarrassingly making matters not better but worse.

State bankers whose careers have been spent within the confines of a highly protected banking system where administrative guidance has long made the need for risk management a redundant skill are unlikely to have that gut feel for how markets work and what reinforces or undermines investor sentiment. Even Liu’s spell at the People’s Bank of China was mostly concerned with the bailout of the state banks in the early 2000s.

While having someone from the securities industry regulating the markets would no doubt come with its own mixed bag of connections and conflicts, it might be time for Beijing to consider appointing a poacher turned gamekeeper to oversee the exchanges.

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