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China: Reining in the free market

Securities regulator the CSRC was set up in 1992 to bring order to China's new and frenetic securities markets. But its attempts to impose discipline have met with mixed success. Turf battles with other authorities, political agendas that take precedence over market-based listing criteria and high-profile departures have made the regulator as raucous as the markets it was supposed to tame. Sophie Röell reports

The conservatives in the Chinese government have been cracking the whip at the China Securities Regulatory Commission (CSRC), China's equivalent of the US Securities & Exchange Commission (SEC). The dismissal last year of the CSRC's free-thinking chairman, Liu Hongru, and his replacement by the more bureaucratically minded Zhou Daojiong - formerly at the policy-making State Development Bank - was the most important sign of a change in philosophy among China's leaders.

This has had serious consequences for the agency, which was set up in 1992 to bring order to China's new securities market. Seven months after Liu's dismissal, the resignation of the CSRC's general counsel and director of public offerings, the US-educated and highly regarded Gao Xiqing, caused alarm. One Beijing banker has referred to the "rise and fall of the CSRC", drawing attention to the way western-educated and open-minded officials are giving way to state planners.

The conservative approach imposed on the CSRC was quickly felt elsewhere in the securities industry. The president of the Shanghai Stock Exchange, Wei Wenyuan, who effectively founded the market and was renowned for his gung-ho approach to its development, was replaced by a municipal planning department official, Yang Xianghai.

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