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 The 57-year-old chairman of the China Securities Regulatory
Commission (CSRC) tendered his resignation last week after his
brainchild - a "circuit breaker" mechanism to limit stock market
losses - was blamed for exacerbating a sharp sell-off, a source with
ties to the leadership and a financial industry source told Reuters.
The "circuit breaker" was deactivated on Jan. 7, just three days
after its introduction.
"The (Communist Party) central (leadership) is extremely unhappy
with Xiao Gang. It is certain he will change jobs," the source close
to the leadership said, adding it was unclear where he would go
next.
"Xiao Gang handed in his resignation last week," said the financial
industry source.
Both sources requested anonymity because they were not authorized to
speak to the media.
It's unclear whether Xiao's resignation offer has been accepted by
the central government. The CSRC did not immediately respond to
requests for comment.
Xiao's term does not formally expire until end-2018. Before taking
over at the CSRC in 2013, Xiao was chairman of the country's
fourth-biggest lender, Bank of China Ltd for a decade.
MARKET MELTDOWN
On Saturday, Xiao gave a speech at an annual meeting in which he
said the stock market rout highlighted the problems facing the
CSRC's regulatory mechanisms.
"The abnormal stock market volatility has revealed an immature
market, inexperienced investors, an imperfect trading system and
inappropriate supervision mechanisms," he said.
The abrupt suspension of the "circuit breaker" followed a flurry of
measures by the CSRC last year - including halting short selling and
banning share sales by major shareholders - in a bid to stabilize
markets after major indexes plunged more than 40 percent in the
summer.
Indexes later rebounded around 25 percent from their August lows,
but have this month dropped back into bear market territory -
usually a reference to a market's 20 percent slide from its last
cyclical peak. The turbulent start to 2016, with currency and stock
markets tumbling, has stoked concerns that Beijing's policymakers
are fumbling as China heads towards its slowest annual growth in a
quarter of a century.
China is expected to report its weakest quarterly economic growth in
nearly seven years on Tuesday, putting policymakers under more
pressure to take bolder steps.
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SHORT-LISTED
The party's Organisation Department, or personnel ministry, has
short-listed three candidates to succeed Xiao, the sources said.
Xiang Junbo, who turns 59 this month and is chairman of the China
Insurance Regulatory Commission (CIRC), is the leading candidate,
they said. The CIRC declined immediate comment.
Another candidate is Huang Qifan, 63, mayor of the southwestern
metropolis of Chongqing, who is also tipped to become
secretary-general of the State Council, or cabinet, and may
concurrently serve as CSRC chairman, the sources said.
If confirmed as cabinet secretary-general, Premier Li Keqiang's
right-hand man, Huang would have to tackle a stalling economy and
market turbulence as well as oversee the entire spectrum of
portfolios: from industry to agriculture, energy, the environment,
state planning and technology, according to a Reuters report last
week.
The identity of the third short-listed candidate is not known.
"The Organisation Department has sounded out all three candidates
and completed background checks," said the source with leadership
ties.
Xiao, Xiang and Huang could not be reached for comment.
The benchmark Shanghai Composite Index, the share market most
closely watched by Chinese investors, last week fell below the lows
seen during last year's crash, closing on Friday at 2,900 points -
its weakest close since December 2014.
The index rose 0.4 percent on Monday.
(Reporting by Benjamin Kang Lim and Kevin Yao, with additioanl
reporting by Winni Zhou and Pete Sweeney in SHANGHAI; Editing by Ian
Geoghegan)
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