Shake-out in CSRC fund division signals new direction

Li Jengxiang, current director-general in charge of fund supervision at the China Securities Regulatory Commission (CSRC), has been pushed out of the mainland regulator, according to market sources.

Li has been redirected by Beijing to become a president of Galaxy Securities. Meanwhile, Xiao Shiqing, who is currently president at Galaxy, will return to the CSRC to take charge of the listing oversight, a department where he had previously worked as a vice-director.

A source close to the situation says the decision has so far been withheld from the public, adding that Li is a casualty of a recent clash between party powers within the regulator.

The source says top level officials at the CSRC blame Li's interventionist policies in the fund market during the volatile period between 2007 and 2008 for causing some of the market instability. With his removal, a number of executive staff close to Li are expected to soon be cleaned out.

In Li's place, Wu Qing, a director-general currently in charge of risk disposal at the regulator, will supersede two vice-general directors to become the most powerful man in China's trillion-yuan fund industry. Wu has been a vocal critic of the excesses in the Western financial industry since the onset of the credit crisis.

Wu first emerged into the public arena when he began cleaning up bankrupt securities firms during his capacity as a director for institutional monitoring. He was instrumental in the drafting of risk disposal rules in the brokerage industry.

The source cautions that the management reshuffle could signal a significant change in regulatory thinking, although he would not elaborate on which policies he expects to be affected.

Recently, Wu has been vocal in criticising Western financial firms for mistaking their role as service provider with speculator; their role in risk management versus risk taking; and the West's backward trend of reversing innovations.

Hong Lei, current CSRC vice-director general and a former CEO of Harvest Fund Management, is expected to stay in his position, along with his colleague vice-director general Tao Guangshao.