Reports of CSRC head's exit spark concerns

China's top securities regulator, Guo Shuqing, is reportedly set to become the governor of Shandong, leaving asset managers uncertain about future market reforms.
Reports of CSRC head's exit spark concerns

Reports that China Securities Regulatory Commission chairman Guo Shuqing is set to become the governor of Shandong province have raised concerns in the investment industry.

When asked to confirm whether Guo's move is imminent, a CSRC spokesperson denied any knowledge of his planned departure, although it has been reported by numerous sources.

Mainland asset managers are anxious of the effect this would have on the market, given that Guo is credited with bringing in major capital market reforms.

One Beijing-based fund manager believes that it would have a major impact, as there would be uncertainty around previously announced policies.    

Zhang HowHow, head of research at Shanghai-based consultancy Z-Ben Advisors, takes a different view, saying it is uncommon for China to make major policy changes shortly after a shift in leadership. Hence Zhang believes that policies spearheaded by Guo will go on as planned, even if he leaves the CSRC. 

Guo's capital market reforms have helped to usher in greater involvement by foreign investors on the mainland. During his tenure, the qualified foreign institutional investor (QFII) quota has risen to $80 billion from $30 billion.

He has also led the expansion of the renminbi-QFII scheme announced last week by allowing in foreign financial institutions registered in Hong Kong, and lifted the quota to Rmb270 billion from Rmb200 billion.

And earlier this year, Guo proposed the creation of RQFII 2, which would allow individual investors to directly access Chinese securities.

Should he leave the CSRC, it may trigger a reshuffle in China’s financial industry. Z-Ben's Zhang says a replacement would likely come from the banking sector, as they would need to know the sector well enough to keep current policies on track and bring about improvements in the industry.

Reported potential candidates for Guo's job include Bank of China chairman Xiao Gang and Industrial and Commercial Bank of China chairman Jiang Jianqing.

Mainland policy has been moving towards reducing the sector's monopoly by the big five state-owned banks. For example, Guo spearheaded a series of policies aimed at giving fund management companies and securities firms the ability to compete with banks, Zhang notes.

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