When Wu Qing took his new job as chairman of the China Securities Regulatory Commission (CSRC), he has made lots of changes to stabilize the stock market and financial orders as the old Chinese saying goes “a new official sets three fires (a new broom sweeps clean).” Since his taking office, the Shanghai Stock Exchange Composite Index (SSE Inex) has risen for several days, breaking through the 3000-point milestone. Who is Wu Qing? He is at his 59 age with a serious look, rarely smiling and talking. Known as a strict and impartial technocrat, Wu has a doctoral degree in economics always keeping in a low key. He started his career as a staff of basic level in the State Planning Commission (Now National Development and Reform Commission) and then a cadre in the Office of State Council Securities Commission, and later working in the China Securities Regulatory Commission for many years. He is a representative of the 20th National Congress of the Chinese Communist Party (CCP) and was elected as an alternate member of the CCP Central Committee at the congress. He was appointed deputy party secretary of Shanghai on July 21, 2023, and concurrently serving as secretary of the Political and Legal Affairs Commission in August of the same year. Wu succeeded Yi Huiman as communist party secretary as well as chairman of the CSRC on February 7, 2024. He has shown “zero tolerance” for misconducts and vigorously cracked down on illegals, earning him nicknames like “broker doctor,” “terminator of problem broker,” and “broker butcher.” From Xi Jinping’s perspective, he is not only politically reliable but capable of solving problems with professional expertise in effectively implementing strict supervision on financial/banking sector, that has made him favored by the leadership. Wu has transformed from a financial technocrat to the chairman of CSRC, a decision maker, like a rising star in politics worthy of attention.
Objectively, Wu Qing possesses rich forefront experiences in securities regulation and implements policies vigorously and resolutely with meticulous attitude toward regulations, allowing no room for compromise. Ever since his taking power, Wu Qing’s three fires (actions) have been in full swing, including using both soft and hard tactics to crack down illegal trading activities with efforts of communications and coordination, enhancing regulation models, and focusing on the washing out of companies engaged in financial frauds. In addition, Wu has recently called more than 10 symposiums to listen to opinions from the market and led a team to the Financial Street branch of China Galaxy Securities for a face-to-face communication with representatives of investors. At the same time, he has successively issued warnings to two securities brokage companies, Shenwan Hongyuan Securities and Ping An Securities and exposed 63 staffs of another brokage company engaged in insider trading, resulting in a total fine of 81.73 million yuan (RMB, same as below). China’s stocks opened the first day of trading after the Chinese New Year on February 19, and a Lingjun Investment company sold out large stocks, totaling RMB 2.567 billion in two markets, through computer-programed automatic transaction instruction in one minute, leading to a sharp falling of two market indices and disturbing normal trading order. The Shenzhen Stock Exchange believes that Lingjun Investment’s action belonged to abnormal behavior regulated by the Shenzhen Stock Exchange Trading Rules and has decided to impose phased restrictions on its accounts and initiate public condemnation and disciplinary proceedings against it. Moreover, the CSRC and the Shanghai and Shenzhen stock exchanges have established task forces to monitor short selling funds, giving instructions to prohibit profit making or concentrated selling through A-share futures or short-selling transactions. The CSRC also asked some brokers to reject margin trading transaction for short-selling clients. All of the actions seem to send warning signals to prevent similar cases from happening in the future.
It is reported that the CSRC is studying a mechanism to improve regulatory model for securities industry, enhance system related to institutions, employees and business, and strengthen risk control requirements for institutions to follow. A better regulatory mechanism of incentives and constraints has also been undertaken to further reward the good and punish the bad while strongly demanding securities companies and public funds to enhance their capabilities. It also emphasizes justice to increase protections of rights and interests of small and medium sized investors comprehensively. It has “zero tolerance” to frauds such as fraudulent financial statements. The problem of false financial statements among China’s listed companies has a long history with numerous cases in recent years. For instance, enterprises like iQIYI, a video platform listed in the US, and Luckin Coffee, known as “Chinese Starbucks,” have all been accused of making false accounts notoriously. HCR Co. Ltd. (688500. SH) was found by the Beijing Securities Regulatory Bureau to have Xintang Puhua, its subsidiary company, exaggerate revenues and profits through fictious business with cooperative partners by singing unsolid sales contracts to confirm project income prematurely, leading to false disclosures of its prospectus on July 13, 2020, and its annual reports after listing from 2020 to 2022, presumably violating information disclosures regulations and rules. Dada Nexus Limited, a logistics company listed in the US, is an investment of Jingdong Group (JD.com), a Chinese e-commerce giant. Dada admitted that there are problems with its financial statements in January this year (2024), in which the incomes and costs of the first three quarters of last year have been exaggerated. It led to the plummet of Dada’s share price to almost half cut. The CSRC will firmly cut off issuance and listing of problem companies to protect the rights of investors from the beginning and to make fraudsters bankrupt and rotten in jails, which might help China’s stock market reform thoroughly to a long and stable development.
From an objective analysis of facts, there is a long way for China heading to financial power, but the three fires of Wu Qing have lit up the way to the stock market. The Japanese stock market hit a historic high in 34 years on February 22. The total listing market value of JPX, core of Tokyo Stock Exchange, surpassed that of Shanghai Stock Exchange after three and half years and returned to number 1 in Asia. Wu Qing needs to make greater efforts to reclaim China’s position if wanted.
（Wo-chiang Lee, Professor, Department of Banking and Finance, Tamkang University）
（Translated to English by Tracy Chou）
