Investors cheer PICC change
Investors yesterday welcomed the news that China Life Insurance chairman Yang Chao would be transferred to the helm of PICC Property and Casualty by pushing PICC's share prices up 9.49 per cent. China Life fell 1.04 per cent in Hong Kong.
There seemed to be little concern about the lack of transparency surrounding the transfer or the government continuing to make high-level personnel decisions at China's largest companies according to its own secret set of priorities.
No official statement has been released yet and the insurance regulator emphasised yesterday that Mr Yang was still the chairman of China Life and not the chairman of PICC 'as of this moment'.
Sources confirmed he would be leaving the country's largest insurer to take over as PICC chairman, replacing Tang Yunxiang, who is retiring.
The move is reminiscent of November 2004, when the top management at China Telecom, China Mobile and China Unicom were switched around without warning or consultation with shareholders.
The logic of that shuffle, not explained officially then, was later attributed to a drive to 'break monopolies and introduce competition'. It was also ostensibly to lift the game of China Telecom and have it try to catch up with the better-performing China Mobile.
The same logic held in moving China Life's chairman to PICC although 'PICC is even further behind China Life than China Telecom was behind China Mobile', one analyst said.
'The growth path of the insurance market is quite unbalanced, with life insurance developing very well and property and casualty suffering from unsophisticated management, inadequate product development, poor asset management and no competition strategies besides price wars,' BNP Paribas analyst Dorris Chen said. 'If I were the regulator, I'd be worried about that part of the market, too.'
As a state-appointed manager of a large state-owned enterprise, Mr Yang almost certainly had no say in his transfer, which comes as PICC prepares for an A-share listing.
'PICC is not in great shape and there is no way he can be happy about this move,' one source said.
Mr Yang has a reputation as a highly able manager and his transfer is expected to improve PICC's performance, which has lagged that of China Life significantly.
PICC's first-half profit last year rose a lower than expected 25 per cent to 1.1 billion yuan while China Life's jumped a surprise 72 per cent.
Even so, as with the telecommunications reshuffle, there is another reason for Mr Yang's move. Regulators who fear they will not be able to control maverick industry captains are prone to reminding them whom they work for by casting them into the jaws of rivals.
Mr Yang is a financial star and represents the growth of China's insurance industry - just the sort of position that can incur the wrath of the powers that be.