Guotai chief quits as checks tighten on top brass of state-owned firms

Overseas links blamed for executive's departure as Beijing steps up 'anti-naked official' drive

PUBLISHED : Thursday, 05 June, 2014, 5:34am
UPDATED : Thursday, 05 June, 2014, 8:11am

The central government is stepping up efforts to check the family backgrounds of top-level executives at major state-owned enterprises, focusing on their overseas links, amid rising national security concerns.

Chen Geng, the president of Shanghai-based Guotai Junan Securities, has apparently become the latest victim of the "anti-naked official" campaign led by the Communist Party's organisation department, which vets appointments to senior government posts and top jobs at state firms.

Chen resigned from the company for "personal reasons", according to a report in the Shanghai Securities News.

A source with working ties with Guotai Junan confirmed Chen's resignation and attributed it to his family members, including his wife and children, holding foreign passports and declining to relinquish them.

The source said Chen held a Chinese passport.

Financial magazine Caixin also reported Chen's resignation and his family background yesterday.

"Naked officials" refer to those with family members holding foreign passports, making it easier for them to travel or emigrate.

Beijing has become increasingly concerned about the reliability of such officials in important positions at major state enterprises.

Guotai Junan is controlled by an investment arm of Shanghai's city government.

It is one of the oldest brokerages on the mainland and is widely considered a flagship home-grown securities firm. It has been involved in many major deals concerning state enterprises and financial innovations.

The company is also in the last stage of an application to list on the Shanghai stock exchange.

One source told the South China Morning Post that Chen was likely to be "demoted" to a smaller brokerage, where he would be given an honorary position.

"Basically, it's a sort of retirement arrangement for him," the source said.

Another sign of increasing efforts by Beijing to strengthen family background checks on senior state company executives is that from late last year, senior executives at the so-called "bureau level" or above have had to report their "overseas links" on a regular basis to the local organisation department.

Such links include whether the executives have any sons, daughters or direct relatives working or studying abroad, and the number of times they have met their family members overseas, according to government sources familiar with the background checks.

Guotai Junan's initial public offering remained on track, two senior executives close to the firm said yesterday, with plans to list in the fourth quarter of this year.

Additional reporting by Ray Chan

Follow the reporters on Twitter: @george_chen and @rayzchan