Xi Jinping's anti-graft campaign

Zhang Dongsheng, former general director of NDRC finance department, in corporate bond sales probe

Zhang Dongsheng, former general director of planning agency's finance unit, investigated over corporate bond issues, magazine says

PUBLISHED : Thursday, 14 August, 2014, 3:04am
UPDATED : Wednesday, 17 September, 2014, 7:14pm

A former director of the mainland's top economic planner who oversaw the country's corporate bond issues from 2003 to 2006 is under investigation, a sign that Beijing will intensify its crackdown on illegal bond trading.

Zhang Dongsheng, who was the general director of the National Development and Reform Commission's (NDRC) finance department, is being investigated in relation to corporate bonds issued in 2005, financial magazine Caixin reported yesterday, citing sources familiar with the matter.

The investigation comes on the back of a separate probe into Guosen Securities executives, Caixin added.

"Talk of investigations into Zhang has been swirling for a while, and if the authorities officially launched the probe, it could mean that the crackdown on irregularities in bond issuance and on illegal bond trading has deepened," said an NDRC researcher who asked not to be identified.

"It is expected that more people will eventually be involved in the investigations."

The authorities and financial regulators last year uncovered a clutch of unethical money managers who pocketed huge, illicit gains via illegal bond trading on the interbank market.

Fund managers from fixed-income departments of several financial institutions, including Citic Securities, Wanjia Asset Management and Guosen Securities were detained and questioned by police.

There is speculation that Wang Qishan , head of the Communist Party's anti-graft body, is determined to weed out illegal practices in the finance sector. Wang was a vice-premier in charge of the financial portfolio from 2008 to 2013.

Bond traders said dozens of institutions had taken part in illegal bond trading in past years and the illegal income could amount to billions of yuan.

In a typical case, a member of the interbank market would sell bonds to an affiliated institution at an artificially low price before the affiliate resold the bonds to another at a premium based on a fair market price.

The NDRC is responsible for approving the issuance of bonds of more than one year by non-listed companies and non-financial firms.

A trader said the officials in charge of approving debt sales had the power to designate buyers of the bonds on the primary market.

The winners of the bonds on the primary market could usually rake in income by selling them on the interbank market.

Zhang was transferred to head the NDRC's employment and income distribution division in 2007.

Caixin said he had retired recently and that the probe might expose details of corruption in corporate bond issuance.

Telephone calls to the NDRC for comment were not answered.

In October, mainland police investigated three fixed-income executives from brokerage Guosen Securities, including the president of its fixed income arm, Sun Mingxia .

According to Caixin, Sun provided a list of several hundred names, including Zhang's name, during the probe.

"Sun is known as a bond market guru who is powerful and resourceful," a Guosen Securities official said.

"However, she might have severely misused the power and resources."