China’s ‘revolving door’: finance officials jump ship for top jobs in the private sector

Top staff at industry watchdogs look to greener pastures as frugality drive and declining promotion prospects take toll

PUBLISHED : Thursday, 04 August, 2016, 12:25am
UPDATED : Thursday, 04 August, 2016, 9:40am

Like the revolving door between Washington and Wall Street, financial professionals in China are ditching their iron rice bowls for better-paying jobs in the private sector.

Yao Yudong, head of a central bank research institute and one of the authority’s best-known faces, is the latest to head for the exit.

He resigned and would move to Shenzhen-based Dacheng Fund in the next two months to head up research at the fund firm, Caixin reported.

Before him, there was Wu Ge, a division chief at a central bank unit in charge of exchange rate policy. He left his state job to become the chief economist at a Chinese brokerage. And at least three officials at the central bank’s payment department quit this year for other jobs, according to local media reports.

A few blocks from the central bank in Beijing’s Financial Street, talent has streamed out the door of the China Securities Regulatory Commission since the stock market rout last year and an anti-corruption campaign within the regulatory agency.

Few lessons learned one year after China’s great market crash

The personnel changes come as China’s financial industry, especially its asset management segment, is expanding to become one of the best-paying businesses in the world’s second-biggest economy. At the same time, the frugality campaign launched under President Xi Jinping is making life tougher for public sector employees.

An overhaul of the financial regulatory system is also in the offing, changes that could mean streamlining at the central bank and regulators, including the CSRC.

It is very likely that many [officials] have similar ... job-hopping plans, given the overwhelming changes in the financial system
Frank Tang, North Square Blue Oak

“It is very likely that many [officials] have similar ... job-hopping plans, given the overwhelming changes in the financial system,” said Frank Tang, an economist with London-based investment bank North Square Blue Oak.

“The space for promotion in the regulatory authorities will become very limited after the reform, while potential salary increases await in the business world.”

Staff at financial regulators are often well-educated professionals who would be very competitive in the job market. Yao, for instance, has a doctorate in economics from Cambridge University, according to his official biography.

As China weighs ‘super-watchdog’, call for including finance ministry

Even if they did not climb high in the bureaucracy, former regulatory officials could be huge assets in an industry still greatly influenced by the state, Tang said.

But the revolving door is usually one way because returning to government is difficult.

The present outflow is also small compared to the early 1990s when the paramount leader Deng Xiaoping persuaded an estimated 100,000-plus communist cadres to “jump into the sea”, or leave public office for private business.

Chen Xingdong, chief China economist with BNP Paribas in Beijing, said the influx of former officials into the industry could give businesses the knowledge to skirt rules. But Chen said the officials could also introduce a more ordered and rules-based culture in the industry, with more constructive interaction between the two sides.