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Xiao Jianhua

Capturing China’s market manipulators a ‘tough task’ for regulator

Shortage of extradition treaties seen as major obstacle to repatriating suspects in economic crimes

PUBLISHED : Saturday, 11 February, 2017, 7:03am
UPDATED : Saturday, 11 February, 2017, 7:03am

Analysts said it would be a daunting task for China’s stock market watchdog to bring alleged market manipulators back to the mainland to face prosecution.

The stock market regulator had limited extradition treaties with other countries – and not even one with its own special administrative region, Hong Kong – the analysts said.

The watchdog also had little enforcement authority, they said, so capturing these big market players who were “skinning or sucking the blood of retail investors” would be an uphill battle.

Liu Shiyu, the chairman of the China Securities Regulatory Commission, has vowed to bring a group of “capital market crocodiles” back to China.

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China has been aggressively hunting suspects in economic crimes, especially corrupt officials, who fled overseas in recent years. Its deputy national police chief was also recently elected as Interpol’s new boss.

But Tao Jingzhou, managing partner at law firm Dechert, said Liu’s remarks represented little more than bluster at this stage.

“Does being a ‘capital market crocodile’ necessarily violate any laws?”asked Tao.

“They buy and sell on a massive scale in the market, but they may not necessarily be operating illegally.”

Tao said that Chinese still authorities needed to establish what specific crime a “crocodile” was suspected of committing before going to Interpol.

After that, extraditing those suspects would still be a lengthy process, he added.

Key stocks tied to missing billionaire Xiao Jianhua hit by 4.3bn yuan sell-off

Then there is the problem that China has only signed extradition agreements with a limited number of countries.

Up to the end of 2016, China had extradition treaties with no more than 40 countries.

Among them are Russia, Thailand, South Korea and Spain, none of which are as popular with economic fugitives as places like the United States, Australia and the European Union.

A lawyer in Hunan, who declined to be named, said that a lack of law enforcement authority also tied the China Securities Regulatory Commission’s hands when it came to trying to prosecute people who were outside of the country.

“What Liu has said will hardly affect those who have managed to flee to foreign countries,” the lawyer added.

But in light of the disappearance of billionaire Tomorrow Group founder Xiao Jianhua, who had been in Hong Kong for years before returning to the mainland to “assist” in investigations, the lawyer said Liu’s words would have “a chilling effect on those ‘crocodiles’ hiding in Hong Kong”.

Additional reporting by Sidney Leng