China Briefing | Why ‘barbarian’ insurers have forced Beijing to intervene
Usually, listening to public speeches by senior Chinese officials is a banal, sleep-inducing affair, as they tend to hide their feelings behind scripted lines of jargon and generalities. So when Liu Shiyu, the mainland’s top securities regulator, went off script last weekend and denounced Chinese insurers as “barbarians”, “robbers” and “sirens”, he set off a frenzied debate over the state and regulation of China’s unruly financial markets.
In a speech to a semi-official association of fund managers, Liu employed unusually strong and colourful language to target his anger at those fund managers who used improperly sourced funds to undertake highly leveraged buyouts and raise their stakes in blue chip companies. He said such acts were tantamount to challenging the bottom lines of China’s financial laws and regulations and professional ethics – a sign of decay in human and commercial moral values.
Regulator suspends product sales of insurers branded ‘barbarians’ for hostile buyouts
He did not name names, but obviously referred to those nouveau riche insurers primarily owned by private investors who raised billions of yuan through high-risk and high-return products to go after some of China’s best managed and biggest companies and signal their intention to force changes of management.
On the same day, Chen Wenhui, a deputy chairman of China’s insurance regulatory commission, echoed Liu’s comments saying that skirting regulations was tantamount to committing a crime.
The speeches suggested a concerted action by the central government to go after those insurers who the authorities believe have become a debilitating force to the stock markets rather than bringing the long-term stability they were supposed to provide.
On Monday, the insurance regulator said it had suspended Foresea Life, a unit of Baoneng Group, for three months from selling universal life insurance products which offered investors guaranteed, short-term high yields. Reports suggested the regulator would send teams of investigators to Foresea Life and the insurance unit of Evergrande Group, a property conglomerate.
As a result, the share prices of many companies in which the insurers had built stakes fell sharply last week as investors tried to make sense of the crackdown.