The problem with China’s financial regulator: Too much power and too little talent

China’s top leaders are seen in a rush to strengthen their grip over the financial regulators to avoid further missteps and restore investor confidence, but senior officials and analysts are warning the key problem with the country’s capital markets is not the lack of top-down guidance but the way it is dispensed.

The State Council, China’s cabinet and the official supervisor of the central bank and the watchdogs of banking, securities and insurance markets, has upgraded a financial affairs department to bureau level to improve coordination between the regulators, local media reported last week. Li Zhenjiang, former vice-president of Agricultural Bank of China, has been appointed deputy director responsible for its daily operations, sources said.

Meanwhile, Huang Qifan, the current Chongqing mayor known for his financial acumen, has been handpicked by President Xi Jinping to become the finance tsar, streamlining the chaotic and fragmented financial market regulation.

“Clearly the top decision-making body feels they are in urgent need to place financial experts at the top and ward off any financial crisis, a goal that has been stressed by President Xi himself,” said a Beijing-based think-tanker who did not want to be named.

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In a speech at an annual work conference at the weekend, Xiao Gang, the beleaguered chairman of the China Securities Regulatory Commission (CSRC), said the recent “abnormal volatilities of the stock market shows the loopholes in CSRC supervision” and that the securities watchdog should “learn the lessons”. But he also noted that CSRC officials are under great pressure and many of them have resigned.