China's Top Stock Regulator Gives Up On "Immature" Market, Hands In Resgination

Tyler Durden's picture

Earlier this month, China tried to implement a circuit breaker designed to guard against the turmoil that’s been reverberating through the country’s equity markets since an unwind in a half dozen backdoor margin lending channels triggered an ugly meltdown last summer.

Although the CSRC launched a concerted effort to prop up the market by creating the so-called “national team” which bought nearly CNY2 trillion in shares from June through the end of the year, Beijing has been unable to restore a sense of normalcy.

The inability to stabilize mainland equity prices partly stems from the fact that 80% of the market is comprised of retail investors who are keen on selling any rips in a futile attempt to recover some of the $5 trillion that’s been wiped off the SHCOMP and the Shenzhen in the ongoing rout. Rampant uncertainty surrounding the country’s new FX regime hasn’t helped matters.

Going into the new year, China had tried everything to stop the bleeding up to and including arresting those suspected of contributing to the selloff even when the actions of the accused were perfectly legal. In a kind of Hail Mary maneuver, CSRC chief Xiao Gang dreamed up a circuit breaker which went into effect on January 4. The mechanism halted trading on the SHCOMP and the Shenzhen for the remainder of the trading day in the event the CSI300 fell 7%.

Put simply: the effort was a miserable failure. Apparently, it didn’t occur to anyone in Beijing that by halting trading for the entire day, the selling pressure would only build and spillover into the next session, creating an endless string of limit down halts as investors panic sell at the open. The circuit breaker was abandoned after just three days.

The fiasco was humiliating for CSRC chief Xiao Gang who on Saturday said elevated volatility in China is the result of an "immature market, inexperienced investors, an imperfect trading system and inappropriate supervision mechanisms." Now, apparently at a loss for how to right the ship, Xiao is ready to throw in the towel. “Xiao Gang, the embattled head of China's securities regulator, has offered to resign,” Reuters reported on Monday, citing unnamed sources close to the Party. 

“The (Communist Party) central (leadership) is extremely unhappy with Xiao Gang. It is certain he will change jobs," one source said.

"Xiao Gang handed in his resignation last week," a “financial industry source” confirmed.

Xiao’s term as chairman doesn’t technically end until 2018, but we can’t exactly blame him for wanting to duck out early. As noted above, the CSRC’s efforts to keep the equity dream alive for the hordes of everyday Chinese who plowed their life savings into the market have been nothing short of unprecedented and at times bordered on the comically absurd. At one point for instance, the regulator simply halted trading in 75% of listed shares indefinitely. In another now famous boondoggle, Beijing arrested a journalist for printing a story that moved futures in the “wrong” direction.

It seems likely that Xiao has run out of ideas. It’s also possible that he fears for his freedom. After all, CSRC officials were among those arrested last year. Indeed, vice chairman Yao Gang came under investigation for graft shortly after a series of brutal selloffs in China rocked global markets in late August.

While Reuters says there are three candidates short-listed to replace Xiao, it’s not clear that i) anyone wants the job, or ii) that the Party will be willing to suffer further reputational damage by admitting that the country’s top securities regulator has effectively given up on the market.

So essentially, the Politburo would probably like nothing more than to have Xiao's head delivered on a silver platter (figuratively speaking we hope), but the optics around his exit would likely mean even more selling by the country's millions of semi-literate, newly-minted, over leveraged daytraders who would see the CSRC chief's ouster as still more proof of that the Chinese stock market is, in the words of one 48-year-old bank accountant from Kunshan, "a mess."

The CSRC said rumors of Xiao's resignation are unfounded. 

"This information does not conform to the facts," the agency said, in a characteristically hilarious statement.

We shall see. In the meantime, anyone who's interested in trying their hand at corralling the most unruly equity market on the planet is encouraged to update their CV and send it to Xi. But be forewarned, this is one job where failure could land you in a Chinese prison for the rest of your days.

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shervin2's picture

Sum Ting Wong Mista Xiao?

Son of Loki's picture

He probably wants to retire to a $8 million house in Vancouver or SF is my guess.

Pinto Currency's picture



Xiao Gang letter - quote: "In short, this stock market reminds me of a Chinese fire drill."

nmewn's picture

"It's not my fault! It is inexperienced investors! An immature market! There was inappropriate supervision, I had a flat tire, there were swarms of locusts, imperfect supervision, a fire, an earthquake, a giant flood. Please God, you're got to believe me, IT WASN'T MY FAULT!!!" - Joliet Xio Jake Blues Gang 

weburke's picture

the guy flapped his mouth, was he drunk? 

theXman's picture

Let's be clear: there is no "resignation" here, he was appointed by the politburo and fired by politburo. He has no personal choice in this. If he dares to raise any objections, he will end up in jail.

Bunga Bunga's picture

The communist central planners will rather chop off his head before they let him live in a million Dollar shack in Canada.

dead hobo's picture

No, he just got tired of reporting to Barney Fife.

ISEEIT's picture

Shit...el bozo is already running the ussa.

Krugman might be tempted but otherwise who is truly qualified?

Son of Loki's picture

It’s a buyers’ market as Hong Kong flat owners slash prices to secure sales


Plagued by weakening market sentiment, rising interest rates and a slowing economy, flat owners in Hong Kong are feeling compelled to slash prices to attract buyers, pushing secondary home prices down for four straight months.

Home prices at 50 housing estates monitored by property agent Ricacorp Properties fell 1.8 per cent in December.


Global RE is following stawks downward looks like...slower because of the massive manipulation but gradually sinking lower acorss most areas excpet maybe key cities like Tokyo, Seattle, Portland and a handful of others.


DirkDiggler11's picture

Ha, if you rent in Hong Kong WB7 may end up being your landlord. Would that be some shit.

Handful of Dust's picture

Hk is still outrageously high compared to local salaries I read. The prices are due to the flood of Loot from Mainlander VIP's who literally carry suitcases of cash across and put into anything RE since the gubmint does not trace them there...yet.

NoDebt's picture

"What we have here is... failure to manipulate."

You think they hire these guys to run an orderly, fair and transparent market?  Any idiot can do that.  They want RESULTS and they want them RIGHT FUCKING NOW.

GMadScientist's picture

Kudos to this guy for pointing out the fucking obvious despite the gun to his head.

NoWayJose's picture

At least he had a choice - resign or 'disappear'

buzzsaw99's picture

he can't leave yet. the year of the goat is not over.

small towel's picture

"This information does not conform to the facts"

Isn't that Dallas Fed speak?

buzzsaw99's picture

the dallas fed doesn't speak. they also don't eat pork.

i_call_you_my_base's picture

Impossible job. Even if you wanted to do the right thing you would never be allowed.

FreedomGuy's picture

The basic reasons he gives add up to the belief that the only proper direction of the market is upwards. 100% YOY increases are perfectly normal and a sign of wise mature investors.

To do the opposite is to be immature and unwise.

The other problem always cited by 100% of governments worldwide is lack of control. If they just had a little more power and control it would all work out... forever.

ebear's picture

"Impossible job. Even if you wanted to do the right thing you would never be allowed."

Which is why you'll never find capable people operating at that level. Intelligent people understand the relationship between authority and responsibility. Taking the fall for someone else's mistakes is not usually one of their career objectives.

What the CCP has done by targeting individuals is to ensure that no one capable is going to step into the breach they themselves created. All you'll get is self-serving climbers who'll roll the dice that they can get theirs before the CCP gets them. These are the people buying homes in Vancouver, BTW.

slicker's picture

"Impossible job. Even if you wanted to do the right thing you would never be allowed."

Which is why you'll never find capable people operating at that level.

Given the quality of candidates for president of the US, the people appointed to various cabinet positions (think Dept. of "Justice") and the Fed, are we any different?  Really is the best this country can offer represented by the list of Republicans and Democrats running for president?

We're in deep shit.

neuronius's picture

Really is the best this country can offer represented by the list of Republicans and Democrats running for president?

No, but it's the best that these two criminal gangs can put together.

DirkDiggler11's picture

Maybe the Chicom's are taking " lying lessons" from the Dallas Fed ?

fatlibertarian's picture

Why don't they just make it illegal for the markets to ever go down?

Liberal thinking 101.

Dr. Engali's picture

One would think that China being the original issuer of fiat would have a better handle on printing. Maybe the problem is all their printers are made in China.

neuronius's picture

"Those damned free-willed people!  Trying to make decisions on their own... They're not experienced enough and don't know what they're doing, we need to tell them what to do!"

- some Central Planner, somewhere



Iam Yue2's picture

That's right mate, blame it on everybody else.


The Chinese, perhaps unsurprisingly do not undertand how financial markets work.  And no amount of praying on the part of Hugh Hendry is going to change things anytime soon. 

The Duke Of Frontenac's picture

Chinese nail gun go pow-pow-pow.

Sir SpeaksALot's picture

this job is freaking easy - first - use this money to buy physical gold, and then  - anounce a gold standard in China in 1 year from now.

4 wheel drift's picture

when will the kommies finally learn ?

complete idiots

Dr. Engali's picture

I don't know. Let's ask the president and the folks at the federal reserve.

Yen Cross's picture

  Fuckin 'A... That guy looks like a Chinese Guido Maffia Don.

  That's a real "paragon of virtue", we've got there. lol

GoldSilverBitcoinBug's picture

China should copy USA or Japan: BUY all the stock at market with QE !!!

tarabel's picture



Rat Numero Uno scuttles down the anchor chain and swims for shore before the SS Catastrophia sails with the tide.

besnook's picture

lol. in other words, only fixed markets work. they should have listened to the free market on wall street. commies.

Bunga Bunga's picture

Yeah, chop off his head, then all will be good again.

Bopper09's picture

'You have failed me for the last time'

SirBarksAlot's picture

I have to admire a man who can admit his mistakes pr shortcomings, if they were his to begin with, and resigns.

If our leaders had that much integrity we'd all be millionaires by now.

Youri Carma's picture

China Equities Regulatory System Had Flaws, CSRC Chairman Says
16 January 2016, (Bloomberg News )

Yeah, it had some disadvantages …

Hazlitt's picture

Either the Chinese markets really are "immature", which, given that the Chinese government had outright banned the market for decades and continues to mislead and suppress it, is entirely the fault of the same government because it destroyed previous knowledge of functioning markets and economics through its obviously wonderful vision for its people, or this regulator is just running his mouth because he can't (or refuses to admit) that markets, even suppressed and semi-capitalistic ones, invalidate his entire career and the destructive worldview it rests on.

Sooner or later, the markets also demonstrate to men how little they really know about what they imagine they can design, as Hayek once said.