Regulator: China needs to rein in risky stock behavior

China Securities Regulatory Commission Deputy Chairman Li Chao

China needs to do more to stop risky behavior in its stock market, a regulator said yesterday, following a 2015 collapse in share prices and complaints investors are engaged in a dangerous new round of speculative buying.

Regulators need to stop “blind expansion” by financial firms, the deputy chairman of the China Securities Regulatory Commission, Li Chao, said at a news conference.

People in financial industries have warned insurance companies and others are making dangerously aggressive investments in stocks and real estate. On Friday, the chairman of a life insurer was banned from the industry for violating limits on investing.

Regulators need to “increase the intensity of supervision” and “seriously deal with illegal acts,” said Li.

China’s stock market is one of the world’s biggest but prices are volatile and complaints of insider trading and other abuses are common. The markets are largely sealed off from global capital flows but Beijing is gradually easing barriers to foreign investors owning Chinese stocks.

In 2015, share prices surged and then collapsed, wiping trillions of dollars off stock value and battering small investors.

That was a “hard lesson” that regulators need to improve their ability to keep track of what brokers and investors are doing, Li said.

Regulators plan this year to “fully implement compliance and risk control” and “standardize the investment banking business,” he said.

Markets have stabilized since the crash, allowing companies to resume raising money in stock offerings, said the agency’s chairman, Liu Shiyu. He said 248 companies raised 163 billion yuan (USD24 billion) last year.

Liu was appointed in February 2016 after his predecessor was fired following the market plunge.

At the same time, said Li, regulators imposed more than 200 administrative measures last year against securities firms, fund managers and others who were found to be acting improperly.

On Friday, the country’s insurance regulator said the chairman of Foresea Life Insurance Co., Yao Zhenhua, was banned from the industry for 10 years. The agency said Foresea, part of Yao’s Baoneng conglomerate, risked too much of its assets on investments in stocks and real estate.

In December, another insurer, Evergrande Life, a unit of China Evergrande Group, was banned from the stock market. Regulators said it engaged in frequent speculative trading and ordered it to improve risk management. Joe McDonald, Beijing, AP