Chinese Communist Party expels official over alleged £30m insider trading scheme

Telegraph

a day ago

A senior Chinese official who supervised stock market floats has been expelled from the Communist Party after corruption investigators found a cash pile of up to 300m yuan (£31m) at his house.
Yang Jiaohong allegedly abused his role and contacts at the market watchdog, the China Securities Regulatory Commission (CSRC), to build a lucrative sideline in insider trading, according to the Chinese business newspaper Caixin.
Mr Yang, who is reportedly in his 50s and no longer works at the CSRC, allegedly used his knowledge of forthcoming initial public offerings (IPOs) to make hugely profitable last-minute share purchases just before companies listed on the Shanghai or Shenzhen stock markets.
'Yang Jiaohong lost his ideals and beliefs and deviated from his original mission,' a notice announcing his party expulsion and his referral for prosecution said.
Mr Yang is only the latest victim of a wider purge of former CSRC officials. In just the past six weeks, the party has ousted Li Xiaoqiang – a former deputy director at Mr Yang's IPO supervision department – and Wu Guofang, deputy director of the legal department.
Mr Wu was last November reported by Nikkei as having 'gone missing', as a Beijing crackdown on stockmarket corruption gathered pace.
In July last year, CSRC deputy chairman Fang Xinghai stepped down, ostensibly after reaching the retirement age of 60. His replacement, Li Ming, had previously headed the regulator's enforcement division – a platform that suggested he was being promoted to drive up the regulator's standards.
Mr Yang had seemingly not worked at the CSRC, or anywhere else, for almost a decade. But he allegedly went on using his CSRC contacts and a network of 'white-glove' front companies to keep making insider trades, which the expulsion notice described as 'a typical example of escapist resignation corruption'.
The Chinese stock market has struggled to shed its reputation for poor governance and transparency, which can create opportunities for graft.
Besides corrupt officials, there have been accusations of companies pumping and dumping their own stock, buying shares rapidly to drive up the price and then selling for a quick profit.
This has made it hard for Shenzhen and Shanghai to attract the kind of stable institutional investors with big pools of capital that are the bedrock of Western stock markets. Most of this class of investor typically prefer Hong Kong.
The CSRC chairman, Wu Qing, was appointed in February last year to spearhead a new era of better governance and attract precisely these bigger players.
In a keynote speech in March this year, he said the CSRC was pursuing reform 'in the face of increasing external pressure and internal difficulties'.
The regulator had 'made every effort to prevent risks, strengthen supervision, promote development, stabilise the market, stabilise confidence and stabilise expectations', he said.
The benchmark Shanghai Composite Index was highly volatile last year, but has increased steadily since early April and is now touching highs last seen four years ago.