Exclusive-China’s securities regulatory chief seeks approval to step down, sources say

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(Reuters) -China’s securities watchdog chief, Wu Qing, has sought approval to step down, sources with knowledge of the matter said, in what would be an abrupt and unexpected exit for a regulatory head brought in last year to stabilise the country’s stock markets.

Wu, who was appointed the chairman of China Securities Regulatory Commission (CSRC) in February 2024, has informed relevant authorities about his intent to exit the role citing his health, the sources said.

It was not immediately known if his resignation had been accepted, and when he would leave the office, one of the top regulatory jobs in the world’s second-largest economy.

The sources declined to be named due to the sensitivity of the matter.

Wu, the CSRC and the State Council Information Office did not immediately respond to requests for comment from Reuters. The Chinese securities watchdog is a government agency directly under the purview of the State Council, the Chinese cabinet.

‘MARKET REFORM ARCHITECT’

The possible exit of Wu is expected to usher in a period of uncertainty for the Chinese market at a time when some investors are questioning the sustainability of the bull run in the near to medium term amid growing caution on tech valuations.

The Shanghai Composite Index is up about 45% since his appointment in February last year, versus a 35% rise for the MSCI world index.

Zhang Jianan, a Shanghai-based fund manager for Wen Ding Capital, said if Wu steps down, China’s stock market will come under pressure.

“That could have a big impact on market confidence,” said Zhang, who holds shares in Chinese banks and insurers. “Wu is the architect of the recent capital market reform. He is very professional and reform-minded.

“So if he steps down, market expectations would be hurt badly.”

Wu, nicknamed the “broker butcher” after a crackdown on securities firms during an earlier regulatory stint, took over as the CSRC chairman at a time when China’s stock markets were near their weakest levels in five years.

BULL MARKET

Wu’s appointment came after the abrupt removal of his predecessor Yi Huiman amid the market turmoil in early 2024. China’s anti-corruption watchdog said this September that Yi was being investigated and “suspected of serious violations of discipline and law”.

Even before taking the top job, 60-year-old Wu, often seen sporting a distinctive cropped haircut, was a familiar face at CSRC, having previously worked at the country’s main securities regulator.

He spent four years tackling risks in the securities industry before becoming head of the regulator’s fund department in 2009, where he pursued a series of high-profile insider trading cases.

Prior to rejoining CSRC, he was the deputy party chief of China’s financial hub Shanghai and was the head of the Shanghai Stock Exchange.

Wu, who has a doctorate in finance from Renmin University in Beijing, was elevated to the elite Central Committee of the ruling Communist Party in October 2022.

A series of market interventions and supportive measures were rolled out soon after he became the CSRC chairman.

Those initiatives were followed by liquidity and governance moves that helped turn around investor sentiment, as global investors also resumed buying Chinese stocks listed onshore and in the offshore market of Hong Kong.

“The possible resignation of Wu Qing will be closely watched mostly to see if a dovish replacement is found,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital.

“Capital markets reform spearheaded by the CSRC has been one of the key drivers of Chinese market performance in recent years. Thus, government efforts to create a ‘slow bull’ market will fall squarely on the new chairman when announced.”

(Reporting by Reuters Staff; Editing by Jamie Freed and Raju Gopalakrishnan)