The former high-flying vice chairman of China’s top body for regulating stocks has been brought down, an action experts believe is preparation for the pivotal 19th Party Congress in October.
Yao Gang, 55, was targeted in November 2015, five months after the mid-year stock crash. He is one of the highest-ranking officials disciplined for alleged stock manipulation.
In mid-June of 2015, the stock market that had seen a long bull run lost nearly a third of its value in three weeks. Shanghai and Shenzhen stock indexes plummeted more than 40 percent during the summer.
The procuratorate stated that Yao was subject to “coercive measures,” but did not spell out the details. In an earlier statement issued by the Central Commission for Discipline Inspection, China’s topmost anti-graft agency, Yao was accused of “resisting investigation,” “disrupting the order of the capital market,” and “sabotaging political ecologies in the security regulation department.”
Yao was expelled from the party and dismissed from office on July 20, 2017. On Aug. 31, the Supreme People’s Procuratorate announced he has been placed under investigation for taking bribes.
‘King of IPOs’
Known as the “King of IPOs” at China’s Securities Regulatory Commission (CRSC), Yao had been in charge of public offerings of A shares—stocks of mainland-based companies—since 2002.
Yao enjoyed a lengthy and cushy career in the security regulation sector. He had been the vice director in the futures administration department in 1993, and ended up presiding over the China Securities Commission as deputy director in 2008. In Nov. 2015, he was investigated on suspicion of “serious breaches of Party discipline,” a phrase commonly used for bribery probes in China.
Chinese news portal Tencent suggested that Yao might be connected to Ling Jihua, a former top aide to the previous Party leader Hu Jintao. The CRSC office over which Yao presided approved six requests for public listings from Ling’s fugitive brother Ling Wancheng, including one for the little known company LeTV.
Huijin Lifang Capital, a private equity firm controlled by Ling Wancheng, amassed 1.4 billion yuan ($225 million) from an initial public offering, according to Caixin. Ling Jihua was arrested for corruption on July 2015, and given a life sentence the following year.
Following Yao’s downfall in July, some Chinese media have criticized him by calling him a “stock traitor” who “colluded with domestic and foreign forces to short the Chinese stock market.” Ifeng reports that some high officials in CSRC transferred a large amount of capital to Hong Kong and Singapore during the rescue of the market, citing Hong Kong media. At least seven of Yao’s associates in the security regulation system have been placed under investigation, according to Xinhua.
The same day that Yao was put under investigation, Beijing also confirmed the date of the 19th Party Congress. Some analysts believed that making the two announcements on the same day was a subtle hint that Xi’s corruption campaign might be focusing on the financial sector.
“Xi’s biggest concern is the financial sector that has been secretly doing sabotage,” the political commentator Tang Jingyuan told The Epoch Times. “By striking a blow at the tycoons and punishing tigers in the financial sector like Yao Gang, Xi Jinping is giving a warning to those bigwigs and corruption groups who still have strength to challenge him.”
“Everyone understands that the economy is the biggest pillar of the Chinese government’s legitimacy to govern and win over popular sentiment,” Chen Jieren, a Beijing-based political commentator, told The New York Times in a 2015 interview.
Chen said that a declining economy would put more pressure on the leadership. “If the economy falters, the political power of the Chinese Communist Party will be confronted with more real challenges…and Xi Jinping’s administration will suffer even more criticism.”
Yao was one of the five officials disciplined over the past month in the latest anti-corruption probe of China’s financial sector. Zhang Yujun, the former assistant head of the China security watchdog; and Yang Jiacai, the ex-assistant chairman of China Banking Regulatory Commission, were placed under investigation on July 21 and Aug. 1 respectively.
According to Beijing News, China has ousted over 60 officials and senior managers in the financial sector since President Xi Jinping came to power in 2012.