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Xiao Gang, the head of China’s embattled stock markets regulator, is a central bank veteran who has played a crucial role in the reform of the country’s banking sector.

Mr Xiao, 57, left the People’s Bank of China to run the Bank of China group for a decade from 2003, a period that included its initial public offering.

Over that period BoC and other state banks, which according to the World Bank in effect control about 95 per cent of China’s bank assets, went from being basket cases with crippling non-performing loan ratios to global powerhouses that spurred China’s growth through the depths of the global financial crisis.

“The whole world benefited [but] there was an irony,” Hank Paulson, the former Goldman Sachs chief executive and US Treasury secretary, told the Financial Times in a recent interview. “The US was supposed to be the [world’s economic and financial] model and then the Chinese banks, which had been defunct 10 years earlier, suddenly were this engine of growth.”

Fred Hu, another former Goldman Sachs banker who worked closely with Mr Xiao on BoC’s IPO, describes the head of the China Securities Regulatory Commission as a “very smart, diligent and cool-headed regulator”.

Despite never having studied abroad, Mr Xiao decided to give his presentations during BoC’s crucial international roadshow in English, staying late in the office to read English-language finance books and absorb BBC and Bloomberg TV broadcasts. “He was very determined and absolutely disciplined,” Mr Hu recalls.

But his move to CSRC in March 2013, as part of the new leadership team headed by President Xi Jinping and Premier Li Keqiang, was not without its shocks, according to another person who has dealt with him.

In addition to suddenly finding himself in a much more politically charged job, the institution he inherited was nowhere near as sophisticated as the one he had just left — a fact that could explain why the CSRC’s response to China’s markets meltdown has not seemed particularly cool-headed.

“Coming from a fairly commercially astute global bank with Chinese characteristics such as Bank of China to CSRC was like going from a very good, sophisticated Beijing restaurant to something out in the sticks somewhere,” says the person, who asked not to be identified.

“Xiao understands markets and is very experienced, but now he has an organisation whose staff don’t have the experience and advantages he’s got and don’t necessarily see things the way he sees things.

“His levers to get things done and make things happen simply aren’t the same,” the person adds. “That would be a real challenge and struggle for anyone. At the same time he’s in a very political position, which is very difficult.”

People who have met Mr Xiao also describe him as quiet, low-key and humble.

“He is unique among Chinese officials in that he has a sense of humility,” one person says. “So many officials think China is on top of the world. But Xiao Gang is eager to learn best practices from abroad.”

Humility and global best practices are two things Mr Xiao will need plenty of as he attempts to steer Communist China safely out of worst markets crisis it has faced since first embracing capital markets reform in the early 1990s.

Copyright The Financial Times Limited 2017. All rights reserved.
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