Economy – CSRC writes off half of the securities houses

Almost half of the Chinese brokerages are ‘risky’ or ‘very risky’, say official of the China Securities Regulatory Commission (CSRC) in a first effort to clean the industry, writes the Financial Times. The others need ‘monitoring’ or ‘close monitoring’.
The sweeping statement bears the hallmark of its new chairman, Huang Qifan, who has a reputation of calling things by their name.
Twelve years after the stock markets opened in China, the industry is still a huge mess. The value for the shares have been falling for over three years, bringing the overinflated market back to reality, but marred with fraud, manipulation and lack of interest by sincere investors.
The heavy losses carried by securities companies for a number of years, resulting from their practice of offering investors guaranteed returns, have been exacerbated by a sharp downturn in the market since April, writes the Financial Times. But the problems are much older.
The steep fall of the shares started early this century as policy makers suggested that the majority of non-tradable share, owned by state-owned companies should be sold to fill the empty coffers of the social security and pension fund. Such a tripling of the market would deflate the value, and many investors left the markets. That deflation has taken place anyway, inflating also the chances of using the remaining value for the lacking social funds.