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China to replace chief of financial markets regulator

Beijing has announced it will replace financial regulator, Xiao Gang. The country is desperately trying to reassure investors after its stock markets plunged multiple times in the last months.

Chinese official news agency Xinhua reported on Saturday that Xiao Gang (pictured above) would be "dismissed" from his post at the China Securities Regulatory Commission and be replaced by Liu Shiyu, chairman of the Agricultural Bank of China.

Liu's appointment was intended to win back investor confidence after the stock market crashed last year. Efforts to smooth dramatic swings in stock prices had brought into question China's capability to manage a financial crisis.

The first major crash occurred in

mid-2015.

The Shanghai index plummeted, wiping off trillions of dollars from the market and shaking up global investments. The crash was triggered after regulators changed the rules on traders using borrowed money, bursting a debt bubble that had propped up Shanghai's benchmark index until that time.

Officials banned major shareholders in publicly traded companies from selling any shares and from ordering state funds to buy. This hurt millions of Chinese investors who had gone into the market after it peaked in June.

Liu Shiyu

Liu Shiyu: Weibo users made fun of the new head, playing with his name and asking whether he'd bring in a "bull market" or leave "dead fish"

Caught between pro-market and pro-control forces

The 57-year-old Xiao was the regulatory commission's chief at the time and was criticized for his handling of the crisis. He also drew flak for introducing a

"circuit breaker"

mechanism in January which halted trading if prices fell by a certain amount. However, the move did little to stabilize stocks and only added to the turmoil in the markets.

Experts believe that Xiao's dismissal may have to do with the Chinese government's dilemma of having to choose between market-oriented reforms and the desire for absolute control. "Xiao Gang is worth no pity but he is destined to be a tragic figure caught between pro-government and pro-market factions and left to take care of a mess from an unhealthy system," financial commentator Shi Shusi told the Associated Press.

Xiao's successor, Liu is a trained engineer with a banking career spanning over 25 years. News of his appointment did not seem to excite the markets much. The Shanghai Composite Index closed at 2,860.02 on Friday, nearly half of the level since last June after which the market crashed.

mg/tj (AFP, AP)

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