China cracksdown on market rumours with mass arrests

31 Aug 2015 | Author: | No comments yet »

A Chinese journalist has appeared on state television ‘confessing’ to causing the stock market chaos.

The Chinese language authorities have swooped on 197 individuals in a police crackdown on web rumours concerning the current inventory market panic and the explosions in Tianjin, in response to official state media. The Chinese authorities have taken unprecedented steps to silence criticism and calm markets in the wake of the “Black Monday” global markets crash, it emerged on Monday.China’s main state broadcaster yesterday paraded a financial journalist “confessing” to causing the stock market “great losses,” as authorities seek to rein in a rout on the exchanges.In footage broadcast Monday morning on CCTV, China’s state broadcaster, a weary-looking Wang said he obtained information about China’s securities regulator “through private channels” and then added his “own subjective judgment” to the report. “During a sensitive period, I should not have published a report which had such a huge negative impact,” he said.

Chinese state media announced a new round of confessions by people alleged to have spread online rumors of stock market irregularities Monday, following the arrest of nearly 200 people Saturday and Sunday.A journalist from one of China’s leading financial magazines has been paraded on state television to make an on-air “confession” for supposedly triggering stock market chaos with his reporting. As Beijing makes an attempt to quell a two-month , the official Xinhua company stated a monetary journalist and an official from the securities watchdog have been amongst these detained. Almost 200 people – from journalists to brokers and regulators – have been arrested and even paraded in public in what Beijing said was a campaign against those who spread rumours and undermined faith in the country’s stock market. Wang Xiaolu (王曉璐), a journalist for business magazine Caijing, was held after writing a story in July saying the securities regulator was studying plans for government funds to exit the market.

Wang Xiaolu, a reporter for one of China’s top financial publications, was arrested as China seeks to lay blame on the media for the slump in China’s stock market. Chinese police on Sunday said that an official at the country’s stock-market watchdog, senior executives at brokerage Citic Securities Co. 6030 -5.01 % , and a reporter at the influential financial publication Caijing, confessed to what they called securities violations. The high-profile — and deeply problematic — forced apology came amid a broader crackdown as Chinese authorities struggle to cope with the fallout from the Tianjin blasts and the ongoing stock crisis. Xinhua news reported the latest half-dozen people who face charges are: a journalist, an official with China’s securities regulator and four senior executives of local securities firms, all of whom have been placed under “criminal compulsory measures.” Before any convictions are reached, the massive crackdown has already demonstrated the government’s determination to keep the stock markets under control and restore confidence in the government’s bailout measures, said Oliver Rui, professor of finance and accounting at China Europe International Business School (CEIBS). “The government clearly wants to send a very strong signal to the markets that, if anyone wants to be the enemy of the government, they will be punished eventually,” Rui said. Beijing has launched interventions on a grand scale to try — with little success — to shore up plunging share prices after a debt-fueled bubble burst in June.

The authorities appear to have obtained hard evidence alleging the involvement of four securities executives – Xu Gang, Liu Wei, Fang Qingli and Chen Rongjie of Citic Securities – in insider-trading, as well as bribe-taking and forging official seals by the regulatory official, the professor said. China is trying to boost its stock markets, which have plunged some 40% since mid-June on concerns over the country’s slowing economy and an unexpected devaluation of the yuan currency in mid-August. Britain’s Financial Times last weekend reported that China had decided to stop buying shares in favor of intensifying a crackdown on those “destabilizing” the market, although there was speculation as recently as Thursday last week that government funds were acquiring stock. CCTV, China’s state broadcaster, showed Wang apologising for his ‘crime’, which included fabricating and spreading fake information that had “caused panics and disorder at (the) stock market, seriously undermined the market confidence, and inflicted huge losses on the country and investors”, according to AFP.

Since an epic stock boom went bust this summer, China’s government has struggled to contain the crisis, ordering the press to downplay the story, and periodically singling out scapegoats, from hostile foreign forces, to “malicious” short-sellers, to the U.S. Among a number of measures, authorities have cracked down on the fabrication of trading information, alleged malicious short selling and other strategies seen as hampering a recovery.

The Shanghai Composite has plummeted 37laptop from its peak in June, because the retail buyers who as soon as made up 80laptop of all buying and selling volumes attempt to escape their market positions. China has unleashed an unprecedented package of support measures, including using state-backed entities to buy stocks and cracking down on “malicious” short-selling — when investors sell shares they do not own in anticipation of a fall in their price. The commission denied the report the next day, but it was convinced Wang’s report had triggered investor panic, which led to the stock markets’ 23 percent decline that week. The crash was preceded by a doubling in worth of the inventory index, as buyers took out loans to margin commerce on what the authorities had depicted as a “sluggish bull” market. However, the moves have done little to calm investors and concerns about the health of China’s economy and its ability to manage its finances has infected world markets, sparking one of the worst global sell-offs, on Aug. 24, since the financial crisis.

In the ministry statement, Wang is reported to have said he wrote the story based on hearsay and his own speculations without having had or verified the facts. Professor Rui said he believes the journalist, whom he said showed poor professional judgment in not fact-checking sensitive information, should be cleared of insider-trading. In a statement last Wednesday, a day after Xinhua said Wang was being held, Caijing said it had not been given a reason for his detention, adding it would support his actions within the normal course of reporting. Liu also said on CCTV that he earned several million yuan by helping win approval for a company’s private placement and then participating in the transaction through proxies. “As a civil servant, I deliberately broke the law and disregarded the laws and rules,” he said.

In a July 20 story in Caijing, Wang wrote that the China Securities and Regulatory Commission (CSRC) was weighing whether to stop stabilizing share prices. In another confession reported by the ministry, CSRC official Liu Shufan also admitted wrongdoings, apparently saying he had taken advantage of his position to pull strings for publicly traded companies and accepted bribes worth millions of Chinese yuan.

Those made to broadcast such statements include Gao Yu, a veteran journalist jailed in April for leaking an internal Communist party document, Charles Xue, a venture capitalist and blogger, and Peter Humphrey, a British private investigator who was released from prison in June after nearly two years behind bars. Officers have been stated to be eager to stabilise the market forward of a army vacation on September three and four to rejoice the World Conflict II victory over Japan. Officials yesterday also urged companies themselves to do more to prop up the market, suggesting they offer higher dividends or cash buybacks to shareholders, which could support their share prices. Liu said he had further forged official seals to fake a court ruling on divorce and taxation certificates for his mistress, according to the public security ministry’s statement.

Speaking earlier this month, Eva Pils, an expert in Chinese law from King’s College London, said so-called televised confessions were being used more and more against government critics including human rights activists, journalists and lawyers. “I have heard previously of people being forced to make statements in front of a camera without that later being shown,” Pils said. “But I think that now clearly … they have also tried to get these filmed confessions and to broadcast them. “The authorities want to use the television confession as a means of censorship,” said Qiao Mu, an outspoken journalist professor from Beijing’s Foreign Studies University. Chinese state media often publish confessions of those detained in high-profile cases before they are tried in court, a practice that rule of law advocates say violates the rights of the accused to due process.

Journalists’ rights group Reporters Without Borders last week said it was “absurd” to blame China’s stock market crash on a reporter and called for Wang’s immediate release. “Suggesting that a business journalist was responsible for the spectacular fall in share prices is a denial of reality. David Bandurski from the University of Hong Kong’s China Media Project told the Financial Times: “This isn’t about the factual nature of his reporting, it’s about the political impact. But no similar confessions have been made public. “Many have long expressed concern over whether China has followed due process in arrest and investigations. The moves followed a centrally imposed a cap on local government borrowing, as concerns grow that excessive debts run up in parts of the public sector could be one potential flashpoint for a financial crisis across China.

If the accused is coerced to make the confession, a fair trial is unlikely to be guaranteed,” said Zhang Qianfan, professor of Peking University Law School. A leaked government propaganda directive from July said: “Do not conduct in-depth analysis, and do not speculate on or assess the direction of the market. Regional authorities have been told that debt levels can only increase by 3.8pc this year, limiting their new borrowing to 600bn yuan (£61bn), which would cap the total debt in the sector at 16 trillion yuan.

The firms are run by a pair of brothers— Wang Boming, the editor of Caijing, and Citic Securities Chairman Wang Dongming—who are among the most well known figures in Chinese finance, and the sons of a former vice minister of finance. Officials and state-backed media have sternly warned against rumor-mongering, spreading fear that could cause further panic on the country’s shaky stock markets. On Sunday, the brokerage said several senior managers had been asked to assist with a public security investigation and that the company was actively cooperating with the request. Beijing has come under criticism both at home and abroad for handling of its stock-market policy in recent months and is under pressure to restore confidence.

If not, no arrest should be made,” Zhang said, adding, “Even if rumors regarding the blasts in Tianjin were spread, the government shouldn’t have arrested anyone as long as it could find ways to correct them.” In the case of media reports, Xu Huiming, an associate professor of journalism at Guangzhou University, argued that news organizations should oversee the quality of stories reported by journalists and, thus, should be largely held legally liable unless they have fully met their oversight obligations. “While fulfilling reporting duties, no journalists should be held legally responsible alone even if the reporters are found to be lacking in professionalism. The country’s major stock index, which once boasted year-to-date gains of about 60%, has given up those gains despite government measures to support it. Such rumors “deliberately confuse people, create a panic, mislead the public, seriously disrupt the financial market order and social order,” the Ministry said in its statement. In recent weeks, regulators suspended some trading accounts as part of probes into what they labeled possible “malicious short-selling.” The reports offered few details about the insider-trading allegations against the officials at Citic Securities. The group includes Xu Gang, an executive director, according to Xinhua, who until recently headed the firm’s brokerage business and has long been in charge of its research operation.

Citic Securities in recent days has issued statements saying the firm and some of its executives have been assisting authorities in probes related to insider trading but hasn’t named the employees. “The steadiness and healthy development of the securities market relates not only to the financial safety and economic stability of the State, but is also the base for survival and development of securities companies,” according to Sunday’s statement, which was signed by its chairman, Mr.

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