(Yicai Global) April 10 — As China presses ahead with anti-corruption campaigns, Xiang Junbo, the head of the China Insurance Regulatory Commission (CIRC), has fallen from grace days after making a public appearance, confirming earlier rumors that he was being probed.
Xiang, party chief and chairman of the CIRC, is under investigation for suspected ‘serious violations of discipline,’ the Central Commission for Discipline Inspection (CCDI) and the Ministry of Supervision said yesterday in an online statement.
Xiang delivered a speech at the signing ceremony of a strategic cooperation agreement between the commission and the China Earthquake Administration on April 6.
The cause of Xiang’s downfall is very hard to pinpoint, several interviewed individuals said. However, there have already been signs in the CCDI’s feedback on its inspection of the commission. Per the central government’s arrangement, the 14th central inspection team carried out an inspection of the CIRC’s Communist Party committee from November 2, 2015 to Dec. 31, 2015.
Disciplinary inspection agencies at all levels should focus on their main tasks, ramp up efforts to act as watchdogs and hold offenders accountable, pay great attention to issues (including abuse of authority by leaders and law enforcement), and carefully inspect clues uncovered by inspection teams, the CCDI said.
Xiang said that the CIRC would comprehensively strengthen Party discipline, take corrective measures, press ahead with the anti-corruption campaign, strengthen the education, supervision and management of party cadres, and take action wherever and whenever disciplinary violations or corrupt behavior is uncovered.
Xiang’s ‘personal life is a mess,’ and he is keen to cultivate his own power base, Tencent Finance reported, citing insurance industry insiders, including several CIRC officials.
While Xiang was president of Agricultural Bank of China Ltd. [SHA:601288], he appointed an employee close to him as the head of the bank’s New York branch. The New York bank head was later accused of harassing a female subordinate in the US, Tencent Finance, citing insiders at the bank.
New York state’s financial regulator told the Agricultural Bank of China’s New York branch to pay a USD215 million penalty after the female subordinate blew the whistle on the bank for violating the state’s anti-money laundering law and masking transactions last November, according to media reports.
Xiang was very displeased with the lack of emphasis on the insurance sector in China’s financial system when he was appointed head of the CIRC, Tencent Finance reported. Later, pushed by Xiang, the CIRC loosened restrictions on the investment (including overseas investment) of insurance funds, prompting the insurance sector to grow rapidly.
Xiang’s new policy greatly stimulated the development of the insurance market, but it also set the stage for disordered competition in the sector. Private investors have acquired a substantial amount of low-cost funds thanks to relaxed investment restrictions on insurance funds. Small and medium-sized insurance firms purchased shares in listed companies.
These insurers raked in premiums by selling short- and medium-term products such as universal insurance products and used such premiums to buy shares in listed companies, triggering market debate about the development path of the insurance sector.
During Xiang’s time in office, several insurance firms quietly exceeded the shareholding limit imposed by the CIRC and were involved in fake capital increases.
Online rumors that Xiang was going to be probed for ‘alleged serious disciplinary violations’ spread in early February, but faded after his subsequent public appearance.
Xiang Junbo, born in 1957, holds a doctorate in law from Peking University. He had rich and colorful experiences before serving as the Chinese insurance industry’s top regulator. He fought in the battle, wrote novels, and made television plays. As a banker, he promoted the reform and successful listing of the Agricultural Bank of China Ltd., one of four state-owned banks. During his tenure on the China Insurance Regulatory Commission, he pushed for marketization of the insurance industry and advocated that underlying principles of risk be adhered to.
Xiang’s father was a professor at a university in Chongqing. Xiang’s family influence contributed to his literature fascination during his teenage years. After growing up, he joined the army and went to the frontline in the 1979 Sino-Vietnamese War. He became an instructor and led a group of soldiers to fight behind enemy’s lines. His leg was injured in the battle.
Xiang left the army after the war and took the recently reinstated national college entrance examination. Xiang hoped to become a writer and considered majoring in Chinese language and literature, but after his father insisted, Xiang applied to study finance at Renmin University of China.
Xiang never gave up on his interest in literature. He continued to write during his study and work in Beijing. Xiang was a minor celebrity for writing poems and novels, one of his literature-loving friends said.
Xiang engaged in audit work after graduation. He became busy with work and had to give up writing novels. He chose to produce TV plays to continue writing. Between 1986 and 1987, Xiang produced and wrote the TV play People Will Not Forget, the first domestic TV series about auditors’ work, Global Entrepreneur reported in 2010.
In 1996, Xiang, who was deputy director at the department of administration and guidance of the National Audit Office, was appointed as a special delegate for Beijing, Tianjin, and Hebei. In 1999, tip-offs were received about severe problems in the tax collection and management of the State Administration of Taxation’s Jixian Office in Tianjin. As head of the special delegate office of Beijing, Tianjin, and Hebei, Xiang led a team that stayed in Jixian.
This case covered a wide range of people, and most of the Jixian Office workers got involved. Liang Huaquan, the office’s director at the time, tried to hinder auditors’ work. Liang’s son bribed local gangsters to monitor the team’s work. During the investigation, Xiang received threatening calls, but kept working. After a great deal of evidence was collected, the offenders were punished.
In July 2004, Xiang was appointed as deputy governor of the People’s Bank of China, and concurrently served as director and secretary of the Party committee at PBOC’s Shanghai Head Office. In July 2007, Xiang was directly designated to be Party secretary and governor of ABC, which was performing poorly (by the end of 2006, ABC’s non-performing loan rate had reached 23.43 percent, while the rate in other major commercial banks was only 7.5 percent that year).
In November 2007, Xiang announced internal reform efforts for ABC. The increased audit and risk controls were successful. By the end of 2009, the bank’s non-performing loan rate had dropped to 2.91 percent. In 2010, the bank successfully listed its A+H shares.
The Chinese government appointed Xiang chairman of the CIRC in 2011 based on his excellent performance at ABC. He started off with the governance of misleading sales and difficult auto insurance claims, while relaxing investment channels for insurance funds. These moves led to a 20 percent increase in China’s insurance industry assets against the revenue decline of the life insurance sector that year.
In later years, he broadened channels of capital supplement, launched bonus insurance and universal insurance rate formation mechanism reform, promoted the marketization of insurance industry, and emphasized that the bottom line should not change.
Last year, Xiang spoke about short-term speculation of insurance funds in the capital market and said that insurance institutions would not become ‘barbarians’ that everyone hates. He told insurance companies that one suspension is better than ten warnings, and their business licenses could be revoked if necessary.