China's Warning to Market Economists: Toe the Party's Line

Senior economists at brokerages, fund firms signed agreement.

China's Warning to Market Economists: Toe the Party's Line
Members of the Japan Self Defense Forces (JSDF) marching band perform during a review at Japan Ground Self-Defense Force (JGSDF) Camp Asaka in Asaka, Japan. (Photographer: Keith Bedford/Bloomberg) 

(Bloomberg) -- China’s Communist Party, beset by slowing growth, a trade war and a weak stock market, is taking steps to ensure that those who predict the economy’s direction for a living take the state’s interests into account.

In early November, Liu Shiyu, the head of the securities regulator, met in Beijing with representatives from more than 30 brokerages and fund firms. His message, according to people with knowledge of the matter: Economists should strive for higher-level thinking and take into account the interests of the Party and the country when publishing research, so as not to mislead market participants. Liu stopped short of urging economists to censor their research, the people said.

China's Warning to Market Economists: Toe the Party's Line

Then, in an announcement late Friday, the Securities Association of China said senior economists from brokerages and fund companies had signed a “Chief Economist Self-Discipline Proposal” -- essentially a more formalized version of Liu’s admonition. The association didn’t name the companies.

The actions by the China Securities Regulatory Commission suggest that even as the country opens its securities markets more to foreign players, Beijing remains keen to manage perceptions of its economy. Leaders’ tolerance for bearish research may be tested further in coming months as mounting trade tensions with the U.S. start to bite.

The CSRC didn’t reply to a fax seeking comment.

China's Warning to Market Economists: Toe the Party's Line

Officials have in recent months talked up China’s economy and the tools available to them to stem losses in the world’s worst performing major stock market. Last month senior government officials marshaled a rare show of coordinated verbal support, outlining policies under consideration, encouraging state-backed funds to help and downplaying the declines.

Regulators’ actions amid this year’s slump have so far been more measured than during the 2015 stock market meltdown, when they cracked down on what they called “vicious” short selling and questioned pessimistic outlooks for Chinese equities. That crash was sparked by the unwinding of massive leveraged stock bets by retail investors -- a danger the CSRC was seen as failing to respond to in time.

Lu Zhengwei, chief economist of Huafu Securities Co., said he’s among those who signed the agreement. The government hasn’t told him specifically what he can and can’t say, and signing the document hasn’t changed how he does his work, he said.

“To me, signing the agreement helps restore standards and is a step toward the healthy development of the industry,” Lu said in an interview. “And you can still say what you want to say, but with more careful and neutral wording.”

Officials started paying more attention to the work of economists following two speeches, in May and July, by Essence Securities chief economist Gao Shanwan, according to two of the people.

In a copy of one of the speeches that circulated online, Gao said Sino-U.S relations were at their most difficult moment since 1972, and he compared how the government was trying to reduce debt levels with performing an operation without anesthetic. Gao, who couldn’t immediately be reached for comment, later said the contents were taken out of context and distorted.

The CSRC initially deliberated whether to curb such research, though it took no action, according to the people. As the stock market decline continued, the idea of more closely overseeing analysts’ output made headway, leading to Liu’s meeting with the economists, they said.

At the meeting, Liu asked if Gao was present, and the economist responded, one of the people said. In acknowledgment, Liu smiled and nodded, the person said.

--With assistance from Lucille Liu and Heng Xie.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at;Charlie Zhu in Shanghai at;Jun Luo in Shanghai at

To contact the editors responsible for this story: Sam Mamudi at, ;Jessica Zhou at, Philip Lagerkranser

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