The Shanghai Daily usually isn’t one of China’s most rebellious newspapers, but a one piece feature in Tuesday’s edition clearly does away with the newspaper’s lame image. An article titled Investor cites CSRC for lax controls was nothing but a harsh attack on Shang Fulin, the president of the Chinese Securities Regulatory Commission.

An open letter from an anonymous “ordinary stock investor”, originally posted on online community Tianya.com, was printed in its entirety in Tuesday’s edition of the Shanghai Daily, an English-language state newspaper. The letter was addressed to Shang and blames him and his office for lax control of Chinese stock markets, especially concerning the wave of new listings on both markets.

The letter cites the sharp declines in recent weeks on Chinese stock exchanges. Although markets all over the world tumbled, the declines in China, according to the anonymous writer, were partly also due to serious inadequate supervision by the CSRC.

This is how the Shanghai Daily puts it:

“New listings have gotten out of control,” the letter said. “The number of listings falling below the initial public offer price has been atrocious, which has made IPOs simply a cheap, personal blood bank for those firms and their bosses. Ordinary shareholders like me are bleeding.”  

As if giving so much attention to an open letter by an anonymous Chinese netizen wasn’t enough, the Shanghai Daily decided to accompany the letter with a full page story in which the paper adds a little bit more spice and even launches an attack on Shang’s position of its own with paragraphs like these:

Days passed, and there was no direct response from the CSRC. However, the Securities Times, one of China’s four largest business dailies and the paper designated by the regulator to handle public notices of company filings, ran an editorial in an apparent effort to squelch anger and ease the uproar created by the letter.

“The Chinese stock market is still at a young age,” the editorial said. “Investors should be patient because a mature market requires time to develop. We need to have faith in Shang (Fulin) and the market itself.”

Faith? It would take a leap of faith to believe such a feeble excuse for the CSRC’s performance.

I’ve not read anything like this in any other Chinese media, so it really makes me wonder how to assess this article, but clearly someone within the Shanghai Daily, maybe even supported by some powerful (local) officials wants Shang removed from his position.

Another paragraph in the Shanghai Daily:

More than 70 percent of 40,000 respondents in a survey by Dazhong Securities News said they had lost money in stock markets last year, when the Shanghai index tumbled almost 16 percent. Up to 80 percent of those who reported losses said their investments dived between 20 percent and 40 percent. Are these the kind of figures that are supposed to inspire faith in the CSRC and its president?

The paper then moves on to write about Shang’s legacy, especially his vision that bigger is better where markets are concerned:

During his tenure, he oversaw the launch of the small- and-medium-sized enterprise board (SME) and the Nasdaq-style ChiNext for technology start-ups.

His idea was to give companies greater access to capital. But as the Chinese saying goes: A child is better unborn than untaught. Maybe it would be better to have bourses unborn than unregulated.

Again, I’ve rarely come across such unvarnished state media-criticism on one of China’s most powerful officials in the financial sector.

The timing of the publication is quite interesting since China is preparing for the launch of an international board, where foreign companies can list.

The preparation for this new board are in full swing, but according to lawyers I spoke to, details about the listing requirements and the exact powers of the CSRC concerning this new board are still being worked out.

I guess it is worthwhile keeping a close eye on Shang Fulin the coming months ….