ôInvestors tend to think state-ownership in China provides stability, but thatÆs not always the case,ö says one industry source.
The events since last Wednesday show how difficult it is to track down who is the final decision maker in the nexus between Chinese politics and business, adds one foreign diplomat in Beijing.
Yang ChaoÆs apparent refusal to go along with the requirements of the China Insurance Regulatory Commission (CIRC) was followed by an announcement on the CIRC website late last week that his deputy would move over instead to take over the role of president of PICC Holding Co.
Property and casualty is growing far more slowly in China than life insurance, where China Life controls almost half the market, making the appointment to PICC effectively a demotion for Yang.
ItÆs very unusual for Chinese executives at large state-owned companies to openly resist personnel allocation instructions, say observers. SOE executives are also civil servants and hold civil servant ranks as well as corporate titles.
Within the civil service hierarchy Yang is clearly subordinate to Wu Dingfu, the chairman of the CIRC, who holds the rank of a minister. Specialists point out that Yang Chao is no lightweight, however. Arriving in July 2005, he oversaw China LifeÆs Shanghai IPO, which raised $3.5 billion, and is considered one of the most experienced industry heads in the country.
China Life is regarded as the most successful insurance company on the Mainland and has been investing heavily in Chinese banks in order to become an integrated financial services player. This has all made Yang more powerful, perhaps dangerously so, say observers.
According to sources quoted in the Hong Kong press, Yang was able to evade the appointment because it had not yet been formally issued by the State Council, which is directed by Premier Wen Jiabao and is ChinaÆs highest state body.
Like the China Securities Regulatory Commission, the CIRC is on the State Council since obtaining the status of a ministry in 2003.
ôItÆs odd because the CIRC must have thought they had top government support following the consultations which took place during the recent National Financial Work Conference,ö says one industry source in Shanghai.
What apparently happened according to other sources is that Yang went to the Party Organisation Department, which oversees the allocation of posts to Party members, and somehow managed to get the order reversed.
In China, state organs like the State Council and the CIRC are invariably subordinate to Party organisations like the Organization Department. The Organisation Department is controlled by the Central Committee, from whom the senior Party leadership is chosen.
The Chinese central government still follows a practice that started thousands of years ago, namely the transfer of officials from province to province and post to post. The aim is to prevent the emergence of relationships between the official and local elites which could threaten the government.
Yang is a government civil servant, so given an order to move, he would normally have little choice. The penalty for not going along with these appointments is usually a stalled career.
The fact that Yang has apparently been able to challenge the established hierarchy and deflect the transfer onto to his deputy makes some analysts wonder who is calling the shots in Beijing.
The political landscape in recent months has been convulsed by rumours and reports that President Hu Jintao and Premier Wen Jiabao are trying to consolidate their power base at the expense of former President Jiang Zemin.
This conflict has had many ramifications, since senior Chinese leaders tend to attack their opponentsÆ subordinates and allies, rather than directly.