Chinese Officials Jailed For Leaking Economic Data

Two former Chinese state officials have been sent to jail by the Supreme People’s Procuratorate, China’s top prosecuting authority, after it was discovered that they had divulged classified economic data to securities brokerages in the highest profile crackdown on selective disclosure linked to insider trading in China.

Two former Chinese state officials have been sent to jail by the Supreme People’s Procuratorate, China’s top prosecuting authority, after it was discovered that they had divulged classified economic data to securities brokerages in the highest profile crackdown on selective disclosure linked to insider trading in China.

Wu Chaoming, a researcher with the People’s Bank of China, and Sun Zhen, a former secretary in China’s national statistics bureau, had allegedly been leaking data related to China’s gross domestic product, inflation, fixed-asset investment, money supply and credit figures to 15 people in the securities industry for nearly two years, said Li Zhongcheng, a state prosecutor in Beijing on Monday. The pair was sentenced to six and five years in prison respectively, based on charges that they had acted in exchange for payments and favours from brokerages that allegedly used the information to predict domestic equity and bond market movements before official data releases. Four securities industry officials were also being held for questioning at press time.

[quote]“The leaking of these economic figures harmed the functioning of the economy, prevented fair market competition and damaged the government’s credibility, thereby causing serious losses to the interests of the nation, society and individuals,” said Li, as quoted by the Financial Times.[/quote]

According to Li, the punishments had been the toughest measures ever taken by the government so far in a campaign designed to stop selective disclosures that undermine China’s stock markets and give an unfair edge to some investors.

“A message is being sent as a deterrent,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp in an interview with Bloomberg. “It’s for anyone who doubts the seriousness with which the issue is being taken.”

Chinese economic data have always been monitored closely by investors all around the world in recent times, as the country continues its surge towards the top of the global economy. Getting access to leaked indicators can allow traders to make profits at the expense of other investors by anticipating how stock and bond prices will react when the information is officially released.

The Chinese government announced the crackdown on leaks of economic data last April, after several news outlets in China published unusually accurate economic data ahead of the government’s official releases. The government is now trying to make earlier releases of data in the hope of preventing statisticians or government officials from profiting from delays in the release of the data.