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China No. 1 Blogger Arrested Over Stock Investment Messaging Services

Posted by Author on July 14, 2007

By Geoff Dyer in Shanghai, The Financial Times, UK, July 12 2007-

China’s proliferation of unregulated investment advice companies and private “hedge funds” could be under threat after the arrest of a blogger whose online stock tips made his site one of the country’s most popular.

Wang Xiujie, 35, was arrested in the north-eastern city of Changchun after an investigation into his unauthorised investment consulting business, Xinhua news agency reported. No charges have yet been filed.

The popularity of Mr Wang’s blog turned him into one of the phenomena of China’s recent stock market frenzy, in which millions of new investors opened share trading accounts. His blog is one of many unlicensed investment advice and fund management operations to have sprung up over the past 18 months and which have begun to attract the attention of regulators.

Mr Wang set up his stock-tip site in 2005 under the name Daitou Dage 777 – which means “senior big brother” and is the name of a famous kung fu character. The site claims to have received more than 33m hits and local media in May branded it China’s most popular blog, eclipsing that of a popular actress.

Mr Wang, who claims to have been a stockbroker in the 1990s, also used personal messaging services to deliver share tips. Chinese media reports have said he made Rmb10m ($1.3m) for his investment advice.

As part of the explosion in informal investment companies, many investment “studios” have sprung up to offer stock tips for a fee to new investors. Meanwhile, hundreds of private investment funds – referred to as hedge funds in China – have been established to trade clients’ money.

Some of these unlicensed funds are run by professional investors, others by relative newcomers investing their friends’ and families’ savings. By some estimates, private funds now have $50bn under management – roughly a third of the formal sector.

Government officials have been debating for months which of these activities to clamp down on and which to allow.

Neither the China Securities and Regulatory Commission, the stock market regulator, nor Jilin province police would comment on Mr Wang’s arrest.

Lawyers said it was unclear whether his detention was part of a broader regulatory move against informal investment companies.

Song Yixin, a partner at Wenda law firm in Shanghai, said the case “could be viewed as a benchmark in the industry, with the government using it as a warning to other unlicensed activities”.

Copyright The Financial Times Limited 2007

– original report: Chinese blogger held over stock tips

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