After two days of meetings in London, the Group of 20 finance ministers and central bankers agreed the broad outlines of a tough new regulatory framework for financial institutions that stops short of setting caps on bankers’ bonuses but leaves open the possibility that regulators will have a say on pay.
In broad terms, the group agreed three major points about banking regulation: banks must raise much more capital once the financial crisis has passed, complex financial institutions should develop “living wills” to plan for their unwinding should that ever become necessary and banks should be required to retain some portion of loans they repackage and sell as asset-backed securities.
EDITOR’S CHOICE
G20 finance ministers’ statement - Sep-05
G20 statement on strengthening financial system - Sep-05
G20 rift opens on banking reform - Sep-05
G20 Video Debate: Does the west know best?
- Sep-04
Editorial: Timing is the soul of economic policy - Sep-04
In depth: G20 summit - Apr-03
The group also made an implicit plea for banks to limit payouts to shareholders, saying: “We call on banks to retain a greater proportion of current profits to build capital, where needed, to support lending.”
The group also agreed that it is far too soon to begin unwinding the unprecedented amounts of fiscal, monetary and financial sector support which have been poured into the economies of member states, with US Treasury Secretary Tim Geithner saying that unemployment remains “unacceptably high”. The US unemployment rate reached 9.5 per cent last month according to figures released on Friday.
In a press briefing following a full day of meetings, UK Chancellor Alistair Darling, said the group believes that although “decisive and concerted policy action has helped to arrest the decline and boost global demand,” stimulatory policies will need to remain in place “until recovery is secured.”
But it is not too soon to discuss an orderly unwinding of that stimulus, Mr Darling added, saying that the G20 has agreed that what is needed is “a transparent and credible process for withdrawal of the stimulus.”
In addition to the measures announced, Dominique Strauss-Kahn, the International Monetary Fund Managing Director, said that the IMF had raised $500bn in funding, which was promised at the April G20 summit.
“We’ll be just over the $500bn figure,” Mr Strauss-Kahn said. “We have experienced an unprecedented level of cooperation among countries.”
Members appear to have passed some of the thorniest issues surrounding reform of bank regulation and the matter of payouts to bankers into the arms of the Financial Stability Board, an international group of central bankers and regulators.
The group stopped short of setting caps on bankers’ bonuses as some nations – France particularly – had pressed it to do. Instead, it has asked the FSB to help it draw up guidelines that incorporated the principles of transparency and improved corporate governance of banks including greater independence of remuneration committees.
It also agreed that compensation packages must have an element in which rewards are deferred for some time, clawback of payments is possible in cases where early profits lead to later losses and there are limits on guaranteed bonuses.
Mr Darling said that banking regulators may have a role in limiting bonuses. “We agreed to look at the total amount set aside for the bonus pool,” he said. “A regulator could look at that in light of the strength of the institution,” he added, implying that banks with highly risky strategies or those facing large losses could be forced to scale back total bonus payments.
The most important thing, Mr Darling said, was that any agreement on bonus structure must be embraced by all member states. “Quite clearly, you don’t want to get into a a situation where banks can play one country against another,” he said, adding that banks that do not adhere to the rules “will face sanctions.”
“You have to balance the bonus payment against the health of the firm,” he said. He added that there was unanimity among finance ministers and central bankers that “every single banker has to realise that they would not be here except for actions that were underwritten by taxpayers.”
On the much larger and more significant issue of bank reform, both Mr Darling and Mr Geithner sought to underscore a determination not to return to the pre-crisis world.
“We cannot put the world in the position where things might go back to where they were at the start of the boom,” Mr Geithner said at a press briefing. And although some may argue that tough capital rules mean that banks will not be as profitable as they had been in the past, Mr Geithner said there are good questions about just how profitable these really were once risks were accounted for.
“They created a mis-leading impression of profits,” he said. “People are worried that things are going to go back to where they were. That’s just not going to happen.”
Saturday, September 5, 2009
Wall Street Pursues Profit in Bundles of Life Insurance
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.
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Michael Appleton for The New York Times
Rating the New Products: Jan Buckler and Kathleen Tillwitz of DBRS, which is reviewing proposals for life- insurance securitizations.
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Betting on Your Life
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The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
The idea is still in the planning stages. But already “our phones have been ringing off the hook with inquiries,” says Kathleen Tillwitz, a senior vice president at DBRS, which gives risk ratings to investments and is reviewing nine proposals for life-insurance securitizations from private investors and financial firms, including Credit Suisse.
“We’re hoping to get a herd stampeding after the first offering,” said one investment banker not authorized to speak to the news media.
In the aftermath of the financial meltdown, exotic investments dreamed up by Wall Street got much of the blame. It was not just subprime mortgage securities but an array of products — credit-default swaps, structured investment vehicles, collateralized debt obligations — that proved far riskier than anticipated.
The debacle gave financial wizardry a bad name generally, but not on Wall Street. Even as Washington debates increased financial regulation, bankers are scurrying to concoct new products.
In addition to securitizing life settlements, for example, some banks are repackaging their money-losing securities into higher-rated ones, called re-remics (re-securitization of real estate mortgage investment conduits). Morgan Stanley says at least $30 billion in residential re-remics have been done this year.
Financial innovation can be good, of course, by lowering the cost of borrowing for everyone, giving consumers more investment choices and, more broadly, by helping the economy to grow. And the proponents of securitizing life settlements say it would benefit people who want to cash out their policies while they are alive.
But some are dismayed by Wall Street’s quick return to its old ways, chasing profits with complicated new products.
“It’s bittersweet,” said James D. Cox, a professor of corporate and securities law at Duke University. “The sweet part is there are investors interested in exotic products created by underwriters who make large fees and rating agencies who then get paid to confer ratings. The bitter part is it’s a return to the good old days.”
Indeed, what is good for Wall Street could be bad for the insurance industry, and perhaps for customers, too. That is because policyholders often let their life insurance lapse before they die, for a variety of reasons — their children grow up and no longer need the financial protection, or the premiums become too expensive. When that happens, the insurer does not have to make a payout.
But if a policy is purchased and packaged into a security, investors will keep paying the premiums that might have been abandoned; as a result, more policies will stay in force, ensuring more payouts over time and less money for the insurance companies.
“When they set their premiums they were basing them on assumptions that were wrong,” said Neil A. Doherty, a professor at Wharton who has studied life settlements.
Indeed, Mr. Doherty says that in reaction to widespread securitization, insurers most likely would have to raise the premiums on new life policies.
Critics of life settlements believe “this defeats the idea of what life insurance is supposed to be,” said Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute, a trade group. “It’s not an investment product, a gambling product.”
After Mortgages
Undeterred, Wall Street is racing ahead for a simple reason: With $26 trillion of life insurance policies in force in the United States, the market could be huge.
Not all policyholders would be interested in selling their policies, of course. And investors are not interested in healthy people’s policies because they would have to pay those premiums for too long, reducing profits on the investment.
But even if a small fraction of policy holders do sell them, some in the industry predict the market could reach $500 billion. That would help Wall Street offset the loss of revenue from the collapse of the United States residential mortgage securities market, to $169 billion so far this year from a peak of $941 billion in 2005, according to Dealogic, a firm that tracks financial data.
Skip to next paragraph
Enlarge This Image
Michael Appleton for The New York Times
Rating the New Products: Jan Buckler and Kathleen Tillwitz of DBRS, which is reviewing proposals for life- insurance securitizations.
Back to Business
Betting on Your Life
This series examines the battles taking place to reshape the financial industry.
Previous Articles in the Series »
Multimedia
Looking to Profit From Life InsuranceGraphic
Looking to Profit From Life Insurance
Readers' Comments
Share your thoughts.
* Post a Comment »
The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
The idea is still in the planning stages. But already “our phones have been ringing off the hook with inquiries,” says Kathleen Tillwitz, a senior vice president at DBRS, which gives risk ratings to investments and is reviewing nine proposals for life-insurance securitizations from private investors and financial firms, including Credit Suisse.
“We’re hoping to get a herd stampeding after the first offering,” said one investment banker not authorized to speak to the news media.
In the aftermath of the financial meltdown, exotic investments dreamed up by Wall Street got much of the blame. It was not just subprime mortgage securities but an array of products — credit-default swaps, structured investment vehicles, collateralized debt obligations — that proved far riskier than anticipated.
The debacle gave financial wizardry a bad name generally, but not on Wall Street. Even as Washington debates increased financial regulation, bankers are scurrying to concoct new products.
In addition to securitizing life settlements, for example, some banks are repackaging their money-losing securities into higher-rated ones, called re-remics (re-securitization of real estate mortgage investment conduits). Morgan Stanley says at least $30 billion in residential re-remics have been done this year.
Financial innovation can be good, of course, by lowering the cost of borrowing for everyone, giving consumers more investment choices and, more broadly, by helping the economy to grow. And the proponents of securitizing life settlements say it would benefit people who want to cash out their policies while they are alive.
But some are dismayed by Wall Street’s quick return to its old ways, chasing profits with complicated new products.
“It’s bittersweet,” said James D. Cox, a professor of corporate and securities law at Duke University. “The sweet part is there are investors interested in exotic products created by underwriters who make large fees and rating agencies who then get paid to confer ratings. The bitter part is it’s a return to the good old days.”
Indeed, what is good for Wall Street could be bad for the insurance industry, and perhaps for customers, too. That is because policyholders often let their life insurance lapse before they die, for a variety of reasons — their children grow up and no longer need the financial protection, or the premiums become too expensive. When that happens, the insurer does not have to make a payout.
But if a policy is purchased and packaged into a security, investors will keep paying the premiums that might have been abandoned; as a result, more policies will stay in force, ensuring more payouts over time and less money for the insurance companies.
“When they set their premiums they were basing them on assumptions that were wrong,” said Neil A. Doherty, a professor at Wharton who has studied life settlements.
Indeed, Mr. Doherty says that in reaction to widespread securitization, insurers most likely would have to raise the premiums on new life policies.
Critics of life settlements believe “this defeats the idea of what life insurance is supposed to be,” said Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute, a trade group. “It’s not an investment product, a gambling product.”
After Mortgages
Undeterred, Wall Street is racing ahead for a simple reason: With $26 trillion of life insurance policies in force in the United States, the market could be huge.
Not all policyholders would be interested in selling their policies, of course. And investors are not interested in healthy people’s policies because they would have to pay those premiums for too long, reducing profits on the investment.
But even if a small fraction of policy holders do sell them, some in the industry predict the market could reach $500 billion. That would help Wall Street offset the loss of revenue from the collapse of the United States residential mortgage securities market, to $169 billion so far this year from a peak of $941 billion in 2005, according to Dealogic, a firm that tracks financial data.
G-20 Ministers Back Stimulus, but Pay Limits Are Elusive
LONDON — Finance ministers of the largest industrial countries vowed on Saturday to keep their multitrillion-dollar stimulus efforts in place, but at a meeting here they failed to agree on any firm limits on bankers’ bonuses, a sign of the deep rifts that remain between American and European leaders.
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Pool photo by Simon Dawson
Finance ministers from the Group of 20 nations met in London on Saturday before a summit meeting this month in Pittsburgh.
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Times Topics: Group of 20
The ministers did agree on a blueprint to raise capital requirements at banks to strengthen the world financial system as the recovery takes hold, a major goal of the United States Treasury secretary, Timothy F. Geithner.
Regarding the higher capital requirements, Mr. Geithner said here that his goal was to reach a final agreement on the new standards by the end of next year.
Mr. Geithner added that while concerted action by central banks and governments had “pulled the global economy back from the edge of abyss,” he added that “conditions for a sustained recovery led by private demand are not yet established.”
The ministers agreed on broad principles to reform bankers’ compensation, including an emphasis on rewarding long-term performance, but asked the Financial Stability Board, an international regulatory body, to come up with specific recommendations on bonuses to be presented at a Group of 20 summit meeting to be held in three weeks in Pittsburgh.
In its final communiqué, the G-20 ministers called for “global standards on pay structure,” emphasizing long-term results in awarding pay and urging provisions to take back bonuses if bank profits tumble, known as “clawbacks.” They also suggested limits on guaranteed bonuses.
That was a setback for French and German ministers who had been pushing hard in recent weeks for a more concrete plan to address bonuses, amid rising public anger that just months after they were rescued, major financial institutions are returning to old habits and rewarding executives who take excessive risks.
In Europe, where Germany’s chancellor, Angela Merkel, is running for re-election later this month and the British prime minister, Gordon Brown, faces a general election within the next year, bonuses have been met with controversy.
While bonuses are still a contentious issue in the United States, they have been overtaken recently by the debate over health care reform. Negotiations between the American and European delegations over bonuses grew tense Friday night, according to one official who insisted on anonymity because he was not authorized to speak publicly.
He said the European negotiators felt their American counterparts were seeking to sidestep the bonus issue out of fear the White House could be accused of yielding too easily to European pressure, which might endanger progress on health care reform.
Mr. Geithner has been cool to proposals to restrict bonuses, instead emphasizing the need for higher capital requirements at banks and other broader regulatory measures to prevent a repeat of the financial crisis that began almost exactly a year ago with the collapse of Lehman Brothers.
The French finance minister, Christine Lagarde, tried to put the best face on the limited recommendations. “We argued very hard and very convincingly,” she said. “We’ve agreed that the F.S.B. will come back to Pittsburgh with proposals on remuneration.”
She added: “Bonuses are quite outrageous, and we can’t let that continue.”
The tone of the meeting, a precursor to the meeting in Pittsburgh, suggested that although the worst of the global financial panic had passed, politicians and economists remained deeply concerned about still-rising unemployment.
“The classic errors of economic policy during crises are that governments tend to act too late with insufficient force and then put the brakes on too early,” Mr. Geithner said. “We are not going to repeat those mistakes.”
With economic growth resuming in France and Germany last quarter, there has been increasing talk in Europe about a so-called exit strategy — how to unwind the trillions of dollars in central bank lending and increased government spending without sending the global economy back into free fall.
But even German officials, who have been wary of the risk of inflation posed by widening deficits on both sides of the Atlantic, agreed in London that it was still too early to withdraw government support of the financial system.
“Everyone is convinced that we have to support the financial markets by all measures and stimulus packages which are necessary,” said the German finance minister, Peer Steinbrück.
Other top financial officials echoed the view that it was still too early to celebrate about signs of growth.
“I was afraid a few weeks ago when we began to have good figures that it might induce an attitude that the crisis is over,” said Dominique Strauss-Kahn, the managing director of the International Monetary Fund. “It’s not the time to implement exit strategies.”
Britain’s chancellor of the Exchequer, Alistair Darling, said members of the G-20 “have to make sure that we finish the job we started.” He added: “There is still a lot of risk, a lot of uncertainty and a lot of obstacles to negotiate.”
Skip to next paragraph
Enlarge This Image
Pool photo by Simon Dawson
Finance ministers from the Group of 20 nations met in London on Saturday before a summit meeting this month in Pittsburgh.
Related
Times Topics: Group of 20
The ministers did agree on a blueprint to raise capital requirements at banks to strengthen the world financial system as the recovery takes hold, a major goal of the United States Treasury secretary, Timothy F. Geithner.
Regarding the higher capital requirements, Mr. Geithner said here that his goal was to reach a final agreement on the new standards by the end of next year.
Mr. Geithner added that while concerted action by central banks and governments had “pulled the global economy back from the edge of abyss,” he added that “conditions for a sustained recovery led by private demand are not yet established.”
The ministers agreed on broad principles to reform bankers’ compensation, including an emphasis on rewarding long-term performance, but asked the Financial Stability Board, an international regulatory body, to come up with specific recommendations on bonuses to be presented at a Group of 20 summit meeting to be held in three weeks in Pittsburgh.
In its final communiqué, the G-20 ministers called for “global standards on pay structure,” emphasizing long-term results in awarding pay and urging provisions to take back bonuses if bank profits tumble, known as “clawbacks.” They also suggested limits on guaranteed bonuses.
That was a setback for French and German ministers who had been pushing hard in recent weeks for a more concrete plan to address bonuses, amid rising public anger that just months after they were rescued, major financial institutions are returning to old habits and rewarding executives who take excessive risks.
In Europe, where Germany’s chancellor, Angela Merkel, is running for re-election later this month and the British prime minister, Gordon Brown, faces a general election within the next year, bonuses have been met with controversy.
While bonuses are still a contentious issue in the United States, they have been overtaken recently by the debate over health care reform. Negotiations between the American and European delegations over bonuses grew tense Friday night, according to one official who insisted on anonymity because he was not authorized to speak publicly.
He said the European negotiators felt their American counterparts were seeking to sidestep the bonus issue out of fear the White House could be accused of yielding too easily to European pressure, which might endanger progress on health care reform.
Mr. Geithner has been cool to proposals to restrict bonuses, instead emphasizing the need for higher capital requirements at banks and other broader regulatory measures to prevent a repeat of the financial crisis that began almost exactly a year ago with the collapse of Lehman Brothers.
The French finance minister, Christine Lagarde, tried to put the best face on the limited recommendations. “We argued very hard and very convincingly,” she said. “We’ve agreed that the F.S.B. will come back to Pittsburgh with proposals on remuneration.”
She added: “Bonuses are quite outrageous, and we can’t let that continue.”
The tone of the meeting, a precursor to the meeting in Pittsburgh, suggested that although the worst of the global financial panic had passed, politicians and economists remained deeply concerned about still-rising unemployment.
“The classic errors of economic policy during crises are that governments tend to act too late with insufficient force and then put the brakes on too early,” Mr. Geithner said. “We are not going to repeat those mistakes.”
With economic growth resuming in France and Germany last quarter, there has been increasing talk in Europe about a so-called exit strategy — how to unwind the trillions of dollars in central bank lending and increased government spending without sending the global economy back into free fall.
But even German officials, who have been wary of the risk of inflation posed by widening deficits on both sides of the Atlantic, agreed in London that it was still too early to withdraw government support of the financial system.
“Everyone is convinced that we have to support the financial markets by all measures and stimulus packages which are necessary,” said the German finance minister, Peer Steinbrück.
Other top financial officials echoed the view that it was still too early to celebrate about signs of growth.
“I was afraid a few weeks ago when we began to have good figures that it might induce an attitude that the crisis is over,” said Dominique Strauss-Kahn, the managing director of the International Monetary Fund. “It’s not the time to implement exit strategies.”
Britain’s chancellor of the Exchequer, Alistair Darling, said members of the G-20 “have to make sure that we finish the job we started.” He added: “There is still a lot of risk, a lot of uncertainty and a lot of obstacles to negotiate.”
China sacks Xinjiang party boss
URUMQI, China - China sacked the top official of the strife-torn city of Urumqi as well as the regional police chief on Saturday, as the city crept back to uneasy calm after days of sometimes deadly protests that inflamed ethnic enmity.
The official Xinhua news agency did not explain why the city’s Communist Party Secretary, Li Zhi, was replaced by Zhu Hailun, head of Xinjiang region’s law-and-order committee.
EDITOR’S CHOICE
China seeks to quell unrest in Urumqi - Sep-04
Xinjiang ethnic groups united in hostility - Sep-04
Xinjiang protests break out over party chief - Sep-03
In depth: China’s Uighurs - Sep-03
But Li presided over the city during deadly unrest on July 5 when a protest by Muslim Uighurs, who call Xinjiang their homeland, gave way to deadly rioting that left 197 people dead, most of them members of China’s majority Han ethnic group.
Urumqi has been put under heavy security again this week after three days of fresh unrest, as thousands of Han Chinese residents protested over a rash of reported syringe stabbings they blamed on Uighurs, a distinct minority in the city.
Officials said five people died in protests on Thursday. Xinjiang police chief Liu Yaohua was replaced by Zhu Changjie, party chief of Xinjiang’s Aksu Prefecture.
The sackings could feed more speculation about the future of Wang Lequan, the regional Communist Party boss, who has barely appeared in state media in the past couple of days, after he pleaded from a balcony with Han crowds demanding his ouster.
The dismissals came as Urumqi returned to something like calm, topping a week that has seen crowds of Han Chinese protesters turn against the region’s top Communist officials.
Troops used tear gas to break up a group of people, apparently Han Chinese, gathered near city government offices in Urumqi on Saturday, footage from Cable TV of Hong Kong showed.
“They should replace Wang Lequan. People already said we do not want Wang Lequan. Of course this will not be totally fair, but we wish to have a secure environment,” said one resident, who did not wish to give his name.
“We must officially and severely deal with those who have broken the law. The law should deal with this fairly and swiftly.”
Shops, buses and roads began to come back to life on Saturday, watched over by thousands of police and anti-riot troops. Many were posted at entrances to Uighur neighbourhoods.
Talk of fresh syringe attacks persisted on Saturday. Dozens of Han Chinese near the city centre complained that troops took away a Uighur man they accused of stabbing a child. The spasm of unrest has alarmed the central government, coming less than a month before China marks the 60th anniversary of the founding of the People’s Republic on Oct. 1.
Government warnings of stabbings fed an upsurge of fear and anger among the city’s Han Chinese, culminating in the protests.
The government has attributed the attacks, which were previously described as syringe attacks, to separatists, an accusation that appears unsupported by the light charges.
Three Uighur men and one woman were indicted on charges of “endangering public security” connected with the spate of stabbings, city procurator Udgar Abdulrahman said on Saturday.
Over 500 people have registered as having been stabbed, but just over 100 had detectable pricks, redness, or other physical signs, military doctors told reporters. Of those, 22 were being monitored for signs of infection.
Some of pricks could have come from common needles, the doctors said, adding it was unlikely any of the victims had contracted AIDS, hepatitis, or sexually transmitted diseases.
Abdulrahman described the four as fruit sellers, petty thieves or heroin users. He said they were organized, but did not say by who.
“Saboteurs may be planning more unnerving disruptions to create a sense of insecurity as the nation counts down to its major celebration of the 60th anniversary,” said an editorial in the China Daily, the country’s flagship English-language paper.
At least 197 people died in Urumqi when a protest by Uighurs on July 5 gave way to riots and killings that China called a separatist attack. Most of the dead were Han Chinese, and in the recent protests Han residents have voiced anger that Uighurs accused of rioting have yet to be tried.
The minister of public security, Meng Jianzhu, flew to Urumqi to oversee security.
“The needle-stabbing attacks of recent days were a continuation of the July 5 incident” Meng said, according to the official People’s Daily on Saturday. “Their goal is to wreck ethnic unity and create splits in the motherland.”
Xinjiang’s population of 21m is divided mainly between Uighurs, long the region’s majority, and Han Chinese, many of whom arrived in recent decades, drawing Uighur complaints that Han get the best jobs. Most Urumqi residents are Han Chinese.
“Now, no matter whether you are Han Chinese or of an ethnic minority, you feel different from the past,” said Wupuer, a 46-year-old Uighur resident. “There is a sense of insecurity.”
Uighur residents spoke of harassment by police and civilians.
“Look at how the security forces are allowing the Chinese to protest. If a Uighur does anything at all, any Chinese citizen can call the police,” said a Uighur man, Ali, adding that he had been detained for 48 hours in late July.
But security forces across Urumqi must now also keep a close watch on Han Chinese residents, long seen as reliably loyal, but now bitter at the lack of security and information.
“Things are returning to normal. People feel they’ve made their voices heard,” said Cao Yang, a Han Chinese student.
“But it’s a problem if you have to take to the streets in such numbers to force any response from the government.”
The official Xinhua news agency did not explain why the city’s Communist Party Secretary, Li Zhi, was replaced by Zhu Hailun, head of Xinjiang region’s law-and-order committee.
EDITOR’S CHOICE
China seeks to quell unrest in Urumqi - Sep-04
Xinjiang ethnic groups united in hostility - Sep-04
Xinjiang protests break out over party chief - Sep-03
In depth: China’s Uighurs - Sep-03
But Li presided over the city during deadly unrest on July 5 when a protest by Muslim Uighurs, who call Xinjiang their homeland, gave way to deadly rioting that left 197 people dead, most of them members of China’s majority Han ethnic group.
Urumqi has been put under heavy security again this week after three days of fresh unrest, as thousands of Han Chinese residents protested over a rash of reported syringe stabbings they blamed on Uighurs, a distinct minority in the city.
Officials said five people died in protests on Thursday. Xinjiang police chief Liu Yaohua was replaced by Zhu Changjie, party chief of Xinjiang’s Aksu Prefecture.
The sackings could feed more speculation about the future of Wang Lequan, the regional Communist Party boss, who has barely appeared in state media in the past couple of days, after he pleaded from a balcony with Han crowds demanding his ouster.
The dismissals came as Urumqi returned to something like calm, topping a week that has seen crowds of Han Chinese protesters turn against the region’s top Communist officials.
Troops used tear gas to break up a group of people, apparently Han Chinese, gathered near city government offices in Urumqi on Saturday, footage from Cable TV of Hong Kong showed.
“They should replace Wang Lequan. People already said we do not want Wang Lequan. Of course this will not be totally fair, but we wish to have a secure environment,” said one resident, who did not wish to give his name.
“We must officially and severely deal with those who have broken the law. The law should deal with this fairly and swiftly.”
Shops, buses and roads began to come back to life on Saturday, watched over by thousands of police and anti-riot troops. Many were posted at entrances to Uighur neighbourhoods.
Talk of fresh syringe attacks persisted on Saturday. Dozens of Han Chinese near the city centre complained that troops took away a Uighur man they accused of stabbing a child. The spasm of unrest has alarmed the central government, coming less than a month before China marks the 60th anniversary of the founding of the People’s Republic on Oct. 1.
Government warnings of stabbings fed an upsurge of fear and anger among the city’s Han Chinese, culminating in the protests.
The government has attributed the attacks, which were previously described as syringe attacks, to separatists, an accusation that appears unsupported by the light charges.
Three Uighur men and one woman were indicted on charges of “endangering public security” connected with the spate of stabbings, city procurator Udgar Abdulrahman said on Saturday.
Over 500 people have registered as having been stabbed, but just over 100 had detectable pricks, redness, or other physical signs, military doctors told reporters. Of those, 22 were being monitored for signs of infection.
Some of pricks could have come from common needles, the doctors said, adding it was unlikely any of the victims had contracted AIDS, hepatitis, or sexually transmitted diseases.
Abdulrahman described the four as fruit sellers, petty thieves or heroin users. He said they were organized, but did not say by who.
“Saboteurs may be planning more unnerving disruptions to create a sense of insecurity as the nation counts down to its major celebration of the 60th anniversary,” said an editorial in the China Daily, the country’s flagship English-language paper.
At least 197 people died in Urumqi when a protest by Uighurs on July 5 gave way to riots and killings that China called a separatist attack. Most of the dead were Han Chinese, and in the recent protests Han residents have voiced anger that Uighurs accused of rioting have yet to be tried.
The minister of public security, Meng Jianzhu, flew to Urumqi to oversee security.
“The needle-stabbing attacks of recent days were a continuation of the July 5 incident” Meng said, according to the official People’s Daily on Saturday. “Their goal is to wreck ethnic unity and create splits in the motherland.”
Xinjiang’s population of 21m is divided mainly between Uighurs, long the region’s majority, and Han Chinese, many of whom arrived in recent decades, drawing Uighur complaints that Han get the best jobs. Most Urumqi residents are Han Chinese.
“Now, no matter whether you are Han Chinese or of an ethnic minority, you feel different from the past,” said Wupuer, a 46-year-old Uighur resident. “There is a sense of insecurity.”
Uighur residents spoke of harassment by police and civilians.
“Look at how the security forces are allowing the Chinese to protest. If a Uighur does anything at all, any Chinese citizen can call the police,” said a Uighur man, Ali, adding that he had been detained for 48 hours in late July.
But security forces across Urumqi must now also keep a close watch on Han Chinese residents, long seen as reliably loyal, but now bitter at the lack of security and information.
“Things are returning to normal. People feel they’ve made their voices heard,” said Cao Yang, a Han Chinese student.
“But it’s a problem if you have to take to the streets in such numbers to force any response from the government.”
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