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At the height of the 2008 financial crisis, as Wall Street slashed jobs, Beijing took advantage of the disarray to poach top Chinese financial talent from overseas to help reform its stock markets.
By summer 2015, China's Securities Regulatory Commission (CSRC) needed them more than ever; a year-long market boom had imploded in a few weeks, and the government was desperate to keep the crisis from widening.
But the best and brightest returnees, known in China as "sea turtles", had already left for the private sector, disillusioned and disappointed.
A former official at the CSRC, one of a group of 20 high-profile returnees, recalled the CSRC's appeal to make "sacrifices for the motherland".
"We moved our families back to China and gave up high-paying jobs, because we wanted to contribute," he said.
He said the group was sent for special training at Jinggangshan, a former revolutionary base used by Mao Zedong during the Chinese civil war.
Their idealism soon turned to cynicism. Their pay was a fraction of what they could earn in the private sector, and the CSRC didn't seem to value them.
"Several years passed, and none of us got promoted," said the official. "Some of us didn't even obtain a concrete position."
"Just at the time they needed people with both domestic and international experience, those most internationally experienced people were forced out," said Liu Li-Gang, China economist at ANZ.
The CSRC did not reply to requests for comment.
BRAIN DRAIN
Those who left include Tang Xiaodong, former head of ABN AMRO's exotic credit derivatives, who served various roles at CSRC including driving reforms to foreign investor access programmes; Li Bingtao from J.P. Morgan Chase's global treasury department, who joined the CSRC planning committee; and Luo Dengpan, former student of Nobel Prize-winning economist Robert Shiller, who took charge of CSRC's institutional innovation department.
None of them replied to requests for comment.
Insiders who spoke to Reuters point to a rising wave of resignations within the regulatory apparatus over the last 12 months, just when sound advice was most needed.
"Nearly every week, there are people submitting resignation letters," said an official at the Shanghai Stock Exchange. "And the pace of people leaving appears to be accelerating."
Chinese fund managers say the exodus left Chinese markets in the hands of people who don't understand markets.
"They don't have the same level of expertise as they did in recent years," said a senior Chinese derivatives trader at a foreign bank in Hong Kong.
That led, he said, to misguided, counter-productive policies like the crackdown on derivatives and "malicious" short-selling that some say only accelerated the selloff.
"It's not that they aren't smart," said an executive at a major fund who communicates regularly with the CSRC. "The difference is they don't have financial expertise."
An official still at the CSRC said regulators failed to grasp the significance of the surge in margin finance used for stock speculation that many warned was destabilising the markets.
It's also criticised for botching reform of the IPO market. It re-opened the market in early 2014 after a year's suspension, but under new pricing guidelines that inadvertently made IPOs a one-way bet that sucked funds from the wider market. After a surge in summer IPOs was partly blamed for setting off the crash, the CSRC suspended them again, indefinitely.
CATALOGUE OF FAILURES
Such failures have hammered government's credibility, not least with investors who trusted Beijing to rescue the market in July and bought back in.
Government directed 900 billion yuan ($140 billion) into stocks, but indexes continued to fall after a brief hiatus, wiping out all the year's gains, and more than $4.5 trillion in market value - more than Germany's gross domestic product.
The heavy-handed intervention also damaged the credibility of China's public commitment to financial reform.
Analysts were not surprised when global stock index compiler MSCI delayed including Chinese shares in its benchmark emerging markets index, a move that might have brought billions of foreign dollars to China's markets.
Former officials said most of the returnees left due to frustration over their lack of influence over policy, limited opportunities for promotion, and low pay. Others spoke of resentment from colleagues.
Some were effectively forced out by the fallout from Beijing's anti-corruption drive, which led to salary cuts for senior staff and a campaign against "naked officials" - those who move family members and assets overseas in case the official is arrested.
"They can get high pay outside at lower risk, higher return. Why not?" said Oliver Rui, professor of finance at the China Europe International Business School in Shanghai.
($1 = 6.4090 Chinese yuan renminbi)
($1 = 6.4060 Chinese yuan renminbi)
