China to strengthen capital market regulation, risk prevention

China's State Council has released a guideline on strengthening regulation, forestalling risks and promoting the high-quality development of the capital market.

This is the third guideline document on the capital market from the State Council in two decades. The first two were issued in 2004 and 2014, respectively.

The country should build a secure, regulated, transparent, open, dynamic and resilient capital market, the guideline noted.

In this regard, efforts should focus on strengthening regulation, preventing risks and pushing forward high-quality development to fully harness the functions and roles of the capital market, promote the building of a country with a strong financial sector and serve the goal of advancing Chinese modernization.

The guideline demanded strict regulation on the entry into the capital market through securities issuance and listing, urging higher standards for listing on the main boards and the start-up board ChiNext.

The oversight on issuance and underwriting should be intensified, and illegal activities such as fraudulent issuance should be investigated strictly, it said.

It urged rigorous sustained oversight on listed firms, noting that authorities should crack down on illegal shareholding reduction and tighten regulation on cash dividend payment by listed firms.

The country vowed to strengthen regulation on delisting, adopt stricter standards for compulsory delisting, smooth diverse channels for delisting, and optimize investor compensation remedy mechanisms, according to the guideline.

Efforts will also go to tightening regulation on institutions like securities and fund management companies, and strengthening shareholder and business access management.

Work should be done to tighten supervision over high-frequency trading and other types of trading, and investigate and punish illegal activities such as market manipulation and malicious short-selling, according to the guideline.

It also demanded strengthening the reserves of strategic forces and the development of stabilizing mechanisms. The impacts of both major economic and non-economic policies on the capital market will be factored into policy orientation consistency evaluation, as part of efforts to enhance the intrinsic stability of the capital market, it said.

China will vigorously guide the entry of medium and long-term capital into the market, it stated.

Work will be done to develop public equity funds and optimize the policy environment for insurance-fund investment. Encouragement will also be given for capital from banks' wealth management products and trust funds to actively participate in the capital market.

The country will advance the registration-based initial public offering system for solid progress and make the market more inclusive to new industries, new business patterns and new technologies to foster new quality productive forces.

It is also imperative to strengthen the rule of law in the capital market and make intensified efforts to jointly crack down on securities and futures malpractice.

The guideline also stressed the importance of upholding and enhancing the leadership of the Communist Party of China, ensuring that the financial sector must always serve the public, and strengthening regulation in all respects and effectively preventing and defusing risks, among others.

"The guideline reflected a goal-oriented and problem-oriented approach," China Securities Regulatory Commission Chairman Wu Qing told Xinhua in an exclusive interview.

In particular, in view of the prominent problems such as those in institutions, mechanisms and regulations exposed by the stock market volatility since August last year, the guideline aimed to shore up weakness in response to investors' concerns and promote the resolution of deep-seated problems accumulated over the years, Wu added.

In the next five years, China expects to form a general framework to support the high-quality development of the capital market, according to the guideline.

By 2035, a capital market with high adaptability, competitiveness and inclusiveness will be basically established, it said. By the middle of the 21st century, the governance system and capabilities of the capital market will be further modernized, creating a high-quality capital market that matches China's status as a country with great financial strength.

Wu said the series of development goals is systematic, comprehensive and progressive, calling for adhering to market-oriented and law-based reform and turning the blueprint into reality.

"In the next step, we will study and formulate reform measures to promote the long-term development of the capital market on the basis of in-depth research," he said.