CSRC's Annual Work Conference Sets Priorities for 2022



On 17 January, China Securities Regulatory Commission (CSRC) convened its Annual Work Conference 2022. Chairman Yi Huiman delivered a report which reviews the achievements of China’s capital market and the CSRC’s regulatory work in 2021, analyzes domestic and international developments, and unfolds the regulatory priorities and initiatives for 2022, with an overarching requirement of prioritizing stability through in-depth reforms. The conference was attended by other members of the CSRC leadership, senior officials from CSRC departments, and representatives from CSRC affiliates as well as relevant government authorities.

The conference noted that, in view of the world changes unseen in a century and widespread impact of the pandemic, the CSRC firmly implemented the decisions and instructions made by the CPC Central Committee and the State Council, upheld the working principle of maintaining stability while making progress, thoroughly followed the new development philosophy, and carried out market-oriented and law-based regulation. Efforts to serve the new development paradigm and high-quality economic growth were organized under four pillars: promoting reforms, mitigating risks, strengthening enforcement, and safeguarding stability. The achievements and accomplishments in 2021 set off a good start for the following years of the 14th Five-year Plan (2021-2025).

The CSRC’s work in 2021 was epitomized in the betterment of the multi-tiered equity, bond and futures markets in both scale and structure. Equity and bond financing reached record highs, of which greater financial resources kept flowing into technology and innovation-driven sectors on a faster pace. In-depth reforms laid the groundwork for a full roll-out of the registration-based IPO system. The Beijing Stock Exchange was founded to offer a new financing channel for innovative small and medium enterprises. New delisting rules were implemented to normalize the delisting process of failing companies and preserve the quality of listings on the market. Investor structure saw notable improvement as institutional investors took up bigger shares of market funds and investments. In addition, the capital market became more resilient and more capable of absorbing risks as risk exposures narrowed in major areas, such as bond default and misconduct in private investment fund. Further progress was made in two-way opening-up and international regulatory cooperation. More importantly, the securities law enforcement and judicial system was upgraded, with efforts focusing on tackling a number of major illegal and criminal cases. The ruling of “Kangmei Case”, the first case under the special representative litigation system against corporate fraud, set a milestone in investor protection. Our zero-tolerance policy stance sent out strong deterrence which protects the investing public and upholds market integrity.

It was pointed out at the conference that in the process of reforming and improving regulatory practices, the CSRC has had a deeper and clearer understanding as to how to better regulate and develop the capital market. The CSRC must ensure that the reform and development of the capital market are heading towards the right direction at a firm and steady pace. The CSRC must take a holistic view to address issues related to the capital market, and endeavor to strengthen policy coordination and information sharing with relevant stakeholders, thus forming a strong synergy. The CSRC must remain committed to deepening reform and opening-up, and must address market challenges, stabilize market expectation, build up market momentum and give full play to the intrinsic stabilizing mechanism of the market through reforms. The CSRC must base its actions on facts and unswervingly follow the path of developing a capital market with Chinese characteristics which suits China’s need at its current development stage and aligns with best practices developed in mature markets.

Consensus was reached at the conference that in spite of increasingly complex internal and external environment, the Chinese economy remains resilient and robust with good long-term prospects, which, along with the positive effects brought by structural improvement in the capital market, forms a solid foundation for the steady and sound development of the market. The CSRC must think and act in alignment with the judgements and plans made by the central government, and be more confident and active in promoting capital market development. The CSRC must fulfill its dual tasks of maintaining stability and making progress by devoting itself to stable markets, steady expectation, and consistent policies, while making progress in reform and opening-up as well as in serving the high-quality economic development. The CSRC must ensure security while pursuing development in the capital market by keeping wary of potential risks with a bottom-line thinking and build on the achievements made in the battle against major financial risks, thus laying a solid foundation for high-quality development. The CSRC must strive to achieve both short-term and long-term goals with persistence and patience, and while accomplishing current tasks, ponder over important theoretical and practical issues related to the capital market to ensure sustainable development. The CSRC must adopt a big-picture view of the economic and social landscape in problem-solving and policy-making, while being equally committed to the details of policy implementation, so as to achieve the expected effect.

It was stressed at the conference that the CSRC and the capital market are faced with important tasks in light of the 20th CPC National Congress to be held later this year. The CSRC must, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, comprehensively implement the guidelines of the 19th CPC National Congress, plenary sessions of the 19th CPC Central Committee and the Central Economic Work Conference, and adhere to the paramount principle of prioritizing stability while pursuing progress. The CSRC must implement the new development philosophy fully, faithfully and comprehensively, and better serve the new development paradigm and high-quality development. The CSRC must continue to uphold the principles of strengthening institutional foundation, non-intervention in the market and zero tolerance against violations, while practicing the regulatory philosophy of forming synergy with reverence for the market, the rule of law, professionalism and vigilance against risks. The CSRC will focus on maintaining economic growth and fending off risks, and continue to deepen reform and opening-up in the capital market, so as to celebrate the 20th CPC National Congress with new achievements.

First, the CSRC will prioritize stability and maintain the robustness of the capital market. It will enhance research and assessment of the macro environment, step up policy coordination, improve the system for the prevention, early warning, handling of risks and ensure accountability. It will facilitate a steady inflow of medium-to-long-term funds into the market, and promote balance between the investment and financing functions of the market. Systematic measures will be taken to better guide market expectation and strengthen market stability.

Second, the CSRC will deepen capital market reform with a focus on the full implementation of the registration-based IPO system. Three principles, namely respect for the nature of a registration-based system, convergence with international best practices, and adaption to the characteristics of China’s capital market, will be upheld throughout the reform. To fully implement the reform, it will make meticulous preparations to ensure the readiness of both the market and regulatory systems, and put in place anti-corruption arrangements to uphold integrity. It will further improve the institutional arrangements for the registration reform with information disclosure at its core, carry out the reform on the main boards, speed up the transformation of stock issuance regulation, hold intermediaries accountable as “gatekeepers”, reinforce the synergy of all stakeholders, and form a virtuous market ecology for the steady implementation of the registration-based system across the board. Meanwhile, it will continue to deepen capital market reform by making holistic efforts to improve the multi-tiered capital market, pressing ahead with reforms in the fundamental market institutions, and building up regulatory capacity within the CSRC system.

Third, the CSRC will support stable growth by empowering the capital market to facilitate high-quality economic development. It will promote the capital market’s ability to better serve national development strategies, identify and leverage the market’s unique role and advantage, and roll out more policy measures that will help stabilize growth and expectation. It will keep a normalized and steady pace of IPOs and secondary financing in the market, promote “hard-core sci-tech” as the key feature of the SSE STAR Market, improve the SZSE ChiNext Board, and develop the Beijing Stock Exchange market. Efforts will also be made to encourage orderly and compliant development of PE and VC, and expand the publicly-offered infrastructure REITs pilot. It will give full play to the capital market barometer by guiding listed companies to focus on growing and upgrading their main business, and ensuring the smooth exit of listed companies with major risks.

Fourth, the CSRC will press ahead with institutional opening-up while maintaining security. It will steadily expand the two-way opening-up of domestic markets, maintain a level playing field for overseas service providers, and encourage the development of cross-border financial products. Cross-border market connectivity schemes will be further enhanced. Conducive conditions will be created to make bigger progress in the audit oversight cooperation between China and the US. It will strive for early implementation of the reformed regulatory system for overseas listings by domestic companies, and continue to firmly support eligible companies to seek overseas listing in an orderly fashion and in compliance with applicable laws and regulations.

Fifth, the CSRC will foster sound norms for capital formation and keep a steady hand on risk resolution in principal sectors. It will frontload regulatory resources under the rule of law and work with other authorities to install early guidance and checks in capital expansion. A traffic light approach will be taken to strengthen the oversight of financing and merger and acquisition activities in specific sensitive industries. It will properly defuse bond default risks and improve legal mechanisms to settle default disputes in a market-based manner. It will make concerted efforts to shore up regulatory gaps, with focuses on weeding out fraudulent private investment funds and illegal trading venues.

Sixth, the CSRC will speed up regulatory transformation and keep appropriate boundaries for the use of regulatory power. It will adapt and respond to the profound changes attendant with the registration-based IPO system and other major reforms, and remain problem-driven in transforming its approach to listed companies supervision, financial institutions supervision, and regulatory enforcement. While striking a delicate balance between hands-off and hands-on approaches, it will gravitate focus to post-entry supervision and champion a merit-based support system for market participants. It will also accelerate the digitalization of regulatory resources and harness smart tools to improve public services and governance capabilities.

Seventh, the CSRC will continuously enhance the legal framework of the capital market and strengthen investor protection. Efforts will be made to promote the drafting of relevant laws and regulations on futures and derivatives and listed company supervision which are in due legislative process. The legal structure will be further streamlined and systemized to provide greater consistency and transparency. To further maximize the deterrence of market misconduct, it will reinforce enforcement cooperation with criminal authorities by fully leveraging existing coordination mechanisms. As an integral part of the investor protection system, the special representative litigation procedures will be further promoted as a legal recourse for minority investors.

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