Chairman Shang Fulin of the China Securities Regulatory Commission (CSRC) said in Washington of the U.S. yesterday that the capital market development should be oriented from the perspective of building China into a moderately prosperous society in an all-round way and the development of the whole national economy. Under the globalization background and the principle of taking all factors into consideration, we should review and unremittingly promote capital market’s reform and opening-up and sound development.

According to the Joint Fact Sheet issued by China and the U.S., the China-U.S. Strategic Economic Dialogue has made substantial progress and achievements in financial cooperation and opening-up between the two countries. Our reporter made an exclusive interview with the CSRC Chairman Shang Fulin.

Reporter: The subprime mortgage crisis had a wide influence on the global economy and the financial market. Has this been discussed in this China-U.S. Strategic Economic Dialogue?

Shang: During this dialogue, China and the U.S. have made full discussion and exchange on reasons of the global financial market turmoil and its solutions. Regarding the outbreak of the subprime mortgage crisis and the subsequent financial turmoil, the U.S. issued corresponding appraisal report as well as advices on strengthening the operation of financial service enterprises and supervisors. The U.S. also announced its plan to issue later this year the appraisal results of the above advices implementation and the suggestion on whether to adopt further measures. China and the U.S. would further enhance communication and supervision cooperation regarding this issue to jointly maintain the safety and stability of the global financial market.

Special attention should be paid to the uncertainties on China's capital market brought by the operation and fluctuation of international finance. Moreover, the construction of the market’s fundamental system should always be put on the strategic height. Problems concerning system and mechanism should be solved to improve the market operation efficiency and overall competitiveness. Meanwhile, to meet the diversified investment and financing demands of different investors and financers as well as the requirements of risk management, the market classification and the structure of products and varieties should be further improved, with an aim to create opportunities for boosting the effective exertion of the capital market’s functions and strengthen the risk tolerance capacity of China’s capital market under the opening-up.

Reporter: Recently, the CSRC has announced the launch of the opening-up appraisal of the securities industry and the capital market. The appraisal, one of the achievements in this dialogue, will be completed by the end of this year. Based on the appraisal result, China will also provide policy advice on the opening-up of the securities industry and the capital market. What’s the reason for it?

Shang: Since its early establishment, China’s capital market has been steadily promoting opening-up and it has made outstanding achievements. Currently, the opening-up of China’s securities industry and capital market is consistent with their development. Next, we will further promote the capital market’s opening-up. Drawing lessons from an overall analysis and appraisal of the existing opening-up policy and its effects will lay foundation for further improving the opening-up policy and orderly promoting the opening-up of the securities industry and the capital market.

Promoting the opening-up steadily has always been a major component of the overall development strategy of China’s capital market. Meanwhile, the opening-up of China’s capital market, an emerging market in economic system transition, should be compatible with the opening-up of the whole economy and the financial market as well as the reform of the whole system. As we all know, the capital market’s opening-up plays a positive role in introducing management technology, promoting competition and innovation, improving market service and development as well as enhancing the international competitiveness of China’s securities business institutions. However, international experience proves that excessive and hasty opening-up will lead to potential financial risks and strike on the capital market. In the future, guided by the principle of “step by step, safety and controllability, competition and cooperation, mutually benefit and win-win”, we will continue to actively expand the opening-up of the securities industry and the capital market in a reasonable and timely way.

Since last year, with continuous turbulence on the global financial market and great fluctuations on major stock markets, many large multinational financial institutions have suffered great losses, and global economic growth has slowed down. Meanwhile, the rapid market development is faced with a series of new challenges due to insufficient the fundamental system construction of China’s capital market and weak overall strength of securities business institutions. China will pay close attention to the changes of global economy and international financial market as well as the relationship between domestic and international capital markets, thoroughly analyzing and evaluating the effect, hidden risks, pros and cons and environment of various opening-up policies. Based on that, we will further improve the opening-up policy, gradually enhance the international competitiveness and risk resistance capacity of China’s securities industry and capital market as well as promote the sound and steady development of China’s capital market.

Reporter: In the third China-US Strategic Economic Dialogue, China allowed eligible foreign-invested companies to issue RMB-denominated stocks. Also, eligible overseas companies are allowed to be listed on China-based exchanges by issuing shares or depositary receipt. Please introduce your idea about this item.

Shang: Since 1990s, the flow and expansion of production factors have speeded up remarkably around the world. Multinational companies have engaged in economic activities of global market and implemented worldwide allocation of resources and production factors. So, almost all countries have participated in the allocation and restructuring of international production factors. In a new round international allocation of production factors, the flow of capital, information, technology and other high-end production factors becomes more convenient and wider. By greatly developing the capital market, promoting the effective allocation of global production factors and gradually guiding the listing of eligible foreign companies in China, such high-end production factors as capital and technology will flow to the areas favorable for China’s economic development in a new round of industry shift, so as to promote the sound development of China’s economy. Furthermore, the listing of high-quality foreign companies in China will improve the listed companies’ quality and boost the internationalization of China’s capital market as well as help Chinese investors share multinational companies’ achievements. China and the U.S. have reached an agreement on strengthening supervision cooperation in foreign companies’ listing in China.

According to Shang, the next 5 years is a key stage for building China into a moderately prosperous society in an all-round way and strengthening comprehensive national power. As China's national economy is gradually integrating into economic globalization, it is vital to construct a multifunctional, safe and efficient capital market for achieving the CPC Central Committee’s goal of building China into a moderately prosperous country in an all-round way and continuously elevating China's competitiveness and comprehensive national power. All in all, based on China’s actual conditions, we should plan the development orientation of the capital market in light of building China into a moderately prosperous country in an all-round way and developing the whole national economy. Under the globalization, we should promote the reform and opening-up as well as the sound and steady development of China’s capital market by taking all factors into consideration.

Source: Shanghai Securities News