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February 20, 2001
It was reported by the Xinhua News on February 19, 2001 that the news spokesman of the China Securities Regulatory Commission was interviewed by the journalist from Xinhua News on the policy that the domestic residents can invest in the B share market, which will be issued today.
Journalist: What does it mean that notable changes have taken place in the macro situation of the foreign exchange capital flow?
Spokesman: For a long history China has been in short supply of foreign exchange capitals. The B share market is designed to attract overseas foreign exchange investments. The domestic residents are always permitted to keep the foreign exchanges obtained by legal means, and the foreign exchange deposits and remittances of the residents are used in the projects requiring foreign exchanges in China’s economic modernization. But this cannot meet the needs of foreign exchange loans. Great changes have taken place in recent years, especially since last year, for example, the foreign exchange deposits of the domestic resident have witnessed a rapid growth and most of these are loaned overseas or used for purchasing bonds by the domestic banks. Since China is still a developing country, excessive capital output is not appropriate at the current stage. Instead, it is a new topic raised in response to the changes of the macro economy to permit the domestic residents to invest in B shares with their legal foreign exchanges.
Journalist: Why does it need to develop B share market?
Spokesman: The establishment of B share market intended to attract overseas investments originally. However, B share play a weakening role as other financing channels such as H share and bonus share are expanded. For this reason, it needs to attract parts of legal foreign capitals held by the domestic residents through the B share market in order to adapt to the new situation and thus support the national economic development. B share have always been the experimental point of China’s capital market reform and opening up. To bring it into full play, it needs to further study the B share market orientation, explore its rules and optimize its functions in accordance with the macroeconomic development requirements so that experiences will be accumulated for intensifying the reform and opening up. Since China’s entry into WTO, China’s capital market will inevitably face fierce competitions from the international counterparts and challenges brought about by the penetration of foreign investments sooner or later. Developing the B share market can facilitate the test and accumulate experiences to a certain degree and thus improve the China’s capital market opening-up standard step by step.
Journalist: The investors felt very surprised about the suspension of B share trading in the afternoon on February 19, 2001, so why did the stock exchange make such a decision?
Spokesman: With regards to the B share market and its relevant policy issues, the China Securities Regulatory Commission, together with other related departments, has carried out study for a long time and also has put forward multiple possible programs. Upon several rounds of study, all parties concerned have almost reached a common consensus. The China Securities Regulatory Commission has submitted the relevant programs to the State Council before long and approval was received at 11:00 am on February 19, 2001. Considering that there are no efficient media means in the noon, we decided to suspend the trading in the afternoon on February 19, 2001 so that it can ensure the equality in respect of receiving information and enables the information to be fully disclosed during the time between the evening of February 19 and February 20. In addition, it needs to perform adjustment in terms of trading rules and technical aspects through trading suspension in order to adapt to the new situation of domestic residents’ investments in B share market.
Journalist: Why are the domestic legal persons not permitted to participate in the B share investments?
Spokesman: Currently China’s legal persons hold only a few foreign exchanges and most parts are required urgently for the corporate operation, so it is not suitable for them to participate in the investments of B share market. For another thing, since the reform of foreign exchange system was launched in 1994, only can those enterprises with special approval keep foreign exchanges. The aim is to meet the foreign exchange turnover needs of the current items of these enterprises. It is inappropriate to use these foreign exchanges for turnover purpose as investments.
Journalist: What will the Shanghai Stock Exchange and Shenzhen Stock Exchange prepare as the domestic residents invest in B shares?
Spokesman: In general they shall prepare three kinds of work as follows: The first one is to amend the relevant rules related to B share trading and to make public the specific measures on how the domestic investors holding legal foreign exchanges open B share stock and capital accounts as soon as possible. The second is to issue and implement the policies and measures in relation of domestic residents investing in B shares. The third is to conduct test or adjustment to the trading system and clearance& settlement system as required.
Journalist: How will the domestic residents who hold legal foreign exchanges invest in B share market?
Spokesman: An administrative measure will be promulgated several days later by the China Securities Regulatory Commission to specify how the domestic residents holding foreign exchange deposits in the banks open capital account in the banks and stock trading account in the securities companies. As soon as this measure is issued, the investors with intention of investing in the B share market can subscribe for B share trading.
Journalist: It is reported that some domestic residents have already invested in the B share market through various means actually. Is your decision to permit the domestic residents to invest in the B share market to further recognize the actual matter?
Spokesman: As far as I am concerned, some domestic residents do subscribed in the B share market during the past time. However, the China Securities Regulatory Commission has always been working in accordance with regulations, and any former disguised subscriptions have been given penalties according to laws. The decision to adjust the B share market policy at this time is mainly based on the macroeconomic needs rather than consideration of the actual matter happened. From now on, any illegal activities such as obtaining foreign exchanges illegally or investing in the B share market via illegal means will be further fought against by the China Securities Regulatory Commission together with relevant departments. We will never change our stance over this point.
Journalist: What risks will occur when developing the B share market?
Spokesman: The purpose of developing the B share market is to attract those domestic residents holding legal foreign exchange savings to participate in the market investment. However, some domestic residents without foreign exchanges may also be attracted by this market and attempt to participate in the market investment through illegal exchange arbitrage. For this reason, I would like to reiterate that illegal exchange arbitrage and black market trading are all illegal activities and will be seriously attacked. The China Securities Regulatory Commission will actively cooperate with the pubic securities departments and foreign exchange administrative departments to restrict and attack illegal activities.
Journalist: What other measures will be taken in the B share market?
Spokesman: Since the B share market size is relatively small, only a few improvements have been made in its service and regulations. Currently, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, together with other relevant departments, are actively formulating and amending the regulations accordingly and studying on improvement in the B share market service so as to meet the B share market needs. And what’s more, the B share market competitiveness and supervision will be further intensified. The related jobs will be completed in the short term.
The China Securities Regulatory Commission
(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)
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