On October 26, 2009, the “People’s Daily” published an article entitled “Stably Boosting Development of Capital Market -- Interview with Shang Fulin, Chairman of China Securities Regulatory Commission”, with the full text as follows:
Development of Capital Market Boosting Economic Development and Social Progress
Compared with the 60-year development of the People’s Republic of China, the capital market of China is much younger. In early 1980s, the capital market came into being along with the exploration and experiment of shareholding system reform. In 1990, the Shanghai Stock Exchange and the Shenzhen Stock Exchange were established in succession, marking the beginning of the form of the national securities market.
Shang said that throughout the development of China’s market capital in the past 20 years, we can find out that the internal need of the socialist market economic system reform in China gave birth to the capital market while the growth of the capital market also played an irreplaceable role in promoting the economic system reform, optimizing the resource allocation and boosting the economic and social development.
Firstly, deepening the reform of the socialist market economic system. The establishment and development of the capital market have enriched the realization forms of public ownership and provided an important platform for the transformation of enterprise governance structure, the change of management mode of stated-owned assets and the acceleration of investment and financing system reform.
Secondly, supporting the excellent and rapid development of the real economy. As of the end of August 2009, the domestic capital market had provided about RMB2,500 billion stock financing in total and RMB2,900 billion bond financing in total for the enterprises.
The capital market has accelerated the concentration of social resources to high-quality enterprises and driven the steady and fast development of national economy.
Thirdly, increasing China’s influence in the international assets pricing. Along with the completion of the equity distribution reform on the whole, the mechanism of marketization evaluation and pricing of Chinese assets has been gradually formed. The market values of listed companies have become the basis of merger and acquisition, contribution and transaction, so the original trading method of pricing according to the net assets has been changed and the rights and interests of Chinese enterprises in the international cooperation have been effectively protected. In the futures market, the futures prices of copper, aluminum and soybean have become the important benchmark of pricing in the international trading negotiation.
Fourthly, increasing the overall risk-resistance capability of China’s economic and financial system. In the past 20 years, 14 commercial banks, 3 insurance companies and 10 securities companies were listed through restructuring on the domestic capital market, which have greatly improved assets quality and company governance, remarkably increased the overall quality of financial industry and provided strong support for replying to the global financial crisis.
Fifthly is that the rapid development of the capital market has enriched the channels of investment and wealth management of citizens in China, spread the concepts of market economy including social investment and risk management and promoted the popularization of basic concepts of socialist market economy such as equity culture, fair and justice and honesty and credit.
Insisting on Way of Reform and Development meeting Actual Market of China
When referring to the market-oriented reform of China for year, Shang said with great experience that the establishment of market-oriented operation system of capital market is the necessary requirement for establishing the socialist market economic system as well as the objective demand for the expansion of scale of the capital market and the diversity of the participants.
In the past 20 years, the development of China’s securities issuance system from line management and indicator management to verification and approval system and sponsorship system as well as the stable and orderly advance of reform of the new shares issuance system in 2009 have indicated the insistence of market orientation and effectively increased the issuance efficiency. According to the concept of “unified organization and separate decision-making”, the equity distribution reforms of listed companies have been completed on the whole to solve the significant problems left over from history and influencing the market development. Along with the stable promotion of the merger, acquisition and reorganization of listed companies, the transaction amount of merger and acquisition of listed companies has accounted for 2/3 of the total amount of merger and acquisition in China. Since 2002, 105 administrative examination and approval projects have been cancelled and adjusted in 4 batches successively, exceeding 2/3 of the original administrative examination and approval projects. The operation mechanism of China’s capital market has been gradually optimized, the market-oriented mechanisms of resources allocation, price discovery and capital restriction have been gradually improved and the self-regulation capacity of the market has been enhanced.
However, Shang also especially emphasized that different from the development mode of a matured market of “natural evolution”, every step of the reform and development of China’s capital market demonstrated the mark of different stage of continuous deepening of China’s economic reform and gradual improvement of socialist market economic system. Meanwhile, there also exist great discrepancies between the credit base, cognition base, legal base also external environment boosting the market development and those of a matured market. According to the internal requirement of the reform of economic system and the basic national condition and market condition of China’s capital market, on one hand, we should persist in the construction of fundamental system of market, further cultivate and give play to the market mechanism and continuously make the market become a more and more important role in resources allocation; on the other hand, we should stick to the balance and coordination among the strength of reform, the speed of development and the endurable level of the market, take the interests of all the parties of the market into consideration with unified planning, gradually solve the deep-rooted problems of system and mechanism of the market and stick to the way of reform and development corresponding with the actual market of China.
Serving the National Economy and Overall Social Development Better
Since the global financial crisis broke out, great changes have been taken place in both the inner and outer circumstances of China’s capital market. Shang said that the current time and a period hereafter is a key period to carry over the crisis and intensify the reform by thoroughly implementing the strategic plans made by the central authorities to deal with the global financial crisis and promote the economic growth. We will hold on to further strengthen and improve the construction of our financial system and mechanism, carry out the reform and innovation, attach importance to the market regulation, stably expand and perfect the functions of the capital market and serve the national economy and the overall social development in a more desirable way.
Firstly is to continuously reinforce the construction of fundamental system. The market basis should be further rammed, the function of market mechanism should be cultivated and exerted, the system arrangements for strengthening the capital restriction and price restriction should be actively explored, the self-restriction and mutual balance of main bodies of the market should be enhanced and the system and mechanism in favor of the healthy development of the market should be continuously improved.
Secondly is to actively and stably boost the reform and innovation of the market. The reform of important fields and stages including the construction of the Growth Enterprise Board, the new shares issuance system and the development of the market of corporate bonds should be stably advanced, the new varieties of securities and futures meeting the economic development requirements should be orderly launched and the vigor and efficiency of market operation should be increased.
Thirdly is to intensify the exertion of the overall function of the market. The functions of assets pricing and resources allocation of the capital market should be exploited, the adjustment and upgrading of the economic structure should be advanced, the development of innovation enterprises should be supported and the social resources should be promoted to be concentrated to the good-quality enterprises. The functions of price discovery and risk hedging of the futures market should be better exerted to continuously increase the harmony between the futures market and the spot market also the entity industry.
Fourthly is to further strengthen and improve the market regulation. According to the new conditions and features of the market reform and development, the concept and mode of regulation should be further improved, the regulation efficiency should be increased and the illegal activities and crimes of securities including insider trading, interest transfer and market manipulation should be severely punished according to laws.
“Under the joint efforts with all the participants of the market, we have the confidence as well as the ability to continuously lay solid foundation for the internal basis of the market and boost the sound development of the capital market through deepening the reform and promoting the development in a persistent way”, Shang stressed.
Source: China Securities Journal