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Opening Remarks by CSRC Chairman Yi Huiman at the SCIO Press Conference on 27 Feb. 2019
06-03-2019

  Ladies and gentlemen, friends from the press,

  Good afternoon! It is a great pleasure to meet you all. I took office at the China Securities Regulatory Commission (CSRC) merely a month ago, still a freshman in capital markets addressing the challenges of role shifting from a market participant to a market regulator. Like treading on thin ice, I have been working with full dedication so as to live up to the trust of the central leadership and public expectations, which also encourage me to keep learning and work hard. In the past month, I have been catching up with the current state of the CSRC's work and engaging in fact-finding and research, while enhancing inter-ministerial coordination to jointly safeguard sound and steady development of the capital markets. Taking today's opportunity given by the State Council Information Office (SCIO), I would like to give you an update of the preparation for the science and technology innovation board (the sci-tech innovation board) and the pilot of a registration-based IPO system, and brief you on the CSRC's work in this coming year.

  The CSRC was trusted by the CPC Central Committee and the State Council with the major task of launching the sci-tech innovation board and experimenting with reforms towards a registration-based IPO system. This job is of great importance to supporting scientific and technological innovation, promoting high quality economic growth, enhancing market-based reform in the capital markets, and to building Shanghai into an international financial hub. Earlier this year, the CSRC issued the guidance for the sci-tech innovation board and the Shanghai Stock Exchange (SSE) is now fine-tuning the supporting rules based on feedback received from public consultation. Another two rules made by the CSRC will conclude public consultation by tomorrow. In general, preparatory work on all fronts has been proceeding rather smoothly. Going forward, we will continue to make thorough and comprehensive preparations, in order to effectively and concretely implement this major reform. Here, I would like to elaborate on some key issues.

  First, the main objective of the sci-tech innovation board is to make the capital markets more inclusive in serving the real economy and better meet the needs of enterprises with core technology, leading performance, good prospects, and high reputation, and promote reforms to further improve capital formation mechanism to drive innovation. Second, the launch of the sci-tech innovation board represents a concrete measure to deepen capital markets reforms. Much more than setting up a new board, the reform will bring about all-round institutional improvement in a market-based and law-based manner, from stock offering, trading, information disclosure to delisting, creating a sound stock offering and listing regime based on information disclosure. The sci-tech innovation board will act as a test field and provide us with valuable experiences that can be replicated and applied on a broader scale. Third, the sci-tech innovation board will set strict standards and stick to a steady start. We will design a thorough rule framework, improve the  contingency plans, enhance investor education, and maintain a balance among different tiers of markets to ensure a smooth and steady start for the sci-tech innovation board and the pilot of a registration-based IPO system. Later, my colleagues and I will take questions regarding the specifics of these reform measures.

  At the Central Economic Work Conference, it was emphasized that the capital markets play a critical role in an interconnected financial system. It was further emphasized that we should deepen reforms and develop capital markets that are well-regulated, transparent, open, vigorous and resilient, by improving the quality of listed companies, refining trading rules, attracting participation of mid-to-long term capital, and preparing for the launch of the sci-tech innovation board at the SSE and the experiment of a registration-based IPO system. At the group study session of the Political Bureau of the Central Committee of the CPC on 22nd February 2019, President Xi Jinping laid out the roadmap to deepen capital markets reforms from the higher perspective of supply-side structural reform of the financial system. These remarks represent the central leadership's high expectations for the capital markets, placing heavy responsibilities on us and also showing us the direction of our work to develop the capital markets. In order to follow through with the guidance of the central leadership and promote sustainable and sound development of the capital markets, we shall abide by the following principles.

  First, we shall revere the market, respecting and following the law of the market to unswervingly promote sound development of the capital markets. As the cornerstone of modern financial system, capital markets act as the barometer of the real economy, connecting businesses, linking families, and contributing to a nation's financial strengths and its ability to participate in international financial governance. On the one hand, capital markets are financing platforms, where the activities of listed companies are indicative of economic trends. Therefore, improving the quality of listed companies is our top priority. On the other hand, capital markets are also investment platforms. The function of value discovery must be fully exploited, so as to attract all types of market participants to a level playing field. Capital markets is in itself a highly complex and intricate ecosystem operating on its own set of laws. As we develop the Chinese capital markets, we shall incorporate national realities into our understanding and interpretation of the nature, purpose, and laws of finance. We shall respect, revere, and follow the law of the market and take actions accordingly. The capital markets must give full play to its functions of resources allocation, asset pricing, and risk mitigation in order to provide high-quality and efficient financial services for economic and social development and for the people, fostering virtuous interactions between the financial system and the real economy. We shall foster the development of diversified equity financing tools, promote coordinated development of the bond markets, advance the futures markets, and improve the financing structure, so as to build a multi-tiered capital markets system featuring orderliness, fairness, efficiency, and transparency.

  Second, we shall revere the rule of law, upholding law-based market supervision and regulation to protect investors' legitimate interests. The CSRC is mandated to strengthen market regulation and protect investors' legitimate interests. We shall attach importance to existing as well as new situations, guard both the market entrance and exit, and step up supervision throughout the whole course of market activities, allowing the market to select the fittest and eliminate the inferior. We shall fully harness the capital markets' advantages in facilitating mergers and acquisitions (M&A) and restructuring to invigorate the market and improve quality and efficiency. We shall fulfill our mandate and hold the firm stance against market misconducts, including fraudulent offerings, capital misappropriation by large shareholders, earnings misrepresentation, M&A manipulation, market manipulation, and insider trading. We will improve the legal framework for the markets by pushing for revisions to the Securities Law and other laws and regulations, so as to substantially increase the costs and deterrence of violations. To cleanse the market environment, we shall enforce continued and targeted supervision to urge listed companies and their large shareholders to tell the truth, keep accurate and faithful accounting, and make timely disclosures, and to refrain from breaking the rules and laws. We shall strengthen supervision over all types of market intermediaries and enforce accountability. We shall invest more in investor education and integrate relevant contents into the national education system. We shall continue to do more in improving the redress mechanisms for securities and futures investors and advocate for sound investing that focuses on value and long term prospects.

  Third, we shall hold high professionalism and strengthen strategic and innovative thinking to reform and open up the capital markets both in width and in depth. First, we shall think in the big picture and work closely with market participants. Guided by the market, rule of law, and regulatory priorities, we shall deepen understanding and analysis of macro strategic issues concerning the capital markets, step up top-level design, maintain strategic composure and search for reforming and innovative solutions to critical problems, in order to address challenges through reform and development. At this moment, it is high on our agenda to launch the sci-tech innovation board and experiment with a registration-based IPO system, from which to advance comprehensive and in-depth reforms of the capital markets. Second, we shall improve fundamental regimes. We will coordinate integrated reforms of relevant listing segments. We will improve trading rules and optimize reforms on trading supervision, so that the market have clear expectation and investors have fair access to trading. Furthermore, we will work closely with relevant authorities to facilitate the access by such institutional investors as the social security fund, the insurance companies, and the corporate annuities, and attract participation of more mid-to-long term funds. Third, we shall promote reforms and development by opening up. We will open up the capital markets on a higher level and in a broader scale, providing wider access for foreign participation in financial services, products, and investment. Fourth, we shall enhance capacity building for our regulatory staff. With the capital markets changing at every moment, new circumstances and new issues constantly sprouting out, we must stay vigilant and keep learning from doing, and from the market and the investors. We will cultivate specialists at all levels, forging skills and carrying forward professionalism, so as to build a dedicated and disciplined regulatory team with outstanding expertise.

  Fourth, we shall stay alert to risks, adopt a bottom-line mindset and take effective measures to prevent and mitigate major financial risks. Preventing and mitigating financial risks, in particular the systemic risks, is the bottom-line and the fundamental mandate of financial regulation. Today, the interplay of domestic and international uncertainties further complicated and aggravated the risks facing our capital markets. In this context, we must be prepared for the unexpected, exploit wisdom from the history and from a dialectical perspective, and take targeted measures to prevent, mitigate, and dissolve the risks brewing in areas such as share pledges by shareholders of listed companies, bond defaults, private funds failure, unregulated leveraged financing, as well as risks from local trading venues. We will also enhance counter-cyclical response mechanism adapted to market circumstances and strengthen the IT systems to capture market volatilities in a timely fashion. We will progress on RegTech and build an intelligent regulatory system focusing on listed companies supervision. We will balance the relationship between ex ante, ongoing, and ex post supervision, gradually shift gravity to the mechanism of risk surveillance, early warning, and mitigation, and strengthen regulatory efficacy and deterrence. Efforts will be doubled to build clean securities regulators at all levels, just as the old Chinese saying goes "one must be strong to forge iron". We will see to it that the requirements on market participants and their senior management are fully complied with, putting everyone on the radar and installing effective firewalls to safeguard investors' assets.

  Reform, development, and stability of the capital markets could never be accomplished without the support from various parties. Guided by the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and following the guidance of the Financial Stability and Development Committee under the State Council, we will enhance coordination and cooperation with relevant competent authorities, local governments, and market participants, and aim to forge a synergy in promoting the development of capital markets of higher quality. We sincerely hope that all of you could continuously support the work of CSRC.

  Thank you!

  

  



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