Necessity is the Mother of Invention: Chinese Stock Market Edition

Global Times: New regulations needed for China’s stock market

China's stock market, which started from scratch in the 1990s, is now undergoing a period of transition and transformation, with many basic institutional arrangements still missing. Here are some thoughts about defining the basic institutional arrangements.

First, the delisting system and the registration-based stock listing system. The mainland A-share market, where about 3,000 to 4,000 companies are currently listed, has only seen a limited number of companies delisting by the end of 2018.

In the global equity market, however, the number of newly-listed companies is generally equivalent to the number of companies delisting each year.

Under the system of "survival of the fittest" in the capital markets, companies that are unqualified, record bad performance or violate regulations are removed from the stock markets, and only those high-quality, good performing and well managed stocks can remain. Therefore, a sound delisting system would prompt listed companies to pay more attention to their own quality, results and openness of disclosures.

Second, there are 140 million individual stock investors in China, accounting for more than 80 percent of the total A-share transactions annually. Therefore, the Chinese equity market has always been criticized for being a retail market and lacking medium- and long-term institutional funds. Interestingly, in major global stock markets, 80 percent of transactions are reserved for institutional investors and 20 percent for retail investors.

Among various medium- and long-term investments, what the A-share market lacks most is annuity investments, one of the three pillars of the social pension insurance. In the US, corporate annuities account for majority of the US pension system.

Third, China's fund management industry has a history of more than 10 years, but it still needs further improvement. In markets like the UK, for example, some fund management companies have been in business for more than 200 years.

At present, there are about 100 public funds controlling 13 trillion yuan and more private funds managing more capital. Out of the 13 trillion yuan ($1.92 trillion) of public funds, only less than 2 trillion yuan is invested in the stock market, which is far from enough to support the market.

SCMP: Shanghai’s hotly anticipated tech board vital to China’s global financial ambitions, says top official

The new board is a key pillar of a new action plan, unveiled at the briefing, to build the city into one of the world’s top financial centres by next year.

It is one of the most important moves by China’s leadership to deepen financial reforms and help Shanghai maintain its status as a pioneer of those reforms, said Zheng.

The action plan outlines six “missions” aimed at helping Shanghai to deepen its financial reforms and further open up its markets. The goal is to develop Shanghai into a top-notch global financial market with a focus on yuan-denominated products, equipped with a strong capacity to deploy financial resources.

China.org: Shanghai aims to become leading global finance hub

Approved by the State Council, eight central regulatory bodies led by the People's Bank of China, the central bank, issued the plan which aims for the municipality to establish itself as a global financial market leader and a go-to market for renminbi-based trading by 2020. A legal, innovative, highly efficient, transparent and open financial system is expected to be in place by that time.

Xu Zhong, director-general of the PBOC's research bureau, said the release of the action plan indicates that Shanghai has entered into the final stage before becoming a global financial hub.

Wu Qing, Shanghai's vice-mayor, said the city should focus on the development of six sectors-asset management, cross-border investment and financing, financial technology, insurance, renminbi asset pricing and financial risk management.

CNStock: 中央深改委会议通过设立科创板并试点注册制总体实施方案

The meeting reviewed and approved the “Implementation Plan for Establishing the Science and Technology Board and the Pilot Registration System on the Shanghai Stock Exchange”, “Implementation Opinions on Establishing the Science and Technology Board and the Pilot Registration System on the Shanghai Stock Exchange”, and “Building a National Park as "Guidance Opinions on the Nature Protection System of the Subject", "Opinions on Deepening the Reform of Education and Teaching Reform to Improve the Quality of Compulsory Education", "Opinions on Encouraging and Leading Talents to Flow to the Frontier and Grassroots Areas" and "Towards Deepening Reform in the Field of Politics and Law" Implementation Opinions, “Guiding Opinions on Coordinating the Reform of Property Rights System of Natural Resources Assets”, “Several Opinions on Establishing a Land and Space Planning System and Supervising Implementation”, “Guiding Opinions on Building a Market-Oriented Green Technology Innovation System”, Natural Forest Protection and Restoration System Program, National Ecological Civilization Experimental Area (Hainan) Implementation Plan, Hainan Tropical Rainforest National Park System Pilot Program and Central Comprehensive Deepening Reform Committee 2019 Work Points, Central Comprehensive Deepening Reform Committee Summary of work in 2018 Divisions "," the party's eighteen big comprehensively deepen reforms since the implementation of the summary evaluation report. "

　　The meeting pointed out that the establishment of the science and technology board and the pilot registration system on the Shanghai Stock Exchange is an important measure to implement the innovation-driven development strategy and deepen the capital market reform. It is necessary to enhance the inclusiveness of the capital market for science and technology innovation enterprises, focus on supporting key core technology innovations, and improve the ability of serving the real economy. It is necessary to steadily pilot the registration system, and promote the reform of the basic systems such as issuance, listing, information disclosure, trading, and delisting, and establish and improve the stock issuance and listing system centered on information disclosure.