Further reform of China's capital markets to boost high-quality development

China Plus Published: 2019-09-03 10:39:33
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Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

China’s Office of Financial Stability and Development Committee under the State Council on Saturday announced that the country will further deepen the reform of its capital market and enhance its role of serving the high-quality development of its real economy. The committee also highlighted the newly launched technology and innovation board, known as the STAR Market, at the Shanghai Stock Exchange, which is expected to play a pivotal role in boosting new momentum for future growth.

[File Photo: IC]

[Photo: IC]

Since China embarked on reforms of its capital market in 1990, the country has introduced a series of measures, including the mixed-ownership reform of its state-owned enterprises. In 2014, the country rolled out an overall development blueprint for its capital markets including stock, bond and futures markets. And a week ago, the China Securities Regulatory Commission said that the overall plan for China’s capital market reform had basically taken shape. And the Office of Financial Stability and Development Committee’s latest announcement put the STAR Market in the spotlight.

As the first submarket of China’s capital market to adopt the registration-based initial public offering (IPO) system, STAR relies heavily on information disclosure. Since its launch over a month ago, 28 of the 150 plus companies that submitted applications have successfully floated on the board. Authorities have since recommended the practices of registration-based IPO system be promulgated to a wider area step by step. The Office of Financial Stability and Development Committee also decided to introduce measures to cultivate various types of institutional investors with long-term capital inflows.

The goal of China’s capital market reforms is to serve its real economy. According to statistics, 80 percent of the enterprises in developed countries borrow funds through direct financing channels such as financial markets. By comparison, only 15 percent of China’s enterprises are able to do so. Only by further reform of the capital markets, can resources be more efficiently allocated to good-quality companies and thus their creativity and competitiveness can be further stimulated.

China’s capital market reforms have won confidence votes from international institutions, such as the FTSE Russell and MSCI. Both index providers have decided to boost the weight of China A-shares in their widely-tracked global benchmarks to 15 percent. As Beijing continues to streamline its capital market reform plan by enhancing the quality of listed-companies as a key aspect, more institutional investors are expected to be attracted to the market. And that will inject long-term momentum into the sustainable development of China’s capital market which, by providing more ammunition to the real sector, will boost high-quality growth in the entire economy.

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of chinaandgreece.com, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.