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Aug 28, 2019

China to deepen capital market reforms

Revised Securities Law to be adopted by the end of this year

China is to roll out a number of measures to deepen and strengthen capital market reforms by following the best international practices, the China Securities Regulatory Commission (CSRC) said on Sunday.

Under its plan, the authorities are to adopt the revised Securities Law by the end of this year and establish a system for security class action lawsuits with so-called Chinese characteristics – significantly raising the cost listed companies will face for engaging in fraudulent floats and disclosures.

Trial arrangements that proved effective on the new tech-focused Star Market – involving issuance, listing, trading and information disclosure reforms – will also be gradually introduced on other subsections of China’s A-share market.

This is all part of the regulators’ plan to achieve improvements in the quality of listed firms over the next three to five years. The CSRC says it learned from the ‘best international practices’ on how to formulate the plan.

A spokesperson says the Chinese capital markets’ ability to withstand external shocks ‘has strengthened’, so the CSRC will continue to step up reform efforts and spur ‘market vitality’, aiming for a ‘steady and healthy long-term development of the capital markets’.

The regulatory commission set up a management team to radically address the deepening of capital market reforms in March and held more than 10 meetings to discuss major aspects of reform.

In addition, the implementation of the registration-based initial public offering system, which is being piloted on the Star Market and later across all submarkets, could be a major factor in A-share market internationalization.

China President Xi Jinping announced in November that China would launch the Star Market and pilot the registration-based IPO system. The new market debuted on the Shanghai Stock Exchange on July 22 to huge success.