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    Ren Zeping: Five Proposals to Revitalize the Capital Market

    2019-01-30 11:22:45

    Financial sector websiteRen Zeping

    Author: Chief Economist and Director of Economic Research Hengda Hengda Economic Research Ren Zeping  

     Revitalizing the capital market: five major recommendations

    Text: Evergrande Institute Ren Zeping Ma Tunan

    Guide

    Recently, the Politburo meeting emphasized the need to focus on capital market reform, strengthen institutional development, and stimulate market vitality. What is the key crux of the current stock market in China? How to solve?

    Summary

    1. The capital market has the role of taking the lead and moving the whole body.

    The Central Economic Work Conference pointed out that the capital market has the role of taking the lead and moving the whole body. It is necessary to deepen reforms to create a standardized, transparent, open, dynamic and resilient capital market. The capital market plays an important role in China's economic and social transformation and development:

    1. The capital market is an important channel for private enterprise financing.It is difficult for private enterprises to obtain sufficient financing through the credit market. The capital market is an important channel for private enterprise financing. From 2014 to 2018, there were 1118 IPOs in the A-share market, with a total net proceeds of 686.76 billion yuan. Among them, there were 968 private enterprises with actual controllers of natural persons, with a total net financing of 433.57 billion yuan, accounting for respectively. 86.6% and 63.1%.

    2. The capital market is an important support for the vigorous development of the new economy.In recent years, many important high-tech enterprises have gained important support for enterprise development through IPO financing. In the early stage of enterprise development, the multi-level capital market represented by PE and VC played a more important role. Different from the traditional credit field of bank credit, PE and VC investment are obviously biased towards high-tech, high-tech manufacturing and other fields, which has made China's dominant position in the fields of Internet+, artificial intelligence and 5G. The number of China's new economic unicorn companies is second only to the United States in the world, and is closely related to the support of the capital market.

    3. The capital market is an important starting point for preventing and defusing financial risks.In 2018, the risk of equity pledge was exposed to a large area. The important reason was that the stock fell and the stock pledge bursted into a negative feedback loop. To resolve the risk of equity pledge business, on the one hand, we must bail out listed companies through various means such as equity, creditor's rights and hybrids. But more important is to restore the vitality of the stock market, introduce funds to source water, prosper the market, and fundamentally resolve the equity pledge crisis.

    Second, the five major recommendations to activate the capital market

    At present, China's A-share market valuation is relatively low, and the risk has been released. Five major reform measures should be adopted to revitalize market confidence, activate market sentiment, enhance market resilience, and enable the capital market to better serve the real economy.

    1. Recover market mechanisms, reduce administrative interventions, stabilize market expectations, and reinvigorate market confidence.In recent years, in order to cope with stock market disasters and maintain stability, regulators have continuously strengthened their supervision of the capital market. As the institutionalized supervision system is still not perfect, more temporary policies have been introduced and window guidance has increased. For example, some public funds previously reported that they received window guidance, were restricted to sell on the net, and the sale of large orders was prohibited. Although these measures were originally intended to maintain market order, they have objectively increased the arbitrariness of regulatory policies, resulting in unstable market expectations and suppressed market mechanisms, which is not conducive to the long-term healthy development of the market. From the international experience, the core of securities regulation in developed capital markets is to establish market-oriented, clear and predictable regulatory rules, and to punish violations in a large way, rather than directly intervening in the market by means of administrative means.

    We suggest that the current administrative intervention in the market should be gradually reduced, the trading resistance should be reduced, market liquidity should be enhanced, market expectations should be stabilized, and market entities that were over-restricted in the previous period should be “relaxed”. For market-neutral trading methods such as short-selling mechanisms, leveraged trading (financing and securities lending), and high-frequency trading, attention should be paid to establishing a system to regulate and reduce restrictive measures across the board.

    2. Accelerate the reform of the stock issuance registration system.At present, China's stock market adopts an approval system for listing companies. From the perspective of implementation effects, it is easy to lead to four major problems: excessive packaging, unreasonable pricing, shell resource speculation, power rent-seeking and corruption.

    The registration system is the reform direction of China's stock issuance system.We believe that to do a good job in the reform of the registration system, we must first improve the market-based issuance system, and we must support the system. To establishMarket-based delisting mechanismTo ensure that the market can continue to spit out new products and form a benign competition mechanism. To establishStrict information disclosure systemTo ensure true, complete and timely disclosure of information. WantImprove supervision, improve the level of supervision in and after the event, and enhance the power of supervision.

    3. Improve the investor structure of A shares. At present, the proportion of institutional investors in China's A-share market is only 16.1%, which is significantly lower than that of developed countries. The turnover of individual investors accounted for 82%, and the average annual turnover rate of Shanghai and Shenzhen stocks reached 189.6%, which was significantly higher than that of major developed markets. The pricing of A-share market was dominated by individual investors, and the speculative speculation atmosphere was too strong.The high proportion of individual investors' transactions has caused the volatility of the A-share market to be too large; the policy trend, the light fundamental analysis, and the institutional behavior of individualization.

    The main reason for the relatively low proportion of institutional investors in the A-share market is that when China's stock market was established, there were no institutional investors specializing in securities investment business in China.Since 2000, the proportion of positions held by professional institutional investors in China has increased, but the overall situation is still low. On the one hand, institutional investors lack long-term stable sources of funds, and on the other hand, because of the strong atmosphere of A-share speculation, institutional investors tend to reduce positions and reduce risks.

    We suggest that the pension fund should be appropriately relaxed and the stock market size should not exceed 30%, and the speed of investment in the stock market in the form of contracting funds with the Social Security Fund Board will be accelerated.When assessing the income of pensions, we should focus on the medium and long-term and absolute returns, and introduce stable sources of medium and long-term funds for the stock market. In addition, it is suggested that on the basis of sufficient research, the pilot fund industry will change from short-term performance ranking to long-term absolute performance assessment, reverse the short-term behavior trend of the fund industry, gradually form the concept of long-term investment and value investment, and increase the proportion of institutional investors. Promote the healthy development of China's stock market.

    4. Improve the design of the trading system. 1) Further regulate the suspension of listed companies.The free suspension of trading of listed companies and long-term suspension of trading have seriously affected the liquidity of stocks and caused damage to investors' right to know and trade. This is an important issue for A-shares. At present, the regulatory agencies have already realized the relevant issues and solved them by improving the system and strengthening supervision.We believe that strengthening supervision and implementation is important.For listed companies that have no clear reason to suspend trading for a long time, or whose suspension reason is more ambiguous, the exchange may force a resumption of trading. For major asset restructuring or asset restructuring, the time limit for suspension should be appropriately shortened, and the suspension time should not be arbitrarily extended for general reasons such as complicated transactions and related parties. When there is a clear abnormality in the market and liquidity collapses, the exchange should deal with it decisively, suspending the application for suspension of the company, and ensuring the normal operation of the market function.2) Cancel the stamp duty on stock transactions and reduce the transaction cost of the market.With the advent of the electronic and paperless trading era, the taxation basis of stamp duty has undergone major changes, and the rationality of continuing to impose stamp duty on stock transactions has declined. Historically, the adjustment of stamp duty rate has been given the function of regulating the market, but it cannot change the overall trend of the stock market, but it will aggravate short-term fluctuations. The developed countries such as the United States, Germany, and Japan have successively cancelled stamp duty on securities transactions.It is recommended to cancel the stamp duty on securities transactions in a timely manner according to market conditions.There are two advantages: On the one hand, from the data of 2018, the stamp duty on securities transactions accounts for only 0.5% of the general budget revenue, and there is little financial pressure after cancellation. On the other hand, the abolition of stamp duty on securities transactions will reduce market transaction costs, enhance investor confidence and capital market dynamism, and promote healthy market development.

    5. Improve the legal system and strengthen investor protection.The current "Securities Law" imposes a maximum penalty of 600,000 yuan on many illegal acts. The maximum penalty for the disclosure of insider information in the Criminal Law is 10 years, but the actual sentence is generally 3-5 years. Compared with the developed capital market, China's relevant laws impose lighter penalties on illegal and criminal activities, and it is difficult to effectively protect investors. In addition, with the continuous development of the market, the current securities law still has problems that cannot adapt to the new situation of the market, so it needs to be resolved through revision.

    We propose to speed up the revision of the Securities Law, significantly reduce the control of securities issuance and other fields, and at the same time strengthen law enforcement, increase penalties for securities crimes, and enhance regulatory power. Improve the level of supervision in the event and afterwards. In terms of criminal liability, for securities crimes with serious circumstances, the sentencing standards should be appropriately promoted, and efforts should be made to crack down on market order, manipulate prices, and violate rules and regulations, and continuously improve the legal environment of China's securities market.

    risk warning:Policy pushes less than expected

    table of Contents

    1 The capital market has a role in taking the lead

    1.1 Capital market is an important channel for private enterprise financing

    1.2 Capital market is an important support for the vigorous development of the new economy

    1.3 Capital market is an important catcher to prevent and resolve financial risks

    2 Five recommendations to activate the capital market

    2.1 Restoring market mechanism, reducing administrative intervention, stabilizing market expectations, and revitalizing market confidence

    2.1.1 Administrative intervention disrupts market expectations, market mechanisms fail to function and reduce market efficiency

    2.1.2 Reduce administrative intervention and strengthen institutional development

    2.2 Accelerate the reform of the stock issuance registration system

    2.2.1 There are four major drawbacks in the approval system: excessive packaging, unreasonable pricing, shell resource speculation, power rent-seeking and corruption.

    2.2.2 Approval system is the result of the marketization of the stock issuance system has not been completed

    2.2.3 Registration system reform is conducive to the formation of a more market-oriented institutional system in the stock market

    2.3 Improving the investor structure of the A-share market

    2.3.1 A-share market institutional investors hold a low proportion of stock market value and transaction volume

    2.3.2 It is difficult for institutional investors to grow and develop due to the strong hype atmosphere and lack of long-term stable funding sources.

    2.3.3 Continue to encourage pensions to enter the market and improve the assessment methods of institutional investors

    2.4 Improve the construction of the trading system

    2.4.1 Further regulate the suspension of listed companies

    2.4.2 Cancel the stamp duty on securities transactions and reduce the transaction cost of the market

    2.5 Improve the legal system and strengthen investor protection

    2.5.1 China's laws are too lightly penalized for some securities violations

    text

    On October 31, 2018, the Political Bureau of the CPC Central Committee held a meeting, emphasizing the need to focus on capital market reform, strengthen institutional development, stimulate market vitality, and promote long-term healthy development of the capital market. The Central Economic Work Conference pointed out that the capital market has a role in the financial operation, and it is necessary to deepen reforms to create a standardized, transparent, open, dynamic and resilient capital market. Recently, due to the superposition of externalities, market factors and policy factors, the vitality of China's capital market has weakened. Further improvement of policies is needed to stimulate the vitality of the capital market.

    1 The capital market has a role in taking the lead

    1.1 Capital market is an important channel for private enterprise financing

    The private economy plays an important role in the entire economic system, contributing more than 50% of tax revenue, more than 60% of GDP, more than 70% of technological innovation, more than 80% of urban labor employment, more than 90% of new employment and number of enterprises. .However, because the amount of collateral is difficult to meet the bank credit requirements, and there is a lack of government “hidden guarantees”, it is difficult for private enterprises to raise funds in the credit field.According to the sample survey data of the China Academy of Fiscal Science, in 2015-2017, the ratio of private and state-owned enterprises in the sample to bank loans fell rapidly from 63% to only 15%. Credit resources are tilted towards state-owned enterprises. At the same time, under the background of strict financial supervision, the non-standard financing that private enterprises rely on has shrunk sharply. The proportion of non-standard financing of sample enterprises in total financing of private enterprises has dropped from 43% to 15%, and the increase of bank credit cannot hedge against non-standard financing. The contraction has led to a decline in the total size of private enterprise financing. Traditional loans are limited, and the tightening of non-standard financing makes the difficulty of financing private enterprises outstanding.

     Revitalizing the capital market: five major recommendations

     Revitalizing the capital market: five major recommendations

    However, under the influence of the market mechanism, private enterprises with good qualifications or prospects can obtain capital market recognition through sufficient information disclosure and perfect corporate governance. Therefore, the capital market is an important way for private enterprises to obtain financing.By the end of 2018, there were 3,580 listed companies in the A-share market in Shanghai and Shenzhen, and 2,298 private listed companies with actual controllers were natural persons, accounting for 64%. From the perspective of financing, from 2014 to 2018, there were 1118 IPOs in the A-share market, with a total net proceeds of 686.76 billion yuan. Among them, there were 968 private enterprises with actual controllers of natural persons, and the total net financing was 433.57 billion. Yuan, accounting for 86.6% and 63.1% respectively. The capital market has become an important source of financing for private enterprises.

     Revitalizing the capital market: five major recommendations

     Revitalizing the capital market: five major recommendations

    1.2 Capital market is an important support for the vigorous development of the new economy

    The stage of high quality development is inseparable from innovation. In recent years, the new economy represented by the Internet economy and high-tech medical services has flourished and has become a key engine for China's economic transformation and industrial upgrading. Such companies are usually in the early stages of their life cycle and have difficulty obtaining banking system financing. The capital market can better solve this problem.Many important high-tech companies, such as BAT, Jingdong and Xiaomi, have gained important support for enterprise development through IPO financing.However, due to equity structure, regulatory rules and other reasons, these companies failed to land in the domestic A-share market, making domestic investors lose the opportunity to directly share the development dividends of these companies. This highlights the importance of perfecting the capital market system and attracting the listing of outstanding domestic enterprises.

    In the initial stage of new economic enterprises, multi-level capital markets have played a more crucial role.In recent years, the venture capital industry represented by PE and VC has developed rapidly, which provides an important guarantee for the vigorous development of the new economy. In 2018, China's total investment in PE and VC reached 1.17 trillion yuan, a year-on-year increase of 72%. From the perspective of industry investment, unlike the traditional credit field of bank credit, PE and VC investment are obviously biased towards high-tech and high-tech manufacturing industries such as information technology, new retail, new energy vehicles, and healthcare. Among them, the Internet software and services and information technology consulting industries accounted for 17.5% and 15.7% respectively, accounting for the top two in all sub-sectors. The continuous development and growth of these high-tech enterprises has provided high returns for high-risk preference funds. The mutual promotion has created China's dominant position in the fields of Internet+, artificial intelligence and 5G. The number of Chinese new economic unicorn enterprises Second only to the United States in the world, it is closely related to the support of the capital market.

     Revitalizing the capital market: five major recommendations

     Revitalizing the capital market: five major recommendations

     Revitalizing the capital market: five major recommendations

    1.3 Capital market is an important catcher to prevent and resolve financial risks

    Preventing the resolution of major risks is the top of the three major battles, and financial risks are an important part of it. In 2018, A-shares continued to fall, and the risk of large shareholder equity pledges was exposed to a large extent, and a negative feedback cycle was formed with the fall in stock prices. Most of the participants in the equity pledge are private enterprises, and some companies have a large proportion of equity pledge. Once the liquidation line is triggered and the forced liquidation is triggered, the control of the enterprise will be transferred. Therefore, the equity pledge risk exposure will cause market confidence and liquidity. Certain impact. In the whole year of 2018, there were as many as 1984 listed companies in which A shares participated in equity pledge, accounting for 55% of all listed companies, including 1,666 private enterprises, accounting for 46% of all listed companies, accounting for 72.5% of the total number of listed companies. Most private enterprises in the market have already participated in the equity pledge business, so once the risk is exposed, the impact will be larger.

    Part of the reason for the exposure of equity pledge risk is that some listed companies have excessive risk appetite.The operating style is radical, using stock pledge financing to increase shares or for businesses unrelated to the company's main business, so once the stock price falls and touches the liquidation line, it will encounter a liquidity crisis.However, some private enterprises also participate in equity pledge because the normal channel financing is blocked.Under the background of strict supervision, non-standard financing contraction and private placement are blocked. Bond financing is caused by frequent private company defaults and high cost, bank risk preference is lowered, and private enterprise loans are more cautious. In contrast, before the Shanghai Stock Exchange issued the "Stock Pledged Repo Trading and Registration and Settlement Business Measures" in March 2018, equity pledge financing was relatively convenient, and the use of funds was not strictly restricted, so it was favored by listed companies.

    To resolve the risk of equity pledge business, it is necessary to provide liquidity assistance to enterprises with temporary difficulties, but with good development prospects, and bail out through various means such as equity, creditor's rights and mixedness.Recently, the Exchange issued the "Notice on Matters Related to Stock Pledged Repo", which optimized the schedule of renewal of default contracts, and relaxed restrictions on the concentration of single-ticket institutions, the upper limit of pledge ratio, and the upper limit of pledge rate. It also played an important role in resolving the risk of stock pledge.But more important is to restore the vitality of the stock market, introduce funds to source water, prosper the market, and fundamentally resolve the equity pledge crisis.At present, China's A-share market valuation is relatively low, and the risk has been released. Through further reforms, we should revitalize market confidence, activate market sentiment, enhance market resilience, and make the capital market better serve the real economy.

    2 Five recommendations to activate the capital market

    2.1 Restoring market mechanism, reducing administrative intervention, stabilizing market expectations, and revitalizing market confidence

    2.1.1 Administrative intervention disrupts market expectations, market mechanisms fail to function and reduce market efficiency

    In recent years, in order to cope with stock market crashes and maintain stability, regulators have continuously strengthened supervision over the capital market, which has played an important role in cracking down on securities violations and boosting market confidence.However, in this process, as the institutionalized regulatory system is still not perfect, more temporary policies are introduced and window guidance is increased. It has a certain impact on normal market financing and trading.

    From the perspective of the issue, the supervisory layer strengthens the verification of the financial indicators of the listed and refinanced enterprises in order to improve the quality of listed companies and protect small and medium-sized investors. However, in the actual process, there has been a problem of repeated changes in financial data standards.Earlier media reports said that when the regulatory authorities audited IPOs and refinancing, they often screened the financial indicators threshold, and the relevant personnel would actively contact companies that did not meet the requirements, and sometimes actively dismissed the issuers. This makes market participants feel overwhelmed and adds a lot of transaction and communication costs.

    From the transaction level, after the abnormal fluctuation of the stock market in 2015, the regulatory authorities attached great importance to stabilizing the market and significantly increased the guidance of the trading window.According to media reports, at the end of 2017, “some stocks with huge gains in the previous period entered an adjustment period, causing some market members to panic. Public funds received window guidance, and were restricted to sell on the same day, and large-sale selling was prohibited.” When there is a rapid rise, there is also window guidance. A person in charge of private equity investment said that “there is a situation where the daily limit is bought and the supervisory department calls 'dismissal'.” At the same time, many quantitative funds have also received window guidance for trading. More frequently, the regulatory authorities will adopt a verbal notification, hoping to reduce the frequency of transactions and stabilize market volatility. In fact, high stock turnover rate does not necessarily lead to large price fluctuations, but excessive window guidance may lead to market expectations of instability, inhibiting the willingness of market participants to trade, resulting in reduced liquidity, but increased market risk.

    2.1.2 Reduce administrative intervention and strengthen institutional development

    Although the above-mentioned regulatory measures are intended to improve the quality of listed companies and maintain market order, they have objectively increased the arbitrariness of regulatory policies, resulting in unstable market expectations and suppressed market mechanisms, which is not conducive to the long-term healthy development of the market.In fact, the qualifications of listed companies should not be completed by the regulatory authorities, but should be handed over to professional institutions and investors in the market. The regulatory authorities are responsible for the integrity and truthfulness of information disclosure. Otherwise, no matter how strict financial standards are set, once the financial information is authentic, it will have a serious impact on investors. From the perspective of trading, there is already a system of ups and downs in China's market. If we further use the window to guide the restriction of trading, it will only further weaken the market liquidity and restrain the market's price discovery function, which is not conducive to the long-term healthy development of the market.

    From the international experience, the core of securities regulation in developed capital markets is to establish market-oriented, clear and predictable regulatory rules, and to punish violations in a large way, rather than directly intervening in the market by means of administrative means.In addition, if a large number of supervisory forces are concentrated in the examination and approval and window guidance, the power of the auditing system and the judicial system will be relatively insufficient, and it will be difficult to effectively shock the behavior that undermines the market order, and it will be difficult to form truly effective supervision.

    We suggest that the current administrative intervention in the market should be gradually reduced, the trading resistance should be reduced, market liquidity should be enhanced, market expectations should be stabilized, and market entities that were over-restricted in the previous period should be “relaxed”.The current stock market valuation is at a low level, and the market risk has been greatly reduced. Continued implementation of the preliminary temporary regulatory policy will not be conducive to the repair of market confidence and the accumulation of popularity, which is not conducive to preventing and defusing financial risks. For market-neutral trading methods such as short-selling mechanisms, leveraged trading (financing and securities lending), and high-frequency trading, attention should be paid to establishing a system to regulate and reduce restrictive measures across the board.

    2.2 Accelerate the reform of the stock issuance registration system

    2.2.1 There are four major drawbacks in the approval system: excessive packaging, unreasonable pricing, shell resource speculation, power rent-seeking and corruption.

    At present, China's stock market adopts an approval system for listing companies. The CSRC has formulated the Measures for the Administration of Initial Public Offerings and Listings (the “Measures”) to review the listing applications of enterprises, and then grant them publicly issued shares. From the actual effect, the approval system has the following problems.

    First, it is easy to cause the company to over-package.The CSRC stated in the Measures that the reporting enterprise should: 1) The net profit of the most recent three accounting years is positive and accumulated more than RMB 30 million; 2) The accumulated net cash flow from operating activities in the last three fiscal years More than RMB 50 million; or the accumulated revenue of the last three fiscal years totaled more than RMB 300 million; 3) The total share capital before the issuance is not less than RMB 30 million; 4) The intangible assets at the end of the latest period (excluding land use rights, surface culture) After the right and mining rights, etc., the proportion of net assets is not higher than 20%; 5) There is no unrecovered loss at the end of the latest period. The purpose of these financial requirements is to ensure that listed companies are in a good state of operation, to prevent companies from listing money and to protect the legitimate rights and interests of investors. However, in practice, some enterprises will achieve the above requirements by beautifying the financial statements, and even suspected of financial fraud, but infringe on the legitimate rights and interests of investors.

    Second, it is easy to cause the issue pricing to be unreasonable.Since the application for listing needs to be approved, the primary market is likely to over-price the approved enterprises. After the listing, the secondary market price of the stock continued to fall, causing unfairness to investors in the secondary market. In order to solve this problem, the CSRC issued the Notice on Issues Related to the Pricing of New Shares in 2012, requesting that the issue price of the issue price based on the inquiry result is higher than the average P/E ratio of listed companies in the same industry by 25%. The board of directors confirms the issue pricing and discusses the analysis of the risk factors of pricing and its related impacts. In fact, it guides the upper limit of the issue price. However, this has limited the issue price of some enterprises, resulting in continuous daily limit after the stock market went on, and other problems such as irrational trading in the secondary market. The examination and approval system weakens the market-based pricing mechanism and interferes with the pricing of the primary market of the stock.

    The third is to encourage the hype of shell resources in the A-share market.Under the approval system, the value of listed companies is not only reflected in the company's performance, but also in the listing qualification itself. This has led to the problem of shell resource speculation that has plagued the A-share market for many years. Some listed companies have poor operating performance and should have been gradually eliminated by the market. However, under the current system, these companies have improved their statements through mergers and acquisitions, thus avoiding the fate of being capped. There are also some companies listed on the curve of the acquisition of listed shell companies. However, in this process, a series of problems such as financial fraud were derived. For example, in order to prevent stocks from being specially dealt with by the Shenzhen Stock Exchange and to retain the qualification for reorganization, the Shenzhen Stock Exchange listed company, St. Leida, conducted a series of financial frauds in 2015 through inflated income and profits. In 2018, the relevant person in charge of the CSRC Penalties such as market bans and fines were imposed. From the performance of the secondary market, in the near future,Hengli Industry,*ST longevityThe constant daily limit of the shell stocks has clearly deviated from the company's fundamentals, indicating that the problem of shell stock speculation still exists.

    The fourth is the breeding of power for rent-seeking and corruption.The listing financing is very important for the development of many enterprises. Under the approval system, the staff of the relevant departments of the CSRC have a strong voice in the listing of the company, which naturally leads to rights rent-seeking and corruption. Judging from the situation of the officials of the CSRC system disclosed since the 18th National Congress of the Communist Party of China, most of the officials who have lost their horses are closely related to the issuance and approval of the listing of enterprises. Most of the crimes of corruption and bribery occur during the period of serving or in charge of the issuance department.

    2.2.2 Approval system is the result of the marketization of the stock issuance system has not been completed

    The approval system for the A-share market is the result of the unfinished market-oriented reforms.Looking back at the reform history of the A-share market, the IPO listing system has undergone a multi-sector approval process to the CSRC-led approval system, and then to the approval system. Although the overall degree of marketization has been continuously improved, a comprehensive market-oriented system has not yet been formed.

    From 1990 to 1992, the approval of new shares issuance and listing belongs to different government departments.The restructuring of the enterprise shareholding system shall be examined and approved by the Planning Commission and the Commission for Reform, and the issuance of shares shall be examined and approved by the People's Bank of China. The stock listing and trading shall be examined and approved by the Shanghai and Shenzhen Stock Exchanges.

    In April 1993, the A-share listing was converted to an approval system.The Provisional Regulations on the Administration of Stock Issuance and Transactions stipulates thatThe competent department of the central enterprise and the local government shall examine and approve the application for issuance of the relevant enterprises in accordance with the affiliation, and the CSRC shall review and copy the securities commission.The regulations established a two-level administrative examination and approval system and laid the foundation for a national unified new share issuance review system.

    In 1999, the A-share issuance system was changed to an approval system.Promulgated by the Securities Law of the People’s Republic of China“The securities regulatory authority under the State Council shall be responsible for approving the application for issuance of shares in accordance with the statutory conditions, and the approval procedures shall be open and subject to supervision according to law”"The decision shall be made within three months from the date of acceptance of the application documents for the issuance of securities; if it is not approved or approved, it shall be explained. The degree of marketization of the IPO is significantly improved. The Interim Measures for the Sponsorship System for Securities Issuance and Listing in February 2004 The issuance of the new shares has entered the stage of sponsorship. Since then, the CSRC has further improved market-oriented reforms in terms of establishing a sponsorship system, pricing of new shares, and issuance scale, but still retains the power to finally approve the listing of the company. The issuance mechanism has not yet been fully marketable.

     Revitalizing the capital market: five major recommendations

    2.2.3 Registration system reform is conducive to the formation of a more market-oriented institutional system in the stock market

    Due to the above problems in the approval system, the registration was made for the reform direction of the listing system in China.Compared with the approval system, under the registration system, the CSRC formulates information disclosure requirements and basic city standards, and is responsible for reviewing the authenticity of the information disclosed by listed companies. It does not require clear requirements for the listed companies' business performance and qualifications, as long as the enterprises meet the basic standards. Providing information is true, you can register for listing, and pricing is also done by the market. The registration system maximizes the role of the market mechanism in the process of listing companies, and at the same time reduces the problems of excessive packaging for the listing and unreasonable pricing and power rent-seeking in the market. At present, the stock markets of major developed countries such as the New York Stock Exchange, NASDAQ, and the London Stock Exchange adopt registration systems.

     Revitalizing the capital market: five major recommendations

    Since its inception in 2013, China’s registration system reform has continued to move forward in twists and turns.In November 2013, the Third Plenary Session of the 18th CPC Central Committee proposed to promote the reform of the registration system for stock issuance. In May 2014, New China Nine Articles proposed to actively and steadily promote the reform of the stock issuance registration system. In March 2015, a spokesman for the China Securities Regulatory Commission said that the first draft of the registration reform plan had been completed and submitted to the State Council. Subsequently, China's stock market experienced abnormal fluctuations, and the registration system reform was also blocked. In March 2018, the Standing Committee of the National People's Congress decided to extend the authorization for the reform of the stock issuance system for two years.

    On November 5, 2018, General Secretary Xi Jinping proposed at the China Import Expo that the Shanghai Stock Exchange set up a science and technology board and a pilot registration system.Compared with the previous stock reform thinking, this reform is an incremental reform. The shift in thinking reflects a more secure policy orientation. At present, China's main board market is large in scale, and the difficulty of reform is increasing. The registration system reform directly in the main board market is likely to have an impact on the existing financial system. Adding a science and technology board and implementing a registration system reform, exploring effective rules and measures such as issuance, listing, trading, information disclosure, supervision, delisting, etc. After successful experience, it will be promoted to the main board market in a timely manner, which will effectively reduce China's capital. The cost of market reform is conducive to the advancement of market-oriented reforms.

    On January 23, 2019, the Sixth Meeting of the Central Comprehensive Deepening Reform Committee reviewed and approved the "General Implementation Plan for Establishing a Science and Technology Board and Pilot Registration System on the Shanghai Stock Exchange" and "On the Establishment of a Science and Technology Board on the Shanghai Stock Exchange." Important documents such as the Implementation Opinions of the Pilot Registration System,The registration system reform continued to advance. We believe that if the registration system is to achieve the desired results, it should not rely solely on the reform of the listing process, but should establish a series of supporting measures such as trading, supervision and delisting to ensure that the registration system reform can achieve corresponding results.

    (1) The establishment of the listing system and the delisting system are equally important.On the one hand, the registration system in the issuance phase can effectively reduce the intervention of the regulatory authorities in the listing process, effectively reducing corruption and rent-seeking. On the other hand, only by establishing an effective delisting system and strictly implementing it, constantly vomiting new products and forming healthy competition, the market can continue to maintain its vitality. If a large number of low-qualified, low-trading enterprises are allowed to flood the market, it will weaken the vitality of the market and is not conducive to the long-term stable development of the market. A perfect delisting system should be established to clarify the whereabouts of delisting enterprises and strictly enforce them. At the same time, it is also necessary to prevent malicious delisting and protect the legitimate rights and interests of investors.

     Revitalizing the capital market: five major recommendations

    (2) Strict information disclosure system is the core of the registration system.Under the registration system, the focus of the supervision department is no longer to review the qualifications of listed companies, but to supervise the quality of corporate information disclosure. Therefore, it is necessary to establish a unified, standardized and efficient information disclosure system, and severely punish companies that violate information disclosure rules and disclose false information.

    (3) Improve the legal system of the capital market.At present, the upper limit of the penalty amount stipulated in China's "Securities Law" is only 600,000 yuan. In the capital market where the illegal income is over 100 million yuan, the excessively low penalty amount can not play a regulatory shocking effect, but it also breeds various infringement investments in the capital market. The behavior of the rights of the person. The revision of the new round of the Securities Law was launched as early as 2014. However, due to the changing market environment in recent years, the review of the Securities Law has been postponed, leading to the obstruction of the relevant reform process. The establishment of the science and technology board should be taken as an opportunity to accelerate the relevant legislative work and promote the construction of China's capital market legal system.

    2.3 Improving the investor structure of the A-share market

    2.3.1 A-share market institutional investors hold a low proportion of stock market value and transaction volume

    Compared with developed markets, the main problem facing the A-share market is that institutional investors hold a low proportion of stock market value. The proportion of general corporate and individual investors ( retail investors) is high, and the volume of individual investors accounts for a relatively high proportion.A large number of retail-led transactions have led to a serious herd effect in the A-share market, causing excessive market price volatility.

    Shanghai Stock Exchange disclosure data displayAt the end of 2017, China’s institutional investors held a stock market value of 16.1%.The market value of investment funds accounted for only 3.3%. Individual investors hold 21.2% of the shares, and the share of general corporate (industry capital) shares is as high as 61.5%.

     Revitalizing the capital market: five major recommendations

    The proportion of institutional investors in the stock market of developed countries is higher than that of China. At the end of 2017, the market value of institutional investors in the US stock market (NASDAQ and NYSE) accounted for 61% of the total market.Among them, mutual fund holdings accounted for 23%, government and private pensions accounted for 11.9%, and foreign investors accounted for 15%. Individual investors hold 39% of the stock market value.

    Institutional investors in the UK stock market held a stock market value of 83.3%.Among them, domestic institutional investors accounted for 29.4%, foreign investors accounted for 53.9%, mainly including various international financial institutions, pensions, charities, investment funds, etc., indicating that the UK capital market is relatively open. Individual investors hold only 12.3% of the stock market value. The UK stock market is characterized by strong institutional dominance.

    Japanese institutional investors accounted for 61% of the stock market value.Domestic and international institutions each account for 30%. The legal person shares account for 21% of the shares, which is relatively high in developed countries, but still far below the 61% level in China.

     Revitalizing the capital market: five major recommendations

    Due to the low proportion of institutional investors in China and the fact that some of the shares held by legal persons are restricted to circulation, the proportion of individual investors in the secondary market is obviously high.2017In the year, the proportion of individual investor transactions in China was as high as 82%, while that of professional institutional investors accounted for 14.76%, of which investment funds accounted for only 4.15%.

     Revitalizing the capital market: five major recommendations

    From the perspective of turnover, the A-share market turnover rate continues to be higher than other major stock exchanges.Since 2009, the average annual turnover of the Shanghai Stock Exchange has been 194.1%, and that of the Shenzhen Stock Exchange has been 335.9%, which is higher than the 108.6% of the NYSE and 63% of the London Stock Exchange. During the abnormal fluctuation of the stock market in 2015, the exchange rate of the Shenzhen Stock Exchange once exceeded 800%, and the market speculation atmosphere was strong.

     Revitalizing the capital market: five major recommendations

    The high proportion of individual investors' transactions indicates that A-share pricing is dominated by individual investors, leading to three problems:The transaction of individual investors has a strong characteristics of chasing up and down, the herd effect is strong, and it is easy to amplify the fluctuations, resulting in a big ups and downs in market prices.two isCompared with professional investors, individual investors lack a deep understanding of the company's financial and business conditions, pay little attention to trading technology, and pay too much attention to subject speculation and policies, and easily overestimate stock prices.Third, because institutional investors need to accept the market prices dominated by individual investors and play games with them for a long time, some institutions have gradually shown a tendency to “divided” in transactions.

    2.3.2 It is difficult for institutional investors to grow and develop due to the strong hype atmosphere and lack of long-term stable funding sources.

    The retailing of the A-share market is inseparable from its development.At the beginning of the establishment of China's securities market, influenced by the planned economic thinking, the stock market was subject to strong administrative control. For example, the "Decision of the Central Committee of the Communist Party of China and the State Council on the recent efforts to combat several corruptions in the fight against corruption" issued in 1993 pointed out that cadres at or above the county level buy and sell stocks. The "Provisions on the Prohibition of State-owned Enterprises and Listed Companies' Speculation of Stocks" promulgated in 1997 clearly states that state-owned enterprises may not trade stocks. Bank funds and insurance funds are also banned from entering the market. In addition, the fund industry has not yet been established, and there is no formal institutional investor specializing in the A-share market. Introducing foreign institutional investors is even more difficult to talk about. In this context, individual investors have naturally become the main players in the A-share market.

    In 1998, the first batch of public fund companies was established. The management hopes to attract social funds and gradually cultivate and strengthen the institutional investor group by introducing professional institutional investors. In 2003, the social security fund officially entered the stock market. Since then, the proportion of institutional investors has increased. However, at present, institutional investors still lack long-term, stable sources of funding due to various regulatory restrictions. Coupled with the problems of listed company quality, market pricing mechanism, etc., the A-share market has a strong atmosphere of “selling stocks”. The concept of long-term investment and value investment has not yet formed, and the market's profit-making effect is not good. Since most institutional investors bear fiduciary responsibility, in the face of this environment, they tend to lower their positions and avoid risks, resulting in a long-term low market share of A-share institutional investors.

     Revitalizing the capital market: five major recommendations

    2.3.3 Continue to encourage pensions to enter the market and improve the assessment methods of institutional investors

    (1) Increase the upper limit of the proportion of investment funds invested by pension funds

    A longer period of time, a larger amount of funds entering the market is conducive to stabilizing market confidence, and is also conducive to the long-term healthy development of China's stock market.Pensions are an important source of long-term funding, and US pensions have a relatively successful experience in entering the market. The US pension is divided into three parts: basic social pension, 401K supplementary pension plan and commercial insurance savings pension account. Among them, 401K accounts for about 50% of the entire pension scale, and the scale at the end of 2017 has reached 8.5 trillion US dollars. The long-term stable investment of funds in the 401K in the stock market has significantly increased the share of US institutional investors in the stock market, providing a long-term stable source of funds for the US stock market and becoming a stabilizer for the US stock market. Currently, 67% of the funds in 401K are invested in the stock market. The main investment methods are stock funds, company stocks and stocks in the hybrid fund. Even in the 2008 financial crisis, the proportion of stock investment in 401K reached about 56%. Long-term capital investment is an important cornerstone for the continued healthy development of the US stock market.

     Revitalizing the capital market: five major recommendations

    China's pension investment stock market is currently facing stricter constraints. According to the “Regulations on Investment Management of Basic Endowment Insurance Funds” issued by the State Council in 2015, the proportion of investment in stocks, stock funds, hybrid funds and stock-based pension products cannot be high. 30% of the net value of the pension fund's assets.From the actual situation of pensions entering the market, as of the end of September 2018, 15 provinces (autonomous regions, municipalities) and the Social Security Fund Council have signed commissioned investment contracts with a total contract value of 715 billion yuan, of which 416.65 billion yuan. Already arrived and started investing.It is recommended to appropriately relax the net value ratio of the pension investment stock market, and accelerate the signing of the investment contract signed by the unsigned provinces and the Social Security Fund Council. When assessing the pension income, the focus is on the medium and long-term and absolute returns as the focus of the stock market. Introduce stable sources of medium and long-term funding.

    (2) Change the short-term trend of fund industry performance appraisal

    At present, the source of funds for public funds is mainly retail investors, which are more dependent on sales channels. Based on factors such as sales pressure, the assessment of the fund industry is short-term, resulting in a shorter-term investment behavior, and the emphasis on short-term gains exceeds long-term value. The strategic position of the industry as a cornerstone investor and value investor has not been fully realized. It is suggested that on the basis of sufficient research, the pilot fund industry will change from short-term performance ranking to long-term absolute performance assessment, reverse the short-term behavior trend of the fund industry, gradually form the concept of long-term investment and value investment, and promote the healthy development of China's stock market.

    2.4 Improve the construction of the trading system

    2.4.1 Further regulate the suspension of listed companies

    (1) The free suspension of listed companies affects the normal trading of the stock market

    The random suspension of listed companies is one of the prominent problems facing the A-share market.The original intention of stock suspension is to prevent major events planned by listed companies from being leaked in advance, which has a significant impact on the stock price and adversely affects small and medium investors. However, in the course of practice, the problems of excessive suspension of listing companies, excessive time, ambiguity of suspension reasons, etc. are more prominent, and the situation of locking out the restructuring price and avoiding special market conditions is derived.

    The suspension of trading by listed companies and the long-term suspension of trading have seriously affected the liquidity of stocks and caused damage to investors' right to know and trade.By studying the suspension of A shares, we found that most of the reasons for the long-term suspension were due to restructuring or major asset restructuring. In the “Guidelines for Listed Companies Planning for Major Events Suspended and Rescheduled Business”, the Shanghai Stock Exchange has requested that, in addition to the major assets reorganization matters subject to prior approval or subject to major precedent, the time limit for the suspension of the major assets restructuring of listed companies shall not exceed 5 month. But in fact, some listed companies have been suspended for more than five months. E.gShagangOn September 19, 2016, it announced that it would suspend trading due to major events. On June 15, the following year, Shagang disclosed the major asset restructuring plan, but it is still in suspension. In this regard, the Shenzhen Stock Exchange has repeatedly sent a letter of concern, saying that the relevant actions of Shagang have violated the provisions of Article 17.1 of the Stock Exchange Listing Rules (2014 Revision) and ordered it to apply for stock resumption in a timely manner, but did not receive supervision. effect.

    In extreme market conditions, the suspension of free listing by listed companies may also have a significant impact on the liquidity and price discovery mechanisms of the entire market.During the abnormal fluctuations of stocks in 2015, many stocks chose to temporarily suspend trading in order to avoid being sold by investors, and some stocks were suspended for reasons of suspension. In the worst case, the A shares have more than 1,000 suspensions on a single trading day, and the market is called “thousands of shares suspended”. In the case of extremely tight market liquidity, the suspension of thousands of shares amplifies the panic in the market. Some public offerings have suffered severe redemption pressures and have to sell large unsold stocks, causing these stocks to quickly fall and the market is rapidly liquid. The ice seal, the stock market price discovery mechanism is almost interrupted. More importantly, the suspension can only temporarily avoid the risk of falling stock prices and cannot change investor expectations. Once the stock resumes trading, the stock price still faces the risk of compensating for the decline.

     Revitalizing the capital market: five major recommendations

    Capital markets in developed countries also have a system of suspension and resumption, but the system design is different from the A-share market.In the United States, for example, there are two situations in which stocks in the US market are closed. The first type is trading Halts, which is executed by the exchange. The most common situation is when the listed company issues an announcement at the time of the transaction. The trade will be interrupted for a short time, usually 15-30 minutes. Its main purpose is to ensure the full dissemination of information and prevent different traders from knowing the different time of information to produce arbitrage. The other is Trading Suspension, which is administered by the US Securities and Exchange Commission and is a regulatory measure. When the SEC finds or suspects that the company has significant information disclosure problems (incomplete information disclosure or information fraud), insider trading, manipulation of the market and other issues, the duration is 2-3 weeks. On the whole, the US market has stricter regulations on the suspension and resumption of trading of listed companies, and the overall time limit for suspension is shorter.

    (2) Improve the supervision system and stop arbitrary suspension of trading

    In fact, relevant departments have continuously improved the construction of relevant systems in response to the problem of random suspension of listed companies.In 2016, the Shanghai Stock Exchange and the Shenzhen Stock Exchange issued the “Guidelines for the Listing of Major Events Stopping and Resumption of Businesses” and the “Memorandum of Business of Stopped Resumption of Listed Companies” respectively, and regulated the scope of suspension, the time limit for suspension of trading and the procedures for suspending trading. On November 6, 2018, the China Securities Regulatory Commission issued the "Guiding Opinions on Improving the System of Stocks Stopping and Resumption of Listed Companies", stipulating that listed companies should be based on the principle of non-stop trading, suspension of cards as an exception, short-term suspension of trading as the principle, long-term suspension of the card as an exception, intermittent The suspension of the card is the principle, continuous suspension of the card is an exception, no free to stop trading or unreasonable delay in the resumption of trading time. The new regulations also regulate the suspension period, information disclosure, and supporting mechanisms to improve the capital market infrastructure, optimize transaction supervision, reduce trading resistance, and enhance market liquidity.

    Strengthen supervision and focus on implementation.At present, the relevant mechanisms have been gradually improved, and the key to achieving the expected results is implementation. For listed companies that have no clear reason to suspend trading for a long time, or whose suspension reason is more ambiguous, the exchange may force a resumption of trading. For major asset restructuring or asset restructuring, the time limit for suspension should be appropriately shortened, and the suspension time should not be arbitrarily extended for general reasons such as complicated transactions and related parties. When there is a clear abnormality in the market and liquidity collapses, the exchange should deal with it decisively, suspending the application for suspension of the company, and ensuring the normal operation of the market function.

    2.4.2 Cancel the stamp duty on securities transactions and reduce the transaction cost of the market

    Stamp duty is an ancient tax type that was established in the Netherlands in the 17th century. The main purpose of its establishment is that a large number of papers, such as contracts and contracts, require government printing endorsements to enhance credibility. When encountering disputes, such "printed" vouchers are also more legally effective, and the government therefore draws a certain percentage in return. In the age of paper vouchers, stock exchanges, etc., need to frequently use paper stocks endorsed by the government. Therefore, it is reasonable to pay stamp duty. However, with the advent of electronic and paperless trading eras, the taxation base has undergone major changes, and the rationality of continuing to impose stamp duty on stock transactions has declined.

    As a major tax in the A-share market, the stamp duty of stock transactions has historically been given the function of regulating market conditions in addition to the basic role of increasing government revenue. However, from the results, the adjustment of the stamp duty rate does not change the long-term trend of the stock market, but it also exacerbates short-term fluctuations.

    On January 24, 2005, the stamp duty rate on securities transactions was reduced from 2‰ to 1‰. The Shanghai Composite Index closed up 1.73% on the day, but continued its downward trend since then, and finally set a historical low of 998.23 points in June.

    On May 30, 2007, the stamp duty rate was raised from 1‰ to 3‰. The Shanghai Stock Exchange Index opened 5.69% lower the next day and fell 6.5% throughout the day. However, this did not change the progress of the A-share bull market. The Shanghai Composite Index continued to rise. And in October of that year reached the apex of 6124.04.

    On April 24, 2008, the stamp duty on securities transactions was reduced from 3‰ to 1‰. On the same day, the Shanghai Composite Index hit the daily limit, and the stocks almost reached the daily limit. However, the follow-up market was still in a narrow range, and the overall trend remained unchanged.

    On September 19, 2008, the stamp duty on securities transactions was changed from bilateral levy to unilateral levy. On the same day, the Shanghai Composite Index closed up 9.46%, and individual stocks almost reached the daily limit. However, in the next two months, the market still fell to a low of 1664.93.

     Revitalizing the capital market: five major recommendations

    From the international experience, since the 1990s, with the electronic trading of stocks, the United States, Germany, Japan, Australia and other countries have successively cancelled the stamp duty on securities transactions. The countries that still collect stamp duty are mainly China, India, the United Kingdom, etc., but the UK adopts a stamp duty reduction and exemption policy for some small and medium-sized board stocks.

    It is recommended to cancel the stamp duty on securities transactions in a timely manner according to market conditions.On the one hand, from the perspective of fiscal revenue, the fiscal revenue raised through stamp duty is relatively small. In 2018, the national securities transaction stamp duty totaled 97.7 billion yuan, while the general public budget revenue was 183.352 billion yuan in the same period, and the securities transaction stamp duty only accounted for 0.5%. . After the cancellation, there is little pressure on fiscal revenue. On the other hand, the abolition of stamp duty on securities transactions will reduce the transaction costs of the stock market, enhance investor confidence and capital market vitality, and promote healthy development.

    2.5 Improve the legal system and strengthen investor protection

    2.5.1 China's laws are too lightly penalized for some securities violations

    The Securities Law and the Criminal Law are the main laws governing China's securities market and protecting the legitimate rights and interests of investors. However, the main problem currently facing is that the punishment for some illegal acts is too light. Among them, it is widely disputed that the administrative penalty for the illegal acts of the Securities Law is 600,000 yuan. Compared with the profit of hundreds of millions of illegal activities in the securities market, the penalty limit imposed by the securities law is too low to effectively deter the illegal behavior of the securities market.

    For example, in December 2017, the China Securities Regulatory Commission announced the decision on penalties for Yabato. From September 2015 to September 2016, Yabait accumulated a false increase in business through fictitious overseas engineering projects, fictitious international trade and domestic trade. With a revenue of 580 million yuan and a profit of 256 million yuan, it is one of the most serious financial fraud cases in the history of China's securities industry. However, even if it is punished by the top case, the company will only bear a fine of 600,000 yuan, and the person responsible will be fined only 300,000, which is difficult to form enough shock. At the same time, investors sued the company for recovering losses in China and faced difficulties in filing and difficult proof. Therefore, there are few cases of obtaining civil compensation for securities fraud, and it is difficult to obtain effective protection of legitimate rights and interests.

    Criminal responsibility,Article 181 of China's "Criminal Law" stipulates that the maximum sentence for insider trading and disclosure of inside information is 10 years. In actual implementation, the largest mouse warehouse case in China, Ma Le involved a total of 1.05 billion yuan, illegally profited nearly 20 million yuan, and was finally sentenced to three years in prison. Xu Xiang case shocked the whole country. From 2010 to 2015, he colluded with the chairman or actual controller of 13 listed companies to manipulate the stock transactions of listed companies, control 139 securities accounts, illegally profited 9.338 billion yuan, and was sentenced to fixed-term imprisonment. Five years and six months.

    In contrast, the penalties for developed capital markets for securities market violations are extremely severe.Take the United States as an example. In 2001, Enron’s inflated profit of 600 million US dollars was exposed, financial fraud caused a sensation worldwide, and the US Securities and Exchange Commission penalized 500 million US dollars, resulting in bankruptcy and liquidation of the company. Relevant intermediaries, such as Andersen, Citigroup, JPMorgan Chase, etc., are being held accountable. Among them, the auditor Andersen was suspected of colluding with Enron and concealing evidence of crimes and was investigated by the US Department of Justice. In the end, Andersen was found guilty of impeding justice and was fined $500,000 and was unable to do business for five years. Since then most of the clients have terminated their business with Andersen, and Andersen was forced to close most of its offices around the world and went bankrupt in 2002.

    From the perspective of criminal responsibility, US law imposes severe penalties on securities violation cases.Take the crime of insider trading as an example. The Sarbanes-Oxley Act of 2002 stipulates that anyone who gains interests in the securities market through insider trading or price manipulation constitutes a crime of securities fraud, up to 25 years in prison or a fine of 5 million. Simultaneously,The United States has a wide range of insider identification: the company's directors, supervisors, senior executives and their partners, trustees; shareholders with more than 10% of the shares and their partners, trustees; company employees and spouses, direct blood relatives and family trustees of the above-mentioned personnel; presumed insiders Including any outsiders who know the inside information through the performance of their duties; information disclosure and disclosure of known people, etc. In 2011, the sailing fund Rajaratnam was charged with insider trading, involving more than 30 million US dollars and was sentenced to 11 years in prison. Dozens of corporate executives, including Intel's strategic investment director, McKinsey & Company's director, and IBM's senior vice president, were also involved in the case. 21 people were arrested and pleaded guilty.

     Revitalizing the capital market: five major recommendations

    In fact, in addition to the penalties for some illegal acts, the existing securities laws still have excessive regulation of securities issuance. The role of the capital market in serving the real economy has not been effectively implemented. The cross-border issuance and trading activities of securities lack the necessary system. Arrangement, the market restraint mechanism is not perfect, the protection of investors is weak, and the quality of information disclosure is not high.Therefore, the revision of the Securities Law, the improvement of the market mechanism, the improvement of supervision, and the strengthening of the crimes against illegal crimes have become the consensus of all walks of life. The revision of the Securities Law of this round was launched in 2013. However, due to the wide coverage, there are many research items and rapid changes in the market environment, which are still under review.

    We propose to speed up the revision of the Securities Law, significantly reduce the control of securities issuance and other fields, strengthen law enforcement, increase the punishment for securities crimes, enhance the supervisory power of supervision, and improve the level of supervision during and after the event. In terms of criminal liability, for securities crimes with serious circumstances, the sentencing standards should be appropriately promoted, and efforts should be made to crack down on market order, manipulate prices, and violate rules and regulations, and continuously improve the legal environment of China's securities market.

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