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Policy 'storm' on horizon

By Chen Jia  (China Daily)

13:40, May 09, 2012

China's top securities regulator told the industry to prepare for a "policy adjustment storm" as he outlined a raft of reforms to develop the capital market and improve its efficiency to keep pace with the nation's economic restructuring.

"Now is the best time for the securities sector to accelerate financial innovation," Guo Shuqing, chairman of the China Securities Regulatory Commission, told 146 top executives from more than 100 securities companies and stock exchanges at a banquet in Beijing.

A similar event, held in 2008, laid down markers for capital market reforms over the subsequent four years

This time, the country's top securities regulator made 11 suggestions on the innovation of institutional market players and collected opinions to prepare for the upcoming "policy adjustment storm".

Guo's comments may signal that a period of deregulation is on the horizon, after China's securities companies last year suffered their most difficult year since 2006, amid a bear market in which the Shanghai Composite Index suffered its third-largest drop, falling of more than 21 percent to 2199.43, according to analysts.

By the end of last year, 109 securities companies in China had a total net income of 39.38 billion yuan ($6.24 billion), only about half of the previous year's figure, according to data from the Securities Association of China.

The next round of crisis for the industry may be sparked by deteriorating financial conditions and the shrinking business space of securities companies, CSRC Vice-Chairman Zhuang Xinyi said on Tuesday.

"We should move fast to strengthen the sense of crisis and accelerate innovation," said Zhuang, who pointed out that lack of product differentiation was one of the obstacles to the expansion of China's securities industry.

The CSRC chief's blueprint encouraged institutional market players to create new financial products based on customer demand, while expanding the range of companies' self-operated businesses until they can invest in all the financial instruments in both the stock exchange and the over-the-counter markets.

Lan Rong, chairman of the board of Industrial Securities Co Ltd, said the financial services of securities companies should be for customer, rather than these firms following a speculative mentality that leads to the pursuit of irrationally high profits .

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