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Stock Market to Be More Open
China will further reform its stock market to make it easier for companies to go public and to increase access for foreign investors, according to a new report.
Policies expected to be revealed soon include the combination of stock markets and the setting up of a specialist market in Shenzhen, according to the Standard Chartered Bank report.
Foreign companies will also be allowed to invest more easily in the domestic A-share market and the hard-currency B shares and A shares will merge, the report added.
This news has been the center of talk in stock market circles for some time, but has not yet been formally announced.
The Chinese Government has shown its willingness to reshuffle the markets before opening them to foreign investors.
Among the already confirmed measures include one to grant more freedom to domestic financial institutions and allow increased co-operation between foreign and domestic brokerage firms.
The long-awaited reform is expected to pave the way for more public listing of the domestic enterprises, both State-owned (SOE) and privately owned, in the next few years, the report said.
This will not only help feed demands from fund-thirsty domestic firms, but will also be an important part of the economic reform of State-owned enterprises.
"The final aim of the securities market reform is to promote corporate structural reform in State-owned enterprises and improve their operation through public listings," the report said.
Though SOE reforms have been going on for years, many State firms have been slow to make changes that would guarantee better management to raise efficiency and prevent corruption.
Many of the firms urgently need technological upgrading to increase competitiveness and so require more funds they could get from going public.
As for the non-SOEs, access to the stock market would bring them funds that are often difficult to get from banks.
The moves should also induce more venture investment in the developing high-tech industry, according to the report.
But it went on to say changes should only be brought in if there was a healthy securities market.
"We need securities regulators to strengthen the supervision of the stock market and come up with new laws and regulations," the report said.
A sound supervision mechanism will increase investor confidence that has been affected by insider trading, fake information, delayed information disclosure and a poor accounting system.
In spite of the problems that need to be tackled, the present macro environment is favorable to the stock market reshuffle, the report said.
China's pending entry into the World Trade Organization will further open the Chinese capital market to overseas investors. (Chinadaily)
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