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China's Capital Market Lacks 'Three Major Things', Says Economist
China's capital market currently lacks "three major things", and it is unrealistic to expect that there is no problem, no risk and no conflict in the development of the capital market, said Fan Gang, famous economist and director of the National Economy Research Institute of the China Economic Reform Research Foundation.
At the "Tsinghua University summit meeting of the new century enterprises, Fan Gang indicated that the "three major things" lacking are:
Firstly, China still lacks "vicious purchase" in the market, so-called "vicious purchase" means conducting operation of the market, realizing purchase or control of it and finally reorganizing it by taking advantage of the opportunity provided by the poor operation of the market, its problems and the stock market fall. Shareholders meeting is often manipulated by managers, when it is impossible for the fall of stock price resulted from the underselling of stocks to stimulate the level of managers, the potential threat posed by "vicious purchase" is, in fact, one of the indispensable effective mechanisms used in the capital market to compel company managers to actively improve efficiency and conscientiously provide profits. If the capital market lacks "the intention to kill" or "the smell of blood", the driving force for improving efficiency and benefit will obviously become inadequate.
Secondly, China still lacks many local small securities markets, or so-called "transactions conducted outside the stock market". Fan Gang pointed out that in some market economy-oriented countries, not only the transaction of large quantities of property rights is conducted outside the stock market, but the trading of large quantities of stocks and securities is also conducted outside regular stock markets, which is realized through "counter deal" or "transaction outside the market".. The large number of paramount problems of China at present and for a period of time to come pose an issue of reforming the poorly performed small State-owned and collective enterprises. If there were only large national markets, it would be impossible for these poorly performed enterprises to trade their stocks on the market.
Fan Gang stressed that the capital market should also have "levels", there should be both plazas and some stalls. Judging from China's specific condition, the special process of the reform and development of Chinese enterprises requires that at the present stage China should pay more attention to local small securities markets. "Stalls" can also be fair and orderly normal markets and are an organic component part of the country's regular markets, in the future, these "stalls" can also be made a "national internet" through computers.
Finally, Fan Gang pointed out that standardized non-securities investment fund is currently also lacking in China's capital market, this kind of investment fund represents an intermediary mechanism for large numbers of small capital owners and the investment activities on the capital market. Small stock players can buy and sell stocks in a decentralized way on the stock market, however, it is difficult for small capital to be directly involved in the non-securities direct capital trading, because small stock players not only lack specialized knowledge and their amounts of capital are too small. Only through the medium of investment fund, can the concentration of capital be realized, can larger amounts of capital be brought into direct trade featuring non-security mergers and acquisitions (M&A), and can the capital market be more vigorous.
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