Apple News Facebook Twitter 新浪微博 Instagram YouTube Wednesday, Mar 15, 2023
Search
Archive
English>>

Capital markets enter new era with revised equities legislation

(Global Times)    07:52, December 30, 2019

Changes aim to promote registration-based IPO reform, raise penalties for violations

China's top legislature approved an amended Securities Law over the weekend, relaxing rules governing new listings on China's stock market and raising penalties for violations, which experts said marked a milestone for the country's capital markets and laid a solid foundation for future market reforms.

The law, a crucial step to marketize and legalize the Chinese capital market, also aims to create a better investment environment and bolster confidence among foreign investors amid the country's efforts of further reform and opening-up, experts noted.

Effective on March 1, 2020, the amendment was approved at the end of a six-day session of the National People's Congress Standing Committee on Saturday. It highlights provisions to expand registration-based IPOs, impose stricter information disclosure requirements, set heavier penalties for market violations and provide better protection for investors.

"It could be considered as one of the most critical steps in China's capital market, as the new law improves market inclusiveness, reduces administrative intervention, and also sets the tone for the market's reforms in the future," Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times on Sunday.

Dong noted that the revision work for the securities law, due to the broad scope and parties it covered, is also "very tough."

The entire revision process took more than four years. The draft revision to the law was submitted to the top legislature for the first reading in April 2015, went through a second reading in April 2017, and underwent third and fourth readings in 2019.

Graphics: GT

Registration-based IPOs

Market observers believe that the most eye-catching revision in the new law is the registration-based IPO system, which will remove regulators' complex reviews and simplify application procedures before listings, and encourage more companies to list on the country's stock market.

Under the current IPO system, new shares are subject to approval by the China Securities Regulatory Commission (CSRC) before being listed.

Cheng Hehong, director of the legal department of the CSRC, told a press conference on Saturday that promotion of the registration-based system will be implemented phase-by-phase, instead of an overnight implementation, and the State Council, China's cabinet, will decide the scope and steps of the reform.

The latest revision also lowers the requirement for issuing shares from "sustained profitability" to "sustainable operation ability."

The lower barrier will boost a list of high-tech start-ups to list on the stock market, which is also in line with country's efforts to support its high-tech industry amid the US' intensified attack on Chinese technology companies, Dong said.

Graphics: GT

"Listed technology companies in China will spring up like mushrooms in the following years with the iconic reform measures," an industry insider surnamed Li told the Global Times on Sunday.

Dong noted that the IPO-based reform underscored the central government' s ambition of reducing administrative intervention in China's capital market, noting that "letting the market do the market thing" will also push the country's capital market to be more connected to international rules and create a more favorable and regulated market environment for foreign investors.

The law also intensified penalties for illegal activities in the securities sector. It not only stipulates the confiscation of illegal proceeds but also pledges stricter administrative punishments.

For instance, if a company indulges in fraudulent public offerings, and does not issue the securities, it would face fines of between 2 million yuan ($280,000) and 20 million yuan. That compares with the previous standard of between 300,000 yuan and 600,000 yuan, according to a report from the Xinhua News Agency.

However, Li cautioned that the intensity of penalties is still "not encouraging," adding the country's capital market has to experience longer exploration and even disruptive development phase before it could fully connect with international rules. 

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Liang Jun, Bianji)

Add your comment

We Recommend

Most Read

Key Words