A giant stride for mainland stocks

PUBLISHED : Friday, 18 August, 1995, 12:00am
UPDATED : Friday, 18 August, 1995, 12:00am

THE move by China's chief securities regulators to stop labelling the domestic stock market an experiment marks a giant stride for the mainland's slackening securities industry.

After five years of experiments, the officials of the China Securities Regulatory Commission (CSRC) are now looking at ways to usher the fledgling securities industry into a second stage of development.

Although the move still lacks substance, the change in labels is symbolically important, indicating China's commitment to the long-term development of the industry.

It will also be a timely confidence booster to Western analysts who have found the development of China's securities industry hampered by the strong dash of government intervention and the immaturity of mainland investors.

In the initial stages of establishing a securities market, government intervention is indispensable because of insufficient infrastructure in areas such as a legal framework and public knowledge of the industry.

But government intervention is usually more of a hindrance than a catalyst, if China really wants to bring the industry a step further and to align it with international practice.

It is time the securities regulators told the state to loosen its grip on the industry and introduced more elements of a market economy into its operation.

For instance, China could be more flexible with stock listings. Under the current environment, Chinese companies have no autonomy when applying for a listing. Where they can be listed and how much they can raise rests at the state's discretion. Instead of picking up candidates for issuing shares, CSRC, like Hong Kong's stock exchange and Securities and Futures Commission, should act more like a gate keeper to ensure companies fulfil listing requirements and quality of information disclosure.

The job of selecting listing candidates should be left with investment bankers who will naturally look for qualified companies.

It is also imperative to have the long-awaited Securities Law promulgated as soon as possible.